What could a new deal look like and is it worth it??Understand the frustration – have shared it – much less so than a few. But it is what it is and I applauded the decision if we can get a better deal and the market reflects that improved deal.
If someone has no confidence in management in a start-up or junior they should exit quickly. If you believe bashing management that already owns a lot of stock is helpful and motivates them and others to boost the stock then continue.
Our initial deal had HELM buy in for 25% of the project at 25% of the cost. The market was happy we had a sure supply offtake and rewarded us so. Since then – the lithium hype has cooled – more names in the space and we increased our risk by walking from HELM.
Now if we turn our attention to what a better deal could look like – let’s assume – someone buys 25% of the project for 20% of NPV or for my model 180M rather than 25% of construction cost. I also through in a 30M at $1.7 private placement to put some institutions in the game. Used $1.7 because if such a deal places that value on us – there should be no way we trade under what a company buys in for – unless it has a lot of hair on it. This would put us at $2.25 - $3.00 today depending on the discount you apply to NPV. The 2.25-3.00 ranges uses a .75-1 range. In any case if such a deal were to occur – it would significantly de-risk us, imply a significant increase in valuation, and is much higher than we are today. The price over the initial HELM deal would be in the $60-100M range improvement for shareholders. However, the risk remains right now that there is no deal, offtakes can take various forms – multiple offtake partners has pros and cons, term, pricing, upfront contribution, etc…. So until we now – we trade where we are.
These processes typically take a minimum of 3 months – NDA – advisors, site visits, lawyers, the negotiating game etc, board approvals. I had thought we would start to trade a bit higher towards the end of March and into mid-April on anticipation. I have been sitting – but started to add a bit yesterday.
If no deal comes – then look out below. Hence – you need to have confidence in management if and you don’t – run now.