Member Info for ceejay101

I mentioned yesterday that processing capacity for non-Chinese processors is limited. This is exactly why huayou has moved quickly.

The biggest problem for lithium is the supply chain. The three key parts are mining, processing, OEM. The Macquarie offtake discussions showed interest but it never really considered the whol supply chain. The processor wants the feedstock (subject to capacity) and the OEM wants secure lithium. Neither really want the mine. This is where Financiers (like Orion, Glencore, Trafigura etc) could step in and help build a deal that works across the supply chain.

They will only proceed if they can sort out a deal without execution risk (i.e. processing in place). The likes of Orion are already partnered with US government entities for co-investing in projects like Ewoyaa. The bit i struggle with is what a deal could look like, would it just be for Elevra JV stake and get Assore to block Huayou with Atlantic remaining independent or a full takeover.

On a separate note, people keep talking about Solgold here. Why did no-one take it out? I would suggest it was the high capex, from memory it was about $2bn. That seriously limits who can get involved. The constraint here is the supply chain! As

The next thing I've been looking into is who would be part of a consortium. We all know OEMs have cash so not to bothered about additional financing. The elephant in the room is spod processing capacity. It looks like China has all the spare capacity if you are not interested in IRA compliance. There are a couple of processors in Australia that would need to be brought on board and very quickly. It doesn't look like there is any spare capacity in Japan or South Korea.

It does seem that the western OEMs face more complex challenges which might explain why huayou were first out of the traps.

Out of interest, if the IER came in that the deal was poor and the assore withdrew support, do you think we would proceed independently with huayou in the JV?

One of the known unknowns is will a counter bid emerge and when. I dont think the issue is the economics, its the politics!

The spod from Ewoyaa is non-IRA compliant as Ghana does not have an FTA with the US. The workaround is that the spod needs refining in the US or an FTA country like Canada or Australia. This might be why western companies are reluctant to speed through to an offer. They want the offtake but not necessarily the mine ownership at this point. There is an alternative path which is a critical minerals agreement. The 6 months allows for MIIF/Ghanian government to get a Critical mineral agreement fast-tracked with the US to allow for IRA compliance. This is a broader prize as it opens up a future ghanian lithium market and the ability to refine, otherwise it will all get shipped to china. We've not had any response from MIIF on the deal and i think they will be Miffed in not getting the equity in the JV. It will be interesting to see what they say.

Lots of stupid questions from me today I'm afraid

1. Why didn't elevra just go to offtake funding, see the project developed and then flip to a higher bid multiple? Obviously their interest was north America but who walks away from what could be a cash machine

2. When did huayou approach the board? The rns language about jurisdictional risk either points to no MIIF involvement in the JV or that ratification hadnt been accounted for in the bid... Or something that we don't know

3. Does huayou bidding mean that any competitive bid is for Atlantic and the full JV? I can't see any Chinese bidders competing so down to the western companies.

4. Is it really 100% that the bid goes through? What if the ier says no? Atlantic might pursue other choices/alternatives.

@5toamillion - I wonder whether some of rns is a bit of a giveaway. Let's take the jurisdiction risk... Where does that come from.

I see it as invite for a western OEM to partner with MIIF on some sort of deal as only a Chinese company is willing to take the risk. It's the first I heard of jurisdictional risk.

Lithium from Ghana falls within the IRA, it's easily exported to the us and pretty sure OEMs from the west were interested in offtake. My understanding was that Elevra offtake was likely earmarked for Tesla but could be wrong.

Btw, huayou probably got to stage 2 offtake through Macquarie so didn't have to do further due diligence. The same will apply to others. The most interesting point for me is what kind of deal is made. An OEM could fund the full Dev with offtake and take a strategic share of Atlantic at a premium... A superior offer perhaps. It would take less than the full bid value and could still be worth more.

I thought this morning competitive bids will come after the IER, I'm now thinking it will be more competitive and bids will arrive soon.

I'm going reverse style as it's chronological.

The ugly- we have a low ball bid for 18.8p. we were dead ended and the board decided on a risk based view we would end up far too diluted without JV funding commitment

The bad - the will be no counterbid any time soon. We are closed shop and any bid will just face huayou having right of first refusal and will likely get matched. It's not in any other bidder to disrupt at this point. The price will drift for months and be below bid because of FX rates etc.

The good - the published ier will show the bid undervalues, I know that, you know that, everyone knows that... But what if spod prices are over $2k till then. The DFS is blown out of the water. Things called out on a risk basis in the recent rns become less valid. So what happens then.. huayou might push up the bid to a higher npv ratio. At that point the ier allows assore dissent, all of you grumble and a competