Enter the US government

Lepidico 5 November 2020 Update
Download PDF

Lepidico

Enter the US government

DFC mandate signed

Metals & mining

5 November 2020

Price

A$0.007

Market cap

A$36m

A$1.4043/US$

Net debt* (A$m) at end-June 2020

0.4

*Includes Desert Lion Energy convertible

Shares in issue (post rights issue)**

5,185.7m

**Includes 230m shares (effectively) in Treasury

Free float

78%

Code

LPD

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.5)

(6.7)

(60.6)

Rel (local)

(16.4)

(8.1)

(57.3)

52-week high/low

A$0.02

A$0.01

Business description

Via its Karibib project in Namibia and unique IP, Lepidico is a vertically integrated lithium development business that has produced both lithium carbonate and lithium hydroxide from non-traditional hard rock lithium-bearing minerals using its registered L-Max® and LOH-Max™ processes.

Next events

Final investment decision

May 2021

Karibib site works commence

September 2021

Chemical plant commissioning

February 2023

Project fully operational

June 2023

Analyst

Charles Gibson

+44 (0)20 3077 5724

Lepidico is a research client of Edison Investment Research Limited

On 28 October, Lepidico (LPD) announced that it had signed a formal mandate with the US International Development Finance Corporation (DFC) to undertake an in-depth analysis and evaluation of the Karibib Phase 1 (LMax/LOH-Max) project for the purpose of determining whether it qualifies for DFC debt-based financing. This entry of a US federal government institution into the development of Lepidico’s Phase 1 project is consistent with the former’s attempt to secure the future supply of up to 35 metals and minerals deemed ‘critical’ for the ongoing health of the US economy – four of which can be produced by Lepidico. In addition to the credibility that the DFC lends Karibib, for the company, its involvement holds out the possibility of a higher (and more efficient) proportion of debt funding and a lower average interest rate.

Year end

Total revenues (A$m)

PBT
(A$m)

Cash from operations (A$m)

Net cash/(debt)*
(A$m)

Capex
(A$m)

06/19

0.0

(5.1)

(3.5)

10.4

(6.3)

06/20

0.0

(10.8)

(4.7)

(0.4)

(7.5)

06/21e

0.0

(4.4)

(2.8)

35.9

(1.3)

06/22e

0.0

(28.0)

(30.7)

(43.0)

(48.1)

Note: *Includes Desert Lion Energy convertible.

Bright Minz acquisition

In addition to its DFC announcement, on 29 October, Lepidico announced that it had also entered into an agreement to acquire Bright Minz, which holds the LOH-Max process technology, designed to produce high-purity lithium hydroxide monohydrate from a lithium sulphate intermediate. In the first instance, this will allow Lepidico to market a technology to conventional spodumene converters to produce lithium hydroxide instead of lithium carbonate, at potentially lower capex and opex costs and without the production of an unwanted sodium sulphate by-product. In the second, it will bring all the process technologies employed by the Phase 1 project under one roof, thereby streamlining the process for any future third-party licences and potentially forming the core of a licensing and royalty business for Lepidico.

Valuation: 5.03cps plus expansion/extension options

The Karibib project is already fully permitted under a granted mining licence and its development has been materially de-risked by Lepidico’s running of an earlier pilot plant campaign. LPD is currently investigating funding and offtake options prior to making a final investment decision targeted for May 2021. Before the entry of the DFC into the project, we estimated a valuation for Lepidico of 4.82 Australian cents per share. All other things being equal, this would have increased by 7.4%, to 5.18c/share on the involvement of the DFC if it had not been for the strengthening of the Australian dollar vs the US dollar, which restrained the increase to 5.03c/share (assuming that LPD can raise equity at a price of 2.9c/share; see pages 5–-6 for more details). However, it leaves Lepidico needing to raise only A$40.4m in equity in order to fund the project (Edison figure) compared with a prior forecast of A$60.5m. Note that this valuation does not attribute any value to Lepidico from either a 20,000tpa Phase 2 plant or the supply of concentrate from any third- party sources or any other development options (eg technology licensing).

US DFC formal mandate to evaluate Karibib project

On 28 October, Lepidico announced that it had signed a formal mandate with the US DFC to undertake an in-depth analysis and evaluation of the Karibib Phase 1 (L-Max/LOH-Max) project for the purpose of determining whether it qualifies for DFC financing.

Background

The US is heavily reliant on imports of certain mineral commodities that are perceived as being vital to its security and economic prosperity. Among other things, this dependency creates a strategic vulnerability for the US to adverse foreign government action, natural disasters and other events that could disrupt the supply chains of these minerals. Pursuant to Executive Order 13817 of 20 December 2017, ‘A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals’, on 16 February 2018 the secretary of the interior presented a draft list of 35 mineral commodities deemed critical under the definition provided in the Executive Order. After due consideration, the Department of the Interior finalised (albeit not permanently) the draft list of the 35 critical minerals as follows: aluminium (bauxite), antimony, arsenic, barite, beryllium, bismuth, caesium, chromium, cobalt, fluorspar, gallium, germanium, natural graphite, hafnium, helium, indium, lithium, magnesium, manganese, niobium, platinum group metals, potash, the rare earth elements group, rhenium, rubidium, scandium, strontium, tantalum, tellurium, tin, titanium, tungsten, uranium, vanadium and zirconium. While ‘final’, the list is not a permanent list, but is subject to periodic updates reflecting, among other things, prevailing supply and demand conditions, the concentration of production and prevailing policy priorities.

The Executive Order effectively recognises – and seeks to reverse – the dominance that China, in particular, has achieved over the course of the past 20 years in the supply of the above metals and minerals and the fact that the US, in many cases, is now almost entirely absent from their supply chain logistics. As such, the list will be the initial focus of a multi-agency strategy to implement the US president’s Executive Order to break America's dependence on foreign minerals. Among other things, the initiative includes:

a strategy to reduce the nation’s reliance on critical minerals;

the status of recycling technologies;

alternatives to critical minerals;

options for accessing critical minerals through trade with allies and partners;

a plan for improvements to mapping the US and its mineral resources;

recommendations to streamline lease permitting and review processes; and

ways to increase discovery, production and domestic refining of critical minerals.

Of the 35 critical minerals cited by the US government, Lepidico’s Karibib project is intended to produce four (lithium, potash, caesium and rubidium). Two of these – caesium and rubidium – are on a short list of 14 metals and minerals, for which the US is 100% import dependent. Given therefore that Lepidico has delineated the world’s only caesium and rubidium resources and reserves at Karibib, it is perhaps unsurprising that the project is of material interest to the federal government and the DFC in their quest to secure future supply for the benefit of the US economy.

Conditions and process

Within the context of the formal mandate signed with the DFC, Lepidico has received an indicative, non-binding term sheet in respect of its requested debt funding for the Phase 1 project in Namibia. In order to qualify fully for debt funding, the project will be required to have a US nexus and, since it does not have a US footprint, this condition may be satisfied instead by an offtake agreement with a US-based consumer of the metals and minerals in question.

In the meantime, the DFC has completed preliminary due diligence on the project, including validating its definitive feasibility study (DFS), its Environmental & Social Impact Assessment (ESIA) statement and its Environment & Social Management Plan (ESMP). However, while the due diligence will be performed over the integrated project (including the Abu Dhabi chemical plant), the DFC’s remit is only to lend to developing countries and therefore we expect it would only provide financing to the Karibib mining and concentration operation in Namibia. The DFC’s due diligence to date has led to the project being listed as a Category B project with limited ESIA impacts and excellent environmental and social principles. The categorisation of projects by the DFC is on a scale from A to D, where A is worst (eg significant adverse environmental and/or social impacts) and C is best (eg minimal adverse environmental or social impacts), and D is reserved for financial intermediaries. Category B projects are likely to have limited adverse environmental and/or social impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. Category B projects are considered medium risk. For these reasons, the scope of environmental and social assessment for Category B projects is narrower than that required for Category A projects. Examples of Category B projects typically include small- to medium-scale housing developments in urban areas, restaurants and light manufacturing. As such, any involvement of the DFC has the potential to be extremely beneficial to Lepidico’s environmental, social and governance (ESG) credentials.

Political backdrop

Lepidico’s discussions with the various departments in the US federal government, regarding both project funding and securing appropriate offtake agreements for critical minerals, are expected to be with non-political appointees and the tone of their negotiations is seen as bipartisan within the context of the US election. In addition, the Democrat stance towards the issue of critical metals and minerals is believed to be similar to that of the Republicans, albeit differently articulated, but with the same recognition of the overwhelming strategic imperative to secure safe sources of supply for critical raw materials. As such, we perceive little risk from the (as yet undeclared) outcome of the US presidential election.

Consequences

Whereas we had originally assumed a 60:40 debt:equity ratio over the whole, integrated Phase 1 L-Max/LOH-Max project, the involvement of the DFC could increase this level to 80% debt (albeit over the Namibian, Karibib portion of the project only). A summary of the potential differences in overall leverage for the integrated project relative to our prior assumption is provided in the table below:

Exhibit 1: L-Max/LOH-Max Phase 1 project debt:equity assumption (updated with DFC vs prior)

Prior assumption

Updated assumption with DFC

Project area

US$m

Debt
(%)

Equity
(%)

Debt
(US$m)

Equity (US$m)

Debt
(%)

Equity
(%)

Debt
(US$m)

Equity (US$m)

Karibib

Initial capex

42.8

60

40

25.7

17.1

80

20

34.2

8.6

Working capital

4.9

60

40

2.9

2.0

80

20

3.9

1.0

Subtotal

47.7

60

40

28.6

19.1

80

20

38.1

9.6

Abu Dhabi

Initial capex

96.2

60

40

57.7

38.5

60

40

57.7

38.5

Working capital

11.1

60

40

6.7

4.4

60

40

6.7

4.4

Subtotal

107.3

60

40

64.4

42.9

60

40

64.4

42.9

Total

Initial capex

139.0

60

40

83.4

55.6

66

34

91.9

47.1

Working capital

16.0

60

40

9.6

6.4

66

34

10.6

5.4

Grand total

155.0

60

40

93.0

62.0

66

34

102.5

52.5

Source: Edison Investment Research, Lepidico

Readers should note that the capex assumptions shown in Exhibit 1 are exactly those made in our note Valuation update post-feasibility study, published on 20 July 2020. Insofar as they may appear different, the difference may be explained by the explicit application of a US$4.9m (13%) contingency to initial mining capex of US$37.9m, in particular, to give a total of US$42.8m for the Karibib portion. Elsewhere, the split in working capital of US$16.0m in total is assumed to occur pro rata to the split in initial capex between the Karibib mine and concentrator and the Abu Dhabi chemical plant.

In addition to a 6pp increase in the potential level of financial leverage applicable to the project (Exhibit 1), the involvement of the DFC in the financing arrangements of the project may also have other benefits. In the first instance, DFC funding represents, in our view, some of the most competitive in the world in terms of interest rates – eg 5–6% in some recent transactions compared to typical debt financing rates from the high-yield market during the last phase in the financing cycle for lithium projects in the order of 11–14% (eg Nemaska 11.25% in US dollar terms). For alternative providers of debt finance, the involvement of the DFC may also act as a guarantor of credibility of the project. This may allow them the option of riding on the coat tails of the DFC as far as due diligence in concerned. In addition, the increase of confidence in the project engendered by the involvement of the DFC could increase competition among commercial lending banks seeking to be involved in the project and thereby improve their lending terms.

LOH-Max technology acquisition

On 29 October, the company announced that it had entered into an agreement to acquire Bright Minz. Controlled by one of Lepidico’s shareholders, Gary Johnson, and owned by the principals of Strategic Metallurgy, Bright Minz holds the LOH-Max process technology, designed for the production of high-purity lithium hydroxide monohydrate from a lithium sulphate intermediate.

Consideration for the acquisition will be a royalty in relation to any third-party LOH-Max licences that Lepidico may enter into and a minor cash payment of A$10,000 as reimbursement to the Bright Minz shareholders for establishment costs incurred by them. As usual, the acquisition is subject to certain conditions precedent, including the completion of due diligence, receipt of required regulatory and/or shareholder approvals and finalising a royalty agreement with the original shareholders of Bright Minz for the royalty stream on any third-party LOH-Max licences.

In the first instance, acquiring LOH-Max will bring all the process technologies employed by the Phase 1 project under one roof, thereby streamlining the process for any future third-party licences. In the second, Bright Minz owns the body of work conducted by Strategic Metallurgy (Lepidico’s largest shareholder) that details the costs and processes required at the back end of the spodumene conversion process to produce lithium hydroxide monohydrate from a lithium sulphate intermediate product. Compared to conventional processes, this technology is reported to result in a c US$50m capex reduction (as the sodium sulphate circuit is obviated), a quantifiable opex saving and an improvement in metallurgical recoveries for a typical 20,000tpa spodumene converter. The absence of a sodium sulphate circuit, in particular, is important, since the global sodium sulphate market is very mature, in which there is a degree of oversupply. As such, the world has a growing requirement for lithium hydroxide without the need for a simultaneously increased supply of sodium sulphate as an (effectively unwanted) by-product. In addition, LOH-Max is reported to be less power intensive and to have a smaller carbon dioxide footprint relative to conventional spodumene conversion. As a result, the LOH-Max technology purchased by Lepidico is expected to be of interest to conventional spodumene converters and could form the core of a licensing and royalty business for the company (see pages 7–8 of our note Piloting its way through, published 9 October 2018). Note however that one of the specific terms of the agreement with Bright Minz is that the Lepidico group will retain the right to use LOH-Max on a royalty-free basis.

Valuation

Project

With the caveat that costs were estimated to an accuracy of ±15%, Lepidico’s DFS calculated a project NPV8 for the integrated Karibib mining and chemical plant operation of US$221m, or A$310m (6.3c/share) at the current foreign exchange rate of A$1.4043/US$ (cf an implied A$1.5385/US$ used in the DFS). Note that this per-share valuation excludes 230m shares issued as collateral under Lepidico’s Controlled Placement Agreement (CPA) with Acuity Capital, which are deemed by Edison to be held in Treasury, until such time as they are actually issued (which may be never).

In our report Gold stars and black holes, we calculated a mean enterprise value (EV) for companies with projects at the DFS stage of development of 30.9% of project net present value (NPV) (ranging up to 133.5%). This alone would imply an immediate valuation for Lepidico of 1.9c/share (ranging up to 8.4c/share), excluding trivial FY20 year-end net debt of 0.009c/share.

Company

Our valuation of Lepidico varies from our value of the integrated Karibib mining and chemical plant project in that it takes into account Lepidico’s 80% interest in the Namibian mine (but not the Abu Dhabi chemical plant), which will give rise to both a tax paying position in Namibia and a minority interest in the profits generated from mining operations. It also assumes ongoing corporate costs in the order of A$3.1m pa. Hitherto, our company model has assumed that Lepidico will raise this equity at a price of 2.9c/share (as set out in our report Valuation update pending feasibility study, published on 6 April 2020). While this price is significantly higher than the current share price of 0.7c, we note that companies with projects at the DFS stage of development are typically valued at 30.9% of project NPV (up to 133% of NPV), which would imply an immediate valuation for Lepidico of 1.9–8.4c/share; we therefore still believe that a near-term share price of 2.9c is achievable, as per the paragraph above, especially in the event of the successful conclusion of US offtake negotiations. In addition, management has indicated that it would be unlikely to commit to raising equity at much below this price. Hence, we continue to show the results of our analysis on this basis. However, we also note that Lepidico’s share price has been below this level since early June 2019 and hence we also show the results of the analysis with equity raisings conducted at a series of different prices (the current share price, in particular) in the ‘Future equity funding price’ section of the note, below.

In our last note on the company (Valuation update post-feasibility study, published 20 July 2020), we calculated a value for LPD’s shares of 4.55c plus 0.27c for the value of the envisaged loan to the minority shareholders in the Namibian mining and concentrating operation. For the purposes of our updated valuation – and in the light of the involvement of the DFC in the project – we have made the following changes relative to our previous financial model:

We have updated the model to reflect Lepidico’s full-year results to the end of June 2020.

We have assumed a 6pp increase in the maximum leverage ratio of the company, from 60% to 66%, as per Exhibit 1. Note that, as a consequence of this assumption, we calculate that Lepidico will be required to raise A$40.4m in equity in FY21, rather than A$60.5m previously (see Exhibit 5).

We have assumed that the average interest rate payable on net debt by the company will reduce from 11.0% to 9.1% (being 62.8% of the debt attracting an interest rate of 11.0% and 37.2% of the debt assumed to be DFC financed at an interest rate of 6.0% for the Karibib portion of the project; see Exhibit 1).

We have updated our future FX rate expectation from A$1.4545/US$ to A$1.4043/US$.

In the wake of these changes, our (discounted) valuation of Lepidico’s future (maximum potential) dividend stream to shareholders increases by almost 5%, from 4.55c/share to 4.75c/share, as shown in the graph below (or by more than 20%, from 2.48c to 2.98c if the equity raising is conducted at the current share price of 0.7c).

Exhibit 2: Edison estimate of future Lepidico EPS and (maximum potential) DPS

Source: Edison Investment Research

To this valuation of 4.75c/share should then be added the value of Lepidico’s envisaged future loan to the minority shareholders in the Namibian mining and concentrating operation, which we estimate to be 0.28c/share (cf 0.27c/share previously), to result in a total value for Lepidico’s shares of 5.03c/share (cf 4.82c/share previously), based solely on its Phase 1 project.

