Hi JRS,
I think you're missing the point that
@HalfHalo correctly raised which is that although the debt is USD denominated, it will be serviced by revenue that is earned on a USD basis, therefore the actual ability to repay the debt is not subject to risks associated with currency change since we are essentially already hedged against this.
Your new post now talks about the accounting treatment and recognition of the debt which of course the debt will be shown in Australian dollars on the financial statements, I don't think anyone is disputing that. What is really an advantage here is that the debt facilities correctly sit as a non-current liability (see below -
page 96 of the 2024 financial statements) which addresses the fact that the debt can be capitalised and is not expected to be repaid in the short-term.
Those capitalised costs are a blessing because they can easily be dealt with after the ramp-up when operations are taking full advantage of a recovered lithium price and production cost per tonne is lowered. It provides flexibility to accumulate a solid cash and cash equivalents balance at 30 June 2025, and reflecting a strong current-asset ratio (since the debt facility sits as non-current) and free cash flow. But I'm happy for management to address this how they see fit.
There is also a solid tax benefit in the capitalised structure of being able to deduct the interest expenses whilst simultaneously deferring the payments to a more suitable time.
This debt structure makes so much sense for LTR, and the advantages are clearly seen. It's why they ditched the bank syndicates.
Regards,
CK
(20min delay)