Lepidico — Acquisition, rights offer and Gulf Fluor alliance

Lepidico (ASX: LPD)

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Research: Metals & Mining

Lepidico — Acquisition, rights offer and Gulf Fluor alliance

Lepidico (LPD) has, this week, announced a trio of transformative initiatives. The first of these is an all-share offer to acquire Desert Lion (TSXV: DLI), according to which LPD will pay 5.4 shares for every one Desert Lion share. The second is a supply and marketing alliance with Gulf Fluor for the supply of sulphuric acid, including the provision of land for the construction and operation of Lepidico’s Phase 1 Plant project in Abu Dhabi. The third is a one for nine renounceable rights issue involving the issue of up to 372.9m new shares in Lepidico at A$0.029/share to raise A$10.8m.

Lord Ashbourne

Written by

Lord Ashbourne

Director of Content, Mining

Metals & Mining

Lepidico

Acquisition, rights offer and Gulf Fluor alliance

Acquisition and rights offer

Metals & mining

9 May 2019

Price

A$0.032

Market cap

A$107m

A$1.4283/US$

Net cash (A$m) at end March 2019

4.9

Shares in issue

3,356.2m

Free float

68%

Code

LPD

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

10.3

88.2

(25.6)

Rel (local)

9.6

81.8

(27.6)

52-week high/low

A$0.05

A$0.02

Business description

Lepidico provides exposure to a portfolio of lithium assets via its wholly owned properties, JVs and IP in Australia, Canada and Europe. Uniquely, it has successfully produced lithium carbonate from non-traditional hard rock lithium-bearing minerals using its registered L-Max process technology.

Next events

Rights issue record date

13 May 2019

Pilot plant operation

May 2019

Feasibility study

Q1 CY20

Analyst

Charles Gibson

+44 (0)20 3077 5724

Lepidico is a research client of Edison Investment Research Limited

Lepidico (LPD) has, this week, announced a trio of transformative initiatives. The first of these is an all-share offer to acquire Desert Lion (TSXV: DLI), according to which LPD will pay 5.4 shares for every one Desert Lion share. The second is a supply and marketing alliance with Gulf Fluor for the supply of sulphuric acid, including the provision of land for the construction and operation of Lepidico’s Phase 1 Plant project in Abu Dhabi. The third is a one for nine renounceable rights issue involving the issue of up to 372.9m new shares in Lepidico at A$0.029/share to raise A$10.8m.

Year end

Total revenues (A$m)

PBT*
(A$m)

Cash from operations (A$m)

Net cash/(debt)
(A$m)

Capex
(A$m)

06/17

0.1

(5.4)

(3.6)

3.3

(0.9)

06/18

0.2

(7.2)

(3.0)

4.9

(3.1)

06/19e

0.0

(5.9)

(6.2)

24.3

(21.4)

06/20e

19.9

2.5

3.2

(5.2)

(32.7)

Note: *PBT is reported.

Full integration de-risks investment proposition

In contrast to its relationship with Grupo Mota at Alvarrões, the proposed Desert Lion merger will transform Lepidico into a fully integrated mining and processing entity by providing it with a direct, controlling interest in a lepidolite deposit under an awarded mining licence. In conferring ownership of a mine, the merger will therefore de-risk Lepidico as an investment proposition from a strategic perspective as well as from an operational perspective, since its L-Max plants will not then be dependent on a single source of lepidolite supply.

Advantages of locating Phase 1 plant in Abu Dhabi

Specific operating advantages for Lepidico of locating its Phase 1 plant project in Abu Dhabi include the fact that sulphuric acid can be piped directly from Gulf Fluor’s plant to Lepidico’s L-Max plant, land rents and labour are cheap relative to Sudbury and it offers world-class, established infrastructure, including power, gas, water, developed roads, storage and logistics hubs that have easy access to multiple ports and airports. Finally, Abu Dhabi also has a ‘plug and play’ approach towards new industrial developments, which means that the approvals and permitting process is expected to be completed within three months.

Valuation: 6.84c/share pending…

It is our intention to update our forecasts and valuation shortly to account for this trio of new developments. In our last report, entitled Alvarrões resource increases 290%, published on 12 April 2019, we estimated that execution of a 7t/hour (5,000tpa) Phase 1 plant would result in free cash flow to Lepidico of A$71.2m per year once steady-state production had been achieved, which we valued at A$0.0684/share, after assuming US$30m (A$41.8m) of equity funding at the then prevailing share price of 3.1c. Note that this valuation did not ascribe any value to the Phase 2 plant or other development options.