Note that this valuation treats all of the convertible bond that Lepidico acquired with its purchase of Desert Lion as conventional debt. However, under the terms of the note, C$1m must be repaid at maturity and the remaining C$4m may be converted, at the noteholder’s discretion, into Lepidico equity at a price of 3.70 Canadian cents (3.95 Australian cents at the time of writing) at any time prior to maturity, which is 7 December 2020. Interest on the convertible note was prepaid to the maturity date. If the C$4m convertible component were instead fully converted into 108m Lepidico shares, our valuation of the maximum potential dividends payable to shareholders reduces by less than 1%, from 4.75c/share to 4.73c/share.

A graph of the contribution of each of the individual assumptions’ effects on the valuation of Lepidico is as follows:

Exhibit 3: Lepidico valuation change, November 2020 vs July 2020 (Australian cents per share)

Source: Edison Investment Research

Future equity funding price

Our financial model assumes that Lepidico will raise A$40.4m in mid-calendar 2021 (cf A$60.5m previously) in order to achieve a future, maximum net debt:equity ratio of 66:34 (cf 60:40 previously) and that it will raise this equity at a share price of 2.9c, as previously noted. Exhibit 4 demonstrates the sensitivity of our valuation to variations in this price:

Exhibit 4: Lepidico valuation sensitivity to future equity funding price

Equity funding price (cents/share)

0.5

0.6

0.7

0.8

0.9

1.0

1.8

2.0

2.9

4.0

5.0

5.52

Previous valuation*

LPD valuation (cents/share)

2.12

2.39

2.63

2.84

3.03

3.21

4.15

4.31

4.82

5.20

5.43

5.52

Change vs base case (%)

-56.0

-50.4

-45.4

-41.1

-37.1

-33.4

-13.9

-10.6

u/c

+7.9

+12.7

+14.5

Updated valuation

LPD valuation (cents/share)

2.64

2.91

3.15

3.36

3.54

3.70

4.51

4.63

5.03

5.30

5.46

5.52

Change vs base case (%)

-47.5

-42.1

-37.4

-33.2

-29.6

-26.4

-10.3

-8.0

u/c

+5.4

+8.5

+9.7

Uplift cf ‘previous’ (%)

+24.5

+21.8

+19.8

+18.3

+16.8

+15.3

+8.7

+7.4

+4.4

+1.9

+0.6

u/c

Source: Edison Investment Research. Note: *See Exhibit 18 in our note, Valuation update post-feasibility study, published on 20 July 2020.

Exhibit 5: Financial summary

Accounts: IFRS; year-end 30 June; A$000s

 

 

2015

2016

2017

2018

2019

2020

2021e

2022e

INCOME STATEMENT

Total revenues

 

 

9

116

127

171

2

47

0

0

Cost of sales

 

 

0

0

0

0

0

0

0

(23,778)

Gross profit

 

 

9

116

127

171

2

47

0

(23,778)

SG&A (expenses)

 

 

(455)

(617)

(912)

(5,284)

(4,006)

(4,904)

(3,146)

(3,146)

Other income/(expense)

 

 

0

0

0

0

0

0

0

0

Exceptionals and adjustments

 

(16)

(415)

(878)

(2,171)

(1,150)

(2,740)

0

0

Depreciation and amortisation

 

(5)

(6)

(6)

(6)

(8)

(1,208)

(1,208)

(1,208)

Reported EBIT

 

(467)

(923)

(1,670)

(7,290)

(5,162)

(8,805)

(4,354)

(28,132)

Finance income/(expense)

 

(18)

(5)

128

70

57

17

(39)

179

Other income/(expense)

 

(559)

(448)

(3,815)

0

0

0

0

0

Exceptionals and adjustments

 

0

(888)

0

0

0

(2,026)

0

0

Reported PBT

 

 

(1,044)

(2,263)

(5,357)

(7,220)

(5,105)

(10,814)

(4,393)

(27,953)

Income tax expense (includes exceptionals)

 

 

0

0

0

0

0

696

0

0

Reported net income

 

 

(1,044)

(2,263)

(5,357)

(7,220)

(5,105)

(10,118)

(4,393)

(27,953)

Basic average number of shares, m

 

 

178

465

1,802

2,624

3,272

4,568

5,625

6,294

Basic EPS (A$)

 

 

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

(0.0)

BALANCE SHEET

 

 

