As we know Bearing Resources (listed on the Toronto stock exchange) has recently bought the rights from OTC listed Li3 for their 17.7% stake in the Maricunga JV. This 17.7% stake that Bearing now own is a free carried stake in the JV until the completion of a DFS, meaning LPI will fund the EIS and DFS (expected to cost approximately USD $13.8m). What is extremely interesting however is the current share price of Bearing ($1.05) and significant increase in daily price volumes ($100-250k) and how this values the Maricunga JV. Here are my calculations which show a major price discrepancy between LPI and Bearing and the value of the JV.
Bearing Resources (BRZ.V)
Shares on issue:37,500,000
Share price:$1.05
Fully diluted MC (CDN$)$39,375,000
JV Ownership: 17.70% JV MC Valuation: $222,457,627
Lithium Power (LPI.AX)
Shares on issue:164,335,898
Share price:$0.325
Undiluted MC: $53,409,167
JV Ownership: 50.00% JV MC Valuation: $106,818,334
SP to reach $222m MC: $0.68
*LPI market cap excludes the following listed and unlisted options:
55c listed options expiring 24/11/17 - 37,526,316
20c unlisted options expiring 24/06/21 - 29,040,001
**Note that CDN/AUD E/R is currently 1:1
Based on the current share prices of both companies and their reflective % ownership, Bearing Resources is valuing the Maricunga JV at $222,457,627 compared to LPI only valuing it at $106,818,334. This is an incredibly large variance and IMO it provides a significant arbitrage opportunity for ASX investors, which has all been brought upon by the capital raising overhang. LPI's share price would need to reach over 60c to value the JV the same as Bearing. Obviously LPI will need to fund the EIS and DFS, but they are already fully funded to get them to the commencement of both of these studies and IMO the 55c options should be in the money by year end which will fund the DFS. The above valuation also excludes the other assets of both companies, of which IMO LPI's Western Australian tenements are very prospective for hard-rock lithium and are far superior to Bearing's.
Cheers
LPI Price at posting:
32.5¢ Sentiment: Buy Disclosure: Held
