INF (ASX) Ongoing SP Discussion

Originally posted by WolfOfWestPerth: ↑
All

As promised, below is my analysis on an investment in INF. Some of you may have more knowledge than me on this but I have really tried to focus on the following:

Capital Structure (There are a few concerns with the options potentially hanging on the SP in the future, but overall not too bad)
The Business (or potential business)
Risks

Not investment advice. All IMO.

Wolf

Infinity Lithium (ASX: INF)
Corporate:
No of Shares on issue
402,914,556
1
Market Cap
~$46m (based on $0.115 share price )
2
Cash on Hand¹
~$19m
3
Enterprise Value
~$27m
4
Options on issue²
Unlisted Options
10,000,000 (Expiring 30 November 2022 exercisable @ $0.09)
500,000 (Expiring 30 November 2022 exercisable @ $0.20)
22,762,137 (Expiring 30 November 2022 exercisable @ $0.12)
72,102,581 (Various expiry dates and prices)
5
Management Share Appreciation Rights³
17,200,000
6
Directors & Management⁴
Great blend of corporate, finance and lithium specific experience
7
Top 20
~36% of share register
8
Shareholding of Management³
Chairman is a top 20 shareholder, rest of board not significant and not well aligned
Estimated on hand as of 30 September 2021
Raised ~$15m in February 2021 @ $0.19 – currently trading well below this
Options
Long expiry dates with SP at a premium to option exercise prices
Might be some hang on the SP in the future with option holders converting and selling at a profit
Some of the options I just can’t drill down into the detailed info
Share Appreciation Rights will better align management with shareholders as overall the director holdings are quite low (except Chairman and MD)
Remuneration not including share based payments is ~$700k p.a. which I think is fair and reasonable
Business/Projects:
Infinity Lithium is the 75% owner of the San JoseIndustrial Lithium Project located in Spain – European Union’s (EU) second largest hard rock lithium resource
Aiming to develop into a fully integrated project
Extraction of raw material
Lithium chemical processing on site
Spain as a whole is moving away from fossil fuels and other dirty carbon producing operations
Spain is the 2^nd largest auto manufacturer in the EU
Other Project Credentials
Easy access to major highway
Nearby to Madrid
Chemical plant very close to project site
Proven production process and low cost
Nearby gas pipeline
ESG credentials
EU targeting net zero by 2050, some countries and companies targeting much earlier
Sustainable battery regulations
EU wants to secure local battery metals supply – ensuring security and guarantee of supply chain
Major risks
Spanish government has cancelled INF’s permit on the San Jose Lithium Project
Having no tenure or licence to operate let alone conduct test work on the site is a major setback
According to the Company the revoking of “granted” to “cancelled” status is a result of an administrative error by the Spanish regional department
It is understandable why the share price has fallen off a cliff with this level of risk
Major derisking events so far:
Scoping Study completed
Pre-feasibility study completed
Pre Tax NPV US$860m – gigantic discount to INF’s current market cap
CapEx US$268m
2.5 year payback period
Generating US$6bn in gross revenue over life
Lithium pricing based on ~US$15k/t (August 2019) – price has rallied above that in 2021
MOU Offtake Agreement with LG Energy Solution
Signed June 2021
Targeting Binding Offtake within 12 months
10,000 tpa which would account for the majority of INF’s annual production (15,000 tpa) in first 10 years
Support with investment and various other support from EIT InnoEnergy – group tasked by the EU to lead the industrial stream of the European Battery Alliance
€800k to fund phase 1 of pilot plant
Further support for €2.4m for phase 2 of pilot plant
Further assistance to connect €300m in debt and equity into the construction phase of the project
Company has sufficient cash on hand and an enterprise value of $27m – again, huge discount to NPV

Broad Timeline:
Oct 2021
Nov – Dec 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
1
First lab scale production expected in early Q4 2021 (fully funded by EIT) – data to go into the Definitive Feasibility Study
Progressing permitting issues
Definitive feasibility Study to be finalised
Rectify permitting issues
Binding offtake agreement with LG Energy Solution
Bankable feasibility study?
Project funding?
My View:
Very Speculative buy @ $0.09 - $0.11
Company is further progressed than many lithium companies
Setback with the permitting issue, with share price/valuation reflecting the obvious risk
Seems hard to believe the Spanish Government would not look to grant the permit asap
There may be something else at play here, which we have no idea about
Given the substantial progress, derisking items and the cash on hand, if you can handle a bit of risk and turbulence then it will pay off big time if the licence is granted to INF
Could dip your toes in the water with a small investment @ $0.09 - $0.11, then increase your investment if the permitting/licence issue gets resolved
Given the discount from NPV to current share price, this could very easily move to $0.40 per share with a positive permitting result + DFS
Major Risks:
Permitting issues with the San Jose Project, currently they have no tenure
Without a granted application the company is effectively worthless (except for the $20m in cash)

Expand
Great Analysis mate well done

No.	Vol.	Price($)
1	170000	3.8¢

No.

Vol.

Price($)

170000

3.8¢

Price($)	Vol.	No.
4.0¢	119288	2

Price($)

Vol.

No.

4.0¢

119288

No.	Vol.	Price($)
1	170000	0.038
2	24000	0.037
2	396515	0.035
1	30303	0.033
2	130000	0.030

No.

Vol.

Price($)

170000

0.038

24000

0.037

396515

0.035

30303

0.033

130000

0.030

Price($)	Vol.	No.
0.040	119288	2
0.041	179365	1
0.042	23800	1
0.045	22222	1
0.050	249228	4

Price($)

Vol.

No.

0.040

119288

0.041

179365

0.042

23800

0.045

22222

0.050

249228

(20min delay)
Last 4.0¢		Change -0.001(2.44%)		Mkt cap ! $18.50M

Open	High	Low	Value	Volume
4.2¢	4.2¢	4.0¢	$105.4K	2.590M

Ongoing SP Discussion, page-202

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	No of Shares on issue	402,914,556
1	Market Cap	~$46m (based on $0.115 share price )
2	Cash on Hand¹	~$19m
3	Enterprise Value	~$27m
4	Options on issue²	Unlisted Options 10,000,000 (Expiring 30 November 2022 exercisable @ $0.09) 500,000 (Expiring 30 November 2022 exercisable @ $0.20) 22,762,137 (Expiring 30 November 2022 exercisable @ $0.12) 72,102,581 (Various expiry dates and prices)
5	Management Share Appreciation Rights³	17,200,000
6	Directors & Management⁴	Great blend of corporate, finance and lithium specific experience
7	Top 20	~36% of share register
8	Shareholding of Management³	Chairman is a top 20 shareholder, rest of board not significant and not well aligned

Ongoing SP Discussion, page-202

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