Three transformative announcements

Lepidico has, this week, announced three transformative initiatives to develop its business:

An all-share offer for Desert Lion (TSXV: DLI), whereby LPD will pay 5.4 shares for every one (1) Desert Lion share, representing a 38% premium based on the closing prices of Lepidico and Desert Lion shares on 3 May or a 39% premium based on the 10 trading day volume weighted average price of the share, and valuing the latter at A$20.3m (C$19.2m, US$14.2m) at the time of writing.

A supply and marketing alliance with Gulf Fluor for the supply of sulphuric acid, including the provision of land for the construction and operation of Lepidico’s Phase 1 Plant project in Abu Dhabi.

A one for nine renounceable rights issue involving the issue of up to 372.9m new shares at A$0.029/share and 186.5m new listed options (exercisable at a price of A$0.05/share in three years’ time) in Lepidico to raise A$10.8m. Investors should note that Edison calculates a Black Scholes valuation for the options (using Lepidico’s annual historical share price volatility) of 1.4c apiece, ie equivalent to a value of 0.7c per share (there being half a new option issued per new share).

Proposed Desert Lion acquisition

Background

Desert Lion Energy is an emerging lithium development company and early-stage producer focused on building Namibia’s first large-scale lithium mine. Its lithium projects are located in Namibia approximately 210km west of Windhoek, 240km east of the deep-water port of Walvis Bay and 25km south of the mining town of Karibib, which provides the project with a reliable source of skilled and semi-skilled labour and logistical support. The company’s historical Rubicon and Helikon lithium mines are located within a 301km2 prospective land package and have been variously operated for the ceramics, glass and battery industries since the 1960s. The project site is accessible year-round by road and has access to power, water, rail, port, airport and communication infrastructure.

A summary of the company’s resources (currently defined to NI 43-101, but not JORC 2012, standards) at its historic Rubicon and Helikon deposits is as follows:

Exhibit 1: Desert Lion mineral resource estimate

Deposit

Category

Cut-off

(% Li2O)

Tonnage

(kt)

Grade

(% Li2O)

Contained Li2O (t)

Contained lithium carbonate equivalent (t)

Rubicon Main

Measured

0.2

0.0

0.00

0

0

Indicated

0.2

3,006.9

0.63

18,943

46,843

Inferred

0.2

1,600.9

0.58

9,285

22,960

Total

0.2

4,607.8

0.61

28,229

69,804

Helikon 1

Inferred

0.2

2,030.0

0.62

12,586

31,123

Helikon 2

Inferred

0.2

215.6

0.56

1,207

2,986

Helikon 3

Inferred

0.2

294.7

0.48

1,415

3,498

Helikon 4

Inferred

0.2

1,510.1

0.38

5,738

14,190

Helikon 5

Inferred

0.2

179.2

0.31

556

1,374

Total

Inferred

0.2

4,229.6

0.51

21,502

53,170

Grand total

Measured

0.2

0.0

0.00

0

0

Indicated

0.2

3,006.9

0.63

18,943

46,843

Inferred

0.2

5,830.5

0.85

49,731

122,974

Total

0.2

8,837.4

0.78

68,674

169,817

Desert Lion interest

80%

7,069.9

0.78

54,939

135,854

Source: Lepidico, Desert Lion, Edison Investment Research. Note: NI 43-101 compliant.

The mineral resource estimate described in Exhibit 1 was prepared by independent consultants The MSA Group (Pty) Ltd of South Africa, and was estimated in accordance with Canadian NI 43-101 requirements and reported to the TSX-V on 12 October 2018. Drilling at Rubicon in support of the mineral resource estimate comprised 142 diamond and RC holes on a general 50m x 50m grid, totalling over 10,000m, including 35 channel samples. At Helikon 1, diamond and RC holes were drilled on a staggered 40m x 20m grid, with 50 holes drilled over a total of 3,760m, including 36 channel samples. At Helikons 2–5, a total of 71 diamond drill holes were completed, totalling 7,700m and including 28 channel samples taken at Helikon 2, 3 and 4. In addition to the hard rock deposits, a mineral resource of 69.4kt at a grade of 0.95% Li2O was reported for the Rubicon slimes in the indicated (89.6% of the total by tonnage) and inferred (10.4%) categories. Lepidico is of the opinion that there is sufficient information to undertake a JORC Code 2012 compliant mineral resource estimate. Nevertheless, as a matter of priority, it is Lepidico’s intention, once the merger is completed, to undertake a programme of drilling to further increase the density and confidence of the data to a level to enable classification of a JORC Code 2012 compliant resource in the measured and/or indicated categories in order to facilitate a subsequent ore reserve estimate.

