The purchase of a 1.35% stake in MSB for ~A$2.03m equates to a A$150m valuation for the whole of MSB. Of interest is the fact that cash was paid and not an exchange for LPI shares. Something that could easily have been done as the intention was clearly to transfer majority ownership to LPI. With BRZ trading at a discount and at 26c the chances of them paying up for their % is unlikely. That 2 directors from MSB have come across increases the probability of a merger once all permits are in place. Makes sense when negotiating with off take partners and funders.
Where does that value LPI currently?
$77m for MSB
$22m in cash (excl MSB cash for costs)
$2.75m for Argentina??
$15m for WA exploration assets
TOTAL $116.75m (excl option strike values and dilution) with 260m shares in issue = 45c / share
That’s before:
1. Litio resolution
2. EIA permit
3. DFS
4. Resource upgrade and export permit increase on old code
5. Off take agreement
6. Project funding
7. Project construction
8. Ramp up and production
Once upon a time you could ascribe a P/NPV for each of those milestones (ending at 1.0) for step 8 but in today’s market it’s a fools errand. What I do know is that if we get to 8, which MSB is progressing towards, a P/NPV of 1 or close is the outcome eventually, that would mean A$1bn + (LPI 500m +) or $2 / share.
LPI Price at posting:
30.0¢ Sentiment: Buy Disclosure: Held