Property, plant and equipment

 

 

9

4

8

27

20

1,904

2,012

48,953

Goodwill

 

 

0

0

0

0

0

0

0

0

Intangible assets

 

 

0

16,204

16,698

19,027

22,925

23,870

23,870

23,870

Other non-current assets

 

 

1,485

715

1,620

730

27,469

42,798

42,798

42,798

Total non-current assets

 

 

1,494

16,922

18,326

19,783

50,414

68,573

68,681

115,622

Cash and equivalents

 

 

53

650

3,307

4,860

13,660

4,793

41,100

41,100

Inventories

 

 

0

0

0

0

0

0

0

0

Trade and other receivables

 

 

4

3,886

706

712

1,869

1,767

1,767

7,695

Other current assets

 

 

0

0

0

0

0

0

0

0

Total current assets

 

 

57

4,537

4,013

5,572

15,529

6,560

42,867

48,795

Non-current loans and borrowings

 

 

0

0

0

0

3,276

5,215

5,215

84,114

Other non-current liabilities

 

 

0

0

0

0

0

10,055

10,055

10,055

Total non-current liabilities

 

 

0

0

0

0

3,276

15,271

15,271

94,169

Trade and other payables

 

 

105

614

1,663

804

10,940

565

957

2,880

Current loans and borrowings

 

 

115

0

0

0

0

0

0

0

Other current liabilities

 

 

40

33

46

51

86

108

108

108

Total current liabilities

 

 

260

647

1,709

856

11,026

672

1,064

2,988

Equity attributable to company

 

 

1,292

20,812

20,630

24,500

53,252

52,404

88,427

60,475

Non-controlling interest

 

 

0

0

0

0

(1,610)

6,785

6,785

6,785

CASH FLOW STATEMENT

 

 

Profit for the year

 

 

(1,044)

(2,263)

(5,357)

(7,220)

(5,105)

(10,118)

(4,393)

(27,953)

Taxation expenses

 

 

0

0

0

0

0

(696)

0

0

Depreciation and amortisation

 

 

5

6

6

6

8

1,208

1,208

1,208

Share based payments

 

 

450

40

1,736

2,138

520

1,027

0

0

Other adjustments

 

 

(451)

1,036

(162)

2,066

664

4,716

0

0

Movements in working capital

 

 

(10)

132

133

(28)

410

(1,509)

392

(4,005)

Interest paid/received

 

 

0

0

0

0

0

0

0

0

Income taxes paid

 

 

0

0

0

0

0

696

0

0

Cash from operations (CFO)

 

 

(1,050)

(1,049)

(3,644)

(3,038)

(3,504)

(4,676)

(2,793)

(30,750)

Capex

 

 

(9)

(63)

(861)

(3,057)

(6,251)

(7,452)

(1,316)

(48,149)

Acquisitions & disposals net

 

 

0

32

122

110

0

416

0

0

Other investing activities

 

 

(563)

(80)

0

0

0

0

0

0

Cash used in investing activities (CFIA)

 

 

(572)

(111)

(739)

(2,947)

(6,251)

(7,036)

(1,316)

(48,149)

Net proceeds from issue of shares

 

 

1,505

1,872

7,040

7,555

18,462

3,523

40,416

0

Movements in debt

 

 

100

(115)

0

0

0

0

0

78,899

Other financing activities

 

 

0

0

0

0

0

0

0

0

Cash from financing activities (CFF)

 

 

1,605

1,757

7,040

7,555

18,462

3,523

40,416

78,899

Increase/(decrease) in cash and equivalents

 

 

(18)

597

2,657

1,570

8,707

(8,190)

36,307

0

Currency translation differences and other

 

 

0

0

0

(17)

93

(678)

0

0

Cash and equivalents at end of period

 

 

53

650

3,307

4,860

13,660

4,793

41,100

41,100

Net (debt)/cash

 

 

(61)

650

3,307

4,860

10,385

(422)

35,885

(43,014)

Movement in net (debt)/cash over period

 

 

(61)

711

2,657

1,553

5,525

(10,807)

36,307

(78,899)

Source: Company reports and accounts, Edison Investment Research. Note: FY19 balance sheet is Lepidico’s stated balance sheet consolidated with Edison’s estimate of Desert Lion’s balance sheet as at 30 June 2019, converted into Australian dollars.


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 research department of Edison 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 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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

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

1185 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

1185 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 research department of Edison 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 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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

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

1185 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

1185 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

Share this with friends and colleagues