@Woolfy, I can't say definitively why they didn't go down that...

@Sharpey I know it's been alluded to a bit already but why did they not start with a pilot plant? Obviously they were confident that their benchtop/workshop magic could be upscaled drastically to P1 proposed outputs, but as we've heard offtake partners didn't share the optimism... Drawing a comparison albeit an apple/orange scenario, AUZ (cobalt/nickel) opted for a pilot/demo plant and their SP went up to 16c or there abouts last year attracting a split 13yr binding offtake from South Korea Innovation at a 12c buy in (yet to happen). It has since come straight back down to Earth around mid 3c from BFS delays, fund raising supplied by Bergen, sloppy presentations from the MD and macro factors amongst others contributing (#specstocklivin).

 

Just can't help but think of LPD and if they had of gone this route initially - would we be in a better position now? Seems like a more careful or sensible approach rather than benchtop to full blown P1 plant. Although I guess there is pressure to get established. If GXY didn't fill their quota in the last cap raise I would've been out at a hefty loss. I feel their involvement is very much a lifeline for LPD and would like to probe JW about what exactly the relationship entails...is it just James Bay down the track? 

 

Like that other fella who posted the other day (and everyone else) am not enjoying seeing the erosion of the SP after reaching such heights not too long ago. Also distinctly remember @rayien warning it would drop, so too @LiefiX on several occasions. Hindsight is wonderful though, should've sold and free carried but lesson learnt. Still very much a belieber in this though so gonna hodl. 

@Woolfy, I can't say definitively why they didn't go down that route first. My guess is they were hoping the mini-plant would be enough for potential offtake partners to get involved. It was, after all, good enough to get GXY involved....

We know were producing samples throughout the March and June quarter, with comments of "Product samples of the highest possible purity will continue to be generated during the June 2018 quarter for third party evaluation" and "Product samples of the highest possible purity will continue to be generated during the second half of 2018 for third party evaluation" from the March and June quarterlies respectively.

 

However, by July it must have been clear that the potential offtake partners all wanted to see a proper pilot plant and the mini-plant wasn't going to cut it, so they started on a design and figuring out how much it would cost.

I've said previously that I think they were gearing up to do another capital raising back in April/May, which may have been what caused the steady share price decline since then. That was based on the sudden return of buyers after the capital raising was completed, but that has dissolved again, so I don't know about that theory anymore. It's plausible still, but difficult to confirm.

Possibly they were getting ready to go down the pilot plant path back then, but had to put it off to deal with S-Max and the engineering redesign and expanded capacity changing the flowsheet (which wasn't finalised until August) http://www.lepidico.com/wp-content/uploads/2018/09/LPD-180907-Pilot-Plant-to-Facilitate-Finance-and-Offtake-Alternatives.pdf

My thinking of the timeline is:

December - Lycopodium confirm the plant could be twice as big for similar money, and the team immediately commit to that work being done as a sensible move

March - The mini-plant has been setup again to test tailings from Mt Cattlin

April/May - The team were booked to be out and about trying to find investors and getting the word out. Possibly by this time some potential customers have already told them they need a pilot plant and they were planning a capital raising, possibly they were just getting the name out in general and capitalising on the lithium attention.

Either way, they couldn't do a pilot plant at the time because they didn't have the engineering settled for the full scale plant. Until you've finished the full-scale design, you can't make a smaller scale replica for investors to look at.

Now, they might have been able to wing it if the situation has just been about the doubling of capacity, but they had S-Max to include as well, and that made it too hard.

 

Instead, they cranked up the mini-plant to start pumping out samples in the hopes they could get away with not having to build a pilot plant.

 

July - It's become clear the customers won't put money down without a pilot plant, and Strategic Metallurgy start working on the small-scale process.

 

August - Lycopodium have completed the flowsheet design and they now know which equipment P1 will use, and the team begin figuring out what size the pilot plant will be and which equipment to get.

September - Design is done and the capital raising happened.

We can sit around all day with the benefit of hindsight and say they shouldn't have bothered with expanding the plant capacity or adding in S-Max. There would be those who argue they should have gone straight to building P1 as fast as possible and capitalised on the lithium sentiment while it was still there.

Perhaps. There's certainly some merit to it. But, at the same time, even those in production have already had an absolute beating this year. GXY's share price was up at $4.46 earlier in the year. 

TAW, which I also hold, never did more than a PFS and then went straight to building a mine, which certainly had its merits. Except now they're saying they need to optimise their plant with some extensive works, which would double capacity from the original design. They've had to borrow $20m at ~15% interest to do that, and it hasn't helped the share price at all. I still like the company, but part of me wonders what else they might have missed by moving that quickly? Would they have gone with that design after a DFS? I doubt it.

So moving from answering the question of "why didn't they do it?" and onto "if we had gone down the pilot plant route, would we be any better off now?", I can't really say.

If we assume they decided to go down that path earlier in the year, the DFS was delivered last month and the pilot plant was humming along for prospective offtake partners now, it is tough to say. I don't think it would have change the sentiment for offtake partners to make prepayments, but the capital raising from shareholders could have been trickier.

You would imagine the share price would have to be higher than it currently is with the DFS out, but how much higher? The market is strange at the moment. KDR, which I also hold, has also taken a beating this year, though there are other issues there. Their PFS came out last week, and frankly I found it lacklustre, but the market rallied quite well. Then they came out with another announcement of $110m debt funding at a very cheap rate, which was much more important in my eyes, and the market initially jumped on it and then failed to hold.

GXY has pretty much funded SdV by selling unused tenements and the market still doesn't care! So what would that mean for LPD trying to fund P1?

We just saw LPD manage to raise $8m at a share price of 1.9c. With a positive DFS, and a share price of double that, it is logical they could have raised twice the money. With $15m-$20m from shareholders and the rest from offtake prepayments, they would be set to get building.

It's also possible that the market doesn't care about the DFS, and the share price wouldn't be much better than it is now. Would they be better off trying to raise that amount of money at, say, 2.5c?

So I can't say if things would be better now if they had gone down the pilot plant route earlier. It would be different, or it may be the same challenges just 6 months earlier. Who knows.

The last point is that, personally, I am glad they didn't dismiss the doubling of the plant or the move to S-Max, as that means they have explored those options and are ready to roll that info into the P2 scoping study. If they had gone headlong into P1, they would have then had to do this work again to consider building P2, and they would be doing it without the benefit of P1 being a large demonstration of P2. It would be close, but they would be reintroducing scaling risk for P2.

Remember the June quarterly had this quote:

"The Scoping Study will consider both a modular approach to development in 5,000 tpa and 10,000 tpa LCE plant lines as well as a single larger scale development."

Well the September quarterly had these to say:

"Scoping study works for a fullscale L-Max® plant, built in 10,000 tpa modules continued."

"In parallel with the engineering work for the Phase 1 Plant Feasibility Study, budget prices will be sought for larger scale major equipment items. This data will inform an initial capital cost estimate to be made for a full-scale L-Max® plant during the first half of 2019."

 

So clearly they've settled on modules of 10,000tpa, and those modules are based on the P1 design, meaning they've done most of the work, and just need to find the right bits to fit all together in larger modules.

That would be a different situation if P1 was using bespoke equipment (as remember that's what they would have for a 2500tpa plant, rather than off-the-shelf for 5000tpa) and didn't have S-Max, as it would be a different flowsheet.

Lastly, as for the relationship with GXY, I'd say Mt Cattlin is the focus, and James Bay a possibility. Joe is happy to answer questions if you want to shoot him a line, or I can add something to my ever-expanding list for the AGM. I can tell you that GXY like to play their cards close to their chest and didn't give LPD any indication about whether they would support the capital raising until they did, just as there was no direct contact between the companies in the lead-up to their investment last year.

I have added a question about when the pilot plant was first considered. Will try and moderate the list and post it later, along with a risks thread that will very much include the funding points above.

 

Cheers