Do not accept Takover - You have nothing to lose!, page-88

LAT 66 has been listed for just over a week now. What have we learnt?

During the takeover DCX shares were consolidated and priced at 20c. This attributed a value to DCX of $6.6m (that is, 33m shares x 20c). This was equal to what the market was saying pre consolidation (3302m shares x 0.002c).

Prior to the takeover, LAT was an unlisted public company so it was difficult to value. DCX's takeover offer valued LAT at 17.6c per DCX share (post consolidation). As there were 125m LAT shares put into the public offer, this valued LAT at $25m (125m x 20c).

An issue of more securities in the soon to be listed LAT 66 accompanied the take-over, so the new LAT 66 emerged with 178m shares in total, consisting of 33m held by ex DCX shareholders, 125m held by ex LAT shareholders and 20m held by new shareholders.

The 178m post consolidation LAT shares were priced at 20c valuing the consolidated company at $35.6m. A week after listing LAT 66 shares are worth 14c each and the company is worth $25m. That is, 30% less than it was valued during the takeover.What has happened?

As LAT 66 has $5.5m cash the market says that as of today it has an enterprise value of $19.5m. The takeover valued DCX assets at $6.6m and LAT assets at $25m and raised $4m cash. What is the breakdown now?

It is very difficult to argue DCX assets have fallen sharply since the takeover.For example, looking at the current Carnaby (CNB) price and the see through value of the ex DCX free carried interest in their tenements it appears the ex DCX assets would retain a $6.6m valuation. Evidence is found in the LAT 66 webinar presentation of 9 July. It states that the ex DCX attributable tonnes of copper equivalent of the recent CNB scoping study equals 7.8% of the project. In other words the ex-DCX free carried interest of 17.5% of part of the CNB copper tenements so far contains 7.8% of the total CNB copper equivalent.The CNB market cap is today around $96m (172m shares x 56c). Taking away cash ($12m est), this leaves an enterprise value of $84m. The ex DCX free carried interest is therefore broadly worth 84m x 7.8% = $6.5m. But let’s be conservative and say $6m as CNB is valued at more than its copper interests and cash, although these dominate.

So a see through value of CNB suggests ex DCX assets would remain valued at around at least $6.6m once you add the other assets like Sylvania, Edjudina and more.

So the decline can be attributed almost entirely to the value of the LAT assets. The market is saying (right now) they are worth around $13m, noting DCX paid $25m for them.

Overpaying can happen in a takeover. Also in time this $12m premium may prove to be justified as the LAT 66 assets become more valuable.However, in the short term ex DCX shareholders have lost a considerable amount of their capital from this transaction.

For the sake of those shareholders, I hope those behind the takeover offer know more than the market.