Banter and general comments, page-39128

Anyone following lithium should have heard about this deal because it is a significant M&A event in the Lithium space with multiple implications

This shifts PLS from being a particularly large single location operation to being a multi-location, multi-country operation. This should increase the chances that PLS will be sensible around capacity expansion and contributing to any possible over-supply situation. This could assist Core as the length of any over-supply situation is reduced. The greater expansion options available to PLS may however slightly decrease the size of future lithium price spikes. The chances of a 3rd or 4th PLS deal has also significantly increased.

The takeover creates a reference price point for DMS capable lithium operations with grades around 1.2% to 1.3% that is well above Core's current market price. LRS's recently released resource was 77.7Mt @ 1.24%. While the regularly quoted value for the takeover is $560m ($2.85 * 0.07 * 2.799b shares), there are various non-listed options and performance rights meaning PLS expects to need to issue 205.5m shares to acquire LRS. The value of LRS acquisition value is therefore slightly higher at $586m (@ a PLS price of $2.85). PLS confirmed LRS's cash balance will be getting low to extremely low by the time the deal reaches its conclusion through providing a $10m loan facility to LRS. If no cash is assumed in the $586m value of a price/resource tons calculation, the deal creates a ~$7.5m per resource ton price point ($586m / 77.7Mt). The valuation is possibly however $8.7/t of Measured and Indicated.

If this $7.5/t price were applied to Core's 48.2Mt at 1.26% resource, the price would be $362m before adjusting for Cash and progress towards implementing the capex necessary to deliver revenue. Even if you only apply a $150m value to Core's capital expenditure incurred, a Core multiple-equivalent value becomes $362+$87+$150 = $599 / 2.137b shares = 28c/share. If $8.7/t of Measured and Indicated is used Core's implied price drops 6c because the resource estimate in the valuation drops from $362m to $243m and the guess becomes $480m / 2.137b shares = 22c/share. Both are more than double the current price.

Other indirect implications
Some of the LRS shareholders will decide to sell on-market and reinvest in other pre-production development projects. The pool of mid to larger size projects that have progressed to a good sized JORC and either have released or are expect to release a PEA/Scoping/DFS study soon is limited. Without some sort of financial study it is hard to evaluate a projects potential. While its more likely that projects like GL1, GT1, Atlantic, Patriot, WR1 etc are closer to the stage LRS is at, some of this reinvestment money may find its way to investing in Core because Core is effectively in a highly advanced stage development.

The PLS team noted they considered a large number of projects. I suspect they were looking for projects that could meaningfully shift the scale of PLS and ideally involved a larger single deposit structure. On those criteria Core would have been cut from the consideration list fairly quickly so the absence of PLS taking over CXO doesn't indicate anything meaningful about Core, just that PLS was looking for something different. Some of the large moves on Friday included other larger Canadian deposits owning companies (SYA, WR1, PMT), possibly on shareholders shifting cash or an increased prospect of further M&A activity.