Lithium mineralisation at Rubicon and Helikon is contained within highly fractionated and well-zoned LCT-type pegmatites in the Karibib Pegmatite Belt. The main lithium minerals present are (predominantly) lepidolite with petalite and (minor) amblygonite. While Desert Lion’s original business plan was predicated on using conventional roasting technology, as part of its due diligence process, Lepidico conducted metallurgical test-work with its technology partner, Strategic Metallurgy, that showed the lepidolite mineralisation at Rubicon and Helikon to be amenable to concentration and conversion to battery-grade lithium carbonate using Lepidico’s proprietary L-Max® hydrometallurgical process technology. In the case of the sample in question, test-work demonstrated 94% lithium extraction from concentrate and production of lithium carbonate with 99.8% purity.

On 1 November 2018, Desert Lion published the results of a preliminary economic assessment (PEA) on its Namibian Lithium project. For an initial capital expenditure of US$275m, it calculated that the project had a pre-tax NPV8 of US$144m and a pre-tax internal rate of return of 29% at a lithium carbonate price of US$13,000/t.

Finally, Desert Lion also has a non-binding offtake agreement for lithium hydroxide with German multi-national BASF.

Strategic rationale

Under the terms of its agreement with Grupo Mota at Alvarrões (announced on 9 March 2017), Lepidico undertook expenditure of at least €250,000 over an 18-month exclusive period with the goal of defining a JORC-compliant mineral resource of >1Mt at a grade of 1.5% Li2O (which it achieved in December 2017). In return, Lepidico has an exclusive, pre-emptive right for three years in which to effect a commercial relationship with Grupo Mota regarding the supply of ore/concentrate from Alvarrões to Lepidico and/or the right for Lepidico to develop and operate a lithium mica mining and concentration project there. By contrast, the Desert Lion merger will create a fully integrated mining and processing entity by providing Lepidico with a direct, controlling interest in a lepidolite deposit under an awarded mining licence. In conferring ownership of a mine, the merger will therefore de-risk Lepidico as an investment proposition from a strategic perspective. It will also de-risk it from an operational perspective, since its L-Max plants will not then be required to be dependent on a single source of lepidolite supply.

While either deposit (Alvarrões or Rubicon/Helikon) could support Lepidico’s Phase 1 plant for c 14 years, both hold out the possibility of doubling the project life from c 14 years to 25–30 years and/or simultaneously expanding it. While the costs of mining mica in Namibia may be expected to be lower than the equivalent costs in Portugal, the potential to blend ore from two different sources together also creates the possibility of lowering operating costs at the process plant as well.

In addition, while its historical Rubicon and Helikon mines are located within a 301km2 prospective land package, Desert Lion holds a strategic land package of over 1,000km2 of contiguous, exclusive prospecting licences covering a large portion of the underexplored, highly prospective Karibib and Southern pegmatite belts that contain numerous lithium-caesium-tantalum (LCT) type occurrences.

Finally, a sample of c 20,000t of Desert Lion lepidolite has already been transported to Perth for processing in Lepidico’s pilot plant.

Valuation considerations

Pursuant to the transaction, Lepidico anticipates issuing 633.8m shares to Desert Lion shareholders (equivalent to 18.9% of LPD’s currently outstanding capital – see Exhibit 5), implying an equity acquisition value of A$20.3m (C$19.2m, US$14.2m) at the time of writing. This compares to Desert Lion’s balance sheet as at end-December 2018 (the last date for which Desert Lion’s financial statements were available), as follows:

Exhibit 2: Desert Lion balance sheet (31 December 2018)

C$m

ASSETS

Current

Cash and equivalents

2.5

Amounts receivable

0.4

Loan receivable

0.3

Prepaid expenses

0.0

Total current assets

3.1

Non-current assets

Deposits

0.0

Property, plant & equipment

17.3

Exploration and evaluation assets

6.3

Total non-current assets

23.7

TOTAL ASSETS

26.8

LIABILITIES

Current liabilities

Trade payables

7.4

Unearned revenue

6.2

Total current liabilities

13.6

Non-current liabilities

Liability component of convertible debenture

3.0

TOTAL LIABILITIES

16.6

NET ASSETS

10.2

Minority interest

1.2

NET ASSETS ATTRIBUTABLE TO DESERT LION SHAREHOLDERS

11.4

ASSETS

Current

Cash and equivalents

Amounts receivable

Loan receivable

Prepaid expenses

Total current assets

Non-current assets

Deposits

Property, plant & equipment

Exploration and evaluation assets

Total non-current assets

TOTAL ASSETS

LIABILITIES

Current liabilities

Trade payables

Unearned revenue

Total current liabilities

Non-current liabilities

Liability component of convertible debenture

TOTAL LIABILITIES

NET ASSETS

Minority interest

NET ASSETS ATTRIBUTABLE TO DESERT LION SHAREHOLDERS

C$m

2.5

0.4

0.3

0.0

3.1

0.0

17.3

6.3

23.7

26.8

7.4

6.2

13.6

3.0

16.6

10.2

1.2

11.4

Source: Desert Lion. Note: Totals may not add up owing to rounding.

As at 31 December 2018, Desert Lion had 89.1m shares in issue, resulting in a book value of 12.8 Canadian cents per share. Since that date, Desert Lion has:

issued 16.7m shares to repay C$3.3m in debts in March/April 2019, and

issued 11.5m shares in payment of C$1.1m in debts in April 2019.

This takes shares in issue (excluding any warrant and/or option exercises, etc) to 117.2m.

In the year to 31 December 2018, Desert Lion made a loss of C$13.6m (in this case, largely financed via changes in working capital) before C$15.3m of expenditure in investing activities.

Inherent in the consideration payable by Lepidico for Desert Lion is C$7.8m in goodwill (relative to DLI’s December 2018 balance sheet). However, it can be seen that consideration is otherwise relatively close to the value of assets acquired less unearned revenue and the liability related to DLI’s convertible. Unearned revenue is secured against broken lepidolite stockpiles (old tailings not included in the resource) and – assuming the Chinese lithium carbonate price recovers – these stocks may be rehandled and shipped, thereby offsetting the prepayment and possibly providing some modest revenue. In the meantime, DLI has a C$5m (face value) convertible note with AIP Asset Management, of which C$4m is convertible at the exchange ratio into 108m Lepidico shares post-deal close, with the balance of C$1m being due in cash in December 2020.

Alternatively, consideration could be expressed as US$103.53 per attributable tonne of lithium carbonate equivalent resource acquired (including Rubicon slimes). This is a premium to the average value of US$53.84/t for non-spodumene, non-brine lithium deposits that Edison calculated in its annual report, Gold stars and black holes: Analysing the discount: From resource to sanction, published in January 2019. However, it is broadly consistent with the value of US$130.16/t calculated for non-spodumene, non-brine lithium in the measured category of resources. Excluding all other assets therefore, Lepidico’s purchase consideration of DLI could be said to discount an approximately 100% increase in the size of the latter’s resource or the resource’s being upgraded into the measured category in its entirety.

By contrast, applying the values calculated in our report, Gold stars and black holes: Analysing the discount: From resource to sanction, published in January 2019, to DLI’s resource (including the Rubicon slimes) implies a value, attributable to the company, of between C$6.4m and C$10.0m (cf the C$6.3m book value at which those assets are held on the balance sheet – see Exhibit 2). As such, and given the other assets being acquired (eg banks of flotation cells, mills, a mining lease, water bores, roads etc), as well as DLI’s resource upside and upgrade potential and the contribution that it is able to make to Lepidico’s L-Max plant feed, the consideration being paid by LPD for DLI could be described as full, but fair.

Timing

A comparison of Lepidico’s and Desert Lion’s share prices (in US cents) since June 2018 would suggest that the timing of the merger is propitious from Lepidico’s perspective:

Exhibit 3: Lepidico and Desert Lion share prices (US cents), June 2018 to present

Source: Refinitiv, Edison Investment Research

Supply and marketing alliance with Gulf Fluor

In addition to its proposed merger with Desert Lion, on 7 May, Lepidico also announced a supply and marketing alliance with Gulf Fluor for the supply of sulphuric acid and land for the construction and operation of Lepidico’s Phase 1 plant project. Gulf Fluor operates a large industrial plant in the Industrial City of Abu Dhabi (ICAD) and is the largest producer of sulphuric acid (a critical reagent in the L-Max process) with an output rate of 140,000tpa in the region. In addition, it owns a large parcel of land in ICAD (on which it is proposed that Lepidico could construct its Phase 1 plant project), has its own dedicated wharf and offers marketing expertise for chemical by-products of the process.

Specific operating advantages for Lepidico of locating its Phase 1 plant project in the Industrial City of Abu Dhabi therefore include (but are not limited to) the following:

Sulphuric acid could be directly piped from Gulf Fluor’s plant to Lepidico’s L-Max plant without the need for land hauled transportation.

ICAD land rents and labour are cheap relative to Sudbury in Canada (the alternative location under consideration).

ICAD offers world-class, established infrastructure, including power, gas, water, developed roads, storage and logistics hubs that have easy access to multiple ports and airports.

ICAD is capable of supplying all of the consumables and services (eg gas and labour) that Lepidico’s Phase 1 plant would require at a cost that has been identified as being lower than in Sudbury. Among other things, for example, Lepidico has identified a lime plant (also a key reagent for L-Max) almost directly opposite its proposed site at ICAD.

Gulf Fluor can provide marketing knowledge and relationships for a number of by-products of Lepidico’s chemical processes in the region (eg sulphate of potash, or SOP, and amorphous silica).

ICAD itself provides a ready market for a number of L-Max and S-Max products (eg in the form of the cement industry situated there).

Logistics costs for shipping concentrate from both Namibia and Portugal to ICAD are estimated to be lower than to Sudbury.

ICAD has adopted a ‘plug and play’ approach towards new industrial developments; an environmental baseline study has therefore already been conducted for the site in question and the approvals and permitting process is expected to be completed within three months.

A number of key Lepidico personnel, including the managing director, Joe Walsh, have worked in Abu Dhabi in the past and report a good working relationship with Gulf Fluor already.

Apart from the obvious (eg fiscal, employment, economic, etc), advantages for Gulf Fluor and the United Arab Emirates in Lepidico locating its Phase 1 plant project in ICAD include:

The (effective) reinvestment of petro-dollars into electric vehicle technology – arguably a natural hedge.

The opportunity for Gulf Fluor to diversify from its industrial chemicals base into speciality and battery metals.

Consequences of recent initiatives on feasibility study and development

Within the last few months, Lepidico has undertaken a number of initiatives that will affect the timing of its feasibility study on the Phase 1 plant project. These include:

The extension of the Phase 1 plant project feasibility study to incorporate an LOH-Max™ circuit for the production of lithium hydroxide (cf lithium carbonate from the L-Max plant alone).

The evaluation of a plant development at ICAD.

The redesign of mining activities at Alvarrões to reflect the expanded resource (see our note Alvarrões resource increases 290%, published on 12 April 2019).

Lepidico’s ICAD trade-off study is anticipated to be complete in the second half of 2019. The engineering required to incorporate an LOH-Max circuit into the plant is expected to be completed in the fourth quarter of calendar year 2019. Ore reserve delineation, mine design and scheduling at Alvarrões is expected to be finalised in early 2020. Once these studies are completed, they will then be incorporated into the final feasibility study in early 2020 at the same time that Lepidico will be seeking to finalise its offtake and financing arrangements.

Sudbury

Until the ICAD trade-off study is complete, however, the feasibility study will continue to contemplate the base-case scenario of locating the plant in Sudbury. Moreover, while the approvals and permitting process in particular favours the near-term development of the Phase 1 plant project at ICAD, in the longer term, Lepidico remains convinced of the benefits of developing a plant at Sudbury, with sulphuric acid being supplied by the two major nickel miners in the region, Vale and Glencore. To this end, it is continuing to establish acid and lime supply agreements as well as navigating the permitting and approvals process in Sudbury at the same time as pursuing a scoping study for a full-scale plant to follow the Phase 1 plant.

1:9 renounceable rights issue

In addition to its other announcements, on 7 May Lepidico announced that it is undertaking a 1:9 renounceable rights offer at a price of 2.9 Australian cents per share to raise A$10.8m via the issue of 372.9m new shares (plus half a warrant per share exercisable at 5 Australian cents per share at any time before the third anniversary of the date of issue). The offer is underwritten in the sum of A$3.0m by the lead manager and underwriter to the offer, CPS Capital Group. Relative to its pre-announcement last (closing) price of 3.8c on 3 May, the 2.9c subscription price implies an ex-rights price of 3.71c per share (excluding any value ascribed to the warrants) and therefore a value attributable to the rights of 0.81c/share. Investors should note that Edison calculates a Black Scholes valuation of the options (using Lepidico’s annual historical volatility) of 1.4c apiece, ie equivalent to a value of 0.7c per share (there being half a new option issued per new share).

Any entitlement not taken up pursuant to the offer will form the Shortfall Offer, whereby the related shares will be offered to investors at a price of 2.9c for up to three months following the closing date of the renounceable offer (currently 29 May, subject to extension).

The funds raised from the offer(s) are anticipated to be applied as follows:

Exhibit 4: Utilisation of funds raised by Lepidico in 1:9 renounceable rights offer

Full subscription

Minimum subscription

Application

Sum
(A$)

Percent of total
(%)

Sum
(A$)

Percent of total
(%)

Integration of Desert Lion

3,000,000

28

2,500,000

83

LOH-Max engineering and revised location evaluation for Phase 1 plant feasibility study

2,000,000

18

0

0

Product development, including pilot plant operations

1,000,000

9

0

0

Mineral resource and mine development in Namibia

1,000,000

9

0

0

Mineral resource and mine development in Portugal

1,000,000

9

0

0

Exploration

1,000,000

9

0

0

Expenses of the offer

489,296

5

349,238

12

Working capital

1,325,046

12

150,762

5

Total

10,814,342

100

3,000,000

100

Source: Lepidico

Lepidico has been advised that Galaxy Resources (its largest shareholder with a c 11.02% shareholding) intends to take up its full entitlement under the offer. Its second largest shareholder, Strategic Metallurgy, is currently understood not to be contemplating taking up its entitlements. This is not a surprise, given that it is a small, specialised metallurgical consulting firm and it is also consistent with its past approach to similar rights issues. However, its principal, Gary Johnson, is understood to intend to take up his rights. In addition, Lepidico’s financial adviser, Bacchus Capital, has informed management of its intention to take up its rights under the entitlement offer.

Following completion of the offer and the proposed merger/acquisition of Desert Lion, Lepidico will have the following number of shares in issue:

Exhibit 5: LPD share in issue following rights offer and Desert Lion merger/acquisition

Number of shares

Shares currently in issue

3,356,175,188

Shares offered pursuant to entitlement offer

372,908,354

Shares to be issued pursuant to Desert Lion merger/acquisition

633,841,875

Total after completion of entitlement offer and Desert Lion merger/acquisition

4,362,925,417

Shares currently in issue

Shares offered pursuant to entitlement offer

Shares to be issued pursuant to Desert Lion merger/acquisition

Total after completion of entitlement offer and Desert Lion merger/acquisition

Number of shares

3,356,175,188

372,908,354

633,841,875

4,362,925,417

Source: Lepidico

Valuation

It is our intention to update our forecasts and valuation shortly to account for all of these new initiatives. In our last report, Alvarrões resource increases 290%, published on 12 April 2019, we estimated that execution of a 7t/hour (5,000tpa) Phase 1 plant would result in free cash flow to Lepidico of A$71.2m per year once steady-state production had been achieved, which we valued at A$0.0684/share, after assuming US$30m (A$41.8m) of equity funding at the then prevailing share price of 3.1c/share. Note that this valuation did not ascribe any value to the Phase 2 plant or other development options.

Exhibit 6: Financial summary

Accounts: IFRS; year end June; A$000s

 

 

2015

2016

2017

2018

2019e

2020e

PROFIT & LOSS

Total revenues

 

 

9

116

127

171

16

19,948

Cost of sales

 

 

0

0

0

0

(2,090)

(11,170)

Gross profit

 

 

9

116

127

171

(2,074)

8,778

SG&A (expenses)

 

 

(455)

(617)

(912)

(5,284)

(3,868)

(3,146)

Other income/(expense)

 

 

0

0

0

0

0

0

Exceptionals and adjustments

Exceptionals

 

(16)

(415)

(878)

(2,171)

0

0

Depreciation and amortisation

 

 

(5)

(6)

(6)

(6)

(9)

(3,277)

Reported EBIT

 

 

(467)

(923)

(1,670)

(7,290)

(5,951)

2,354

Finance income/(expense)

 

 

(18)

(5)

128

70

24

121

Other income/(expense)

 

 

(559)

(448)

(3,815)

0

0

0

Exceptionals and adjustments

Exceptionals

 

0

(888)

0

0

0

0

Reported PBT

 

 

(1,044)

(2,263)

(5,357)

(7,220)

(5,927)

2,476

Income tax expense (includes exceptionals)

 

 

0

0

0

0

0

(619)

Reported net income

 

 

(1,044)

(2,263)

(5,357)

(7,220)

(5,927)

1,857

Basic average number of shares, m

 

 

178

465

1,802

2,624

3,803

4,705

Basic EPS (A$)

 

 

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

0.0

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

Property, plant and equipment

 

 

9

4

8

27

21,390

50,794

Goodwill

 

 

0

0

0

0

0

0

Intangible assets

 

 

0

16,204

16,698

19,027

19,027

19,027

Other non-current assets

 

 

1,485

715

1,620

730

730

730

Total non-current assets

 

 

1,494

16,922

18,326

19,783

41,147

70,551

Cash and equivalents

 

 

53

650

3,307

4,860

24,288

24,288

Inventories

 

 

0

0

0

0

1

1,662

Trade and other receivables

 

 

4

3,886

706

712

1,176

1,640

Other current assets

 

 

0

0

0

0

0

0

Total current assets

 

 

57

4,537

4,013

5,572

25,465

27,590

Non-current loans and borrowings

 

 

0

0

0

0

0

29,486

Other non-current liabilities

 

 

0

0

0

0

0

0

Total non-current liabilities

 

 

0

0

0

0

0

29,486

Trade and other payables

 

 

105

614

1,663

804

991

1,177

Current loans and borrowings

 

 

115

0

0

0

0

0

Other current liabilities

 

 

40

33

46

51

51

51

Total current liabilities

 

 

260

647

1,709

856

1,042

1,228

Equity attributable to company

 

 

1,292

20,812

20,630

24,500

65,570

67,427

Non-controlling interest

 

 

0

0

0

0

0

0

 

 

 

 

 

 

 

 

 

CASH FLOW STATEMENT

 

 

Profit for the year

 

 

(1,044)

(2,263)

(5,357)

(7,220)

(5,927)

1,857

Taxation expenses

 

 

0

0

0

0

0

619

Depreciation and amortisation

 

 

5

6

6

6

9

3,277

Share based payments

 

 

450

40

1,736

2,138

0

0

Other adjustments

 

 

(451)

1,036

(162)

2,066

0

0

Movements in working capital

 

 

(10)

132

133

(28)

(279)

(1,939)

Interest paid / received

 

 

0

0

0

0

0

0

Income taxes paid

 

 

0

0

0

0

0

(619)

Cash from operations (CFO)

 

 

(1,050)

(1,049)

(3,644)

(3,038)

(6,197)

3,195

Capex

 

 

(9)

(63)

(861)

(3,057)

(21,373)

(32,681)

Acquisitions & disposals net

 

 

0

32

122

110

0

0

Other investing activities

 

 

(563)

(80)

0

0

0

0

Cash used in investing activities (CFIA)

 

 

(572)

(111)

(739)

(2,947)

(21,373)

(32,681)

Net proceeds from issue of shares

 

 

1,505

1,872

7,040

7,555

46,998

0

Movements in debt

 

 

100

(115)

0

0

0

29,486

Other financing activities

 

 

0

0

0

0

0

0

Cash from financing activities (CFF)

 

 

1,605

1,757

7,040

7,555

46,998

29,486

Increase/(decrease) in cash and equivalents

 

 

(18)

597

2,657

1,570

19,428

0

Currency translation differences and other

 

 

0

0

0

(17)

0

0

Cash and equivalents at end of period

 

 

53

650

3,307

4,860

24,288

24,288

Net (debt) cash

 

 

(61)

650

3,307

4,860

24,288

(5,198)

Movement in net (debt) cash over period

 

 

(61)

711

2,657

1,553

19,428

(29,486)

Source: Lepidico sources, Edison Investment Research

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Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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New Zealand

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United Kingdom

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United States

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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United Kingdom

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1,185 Avenue of the Americas

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United States of America

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Lepidico and prepared and issued by Edison, in consideration of a fee payable by Lepidico. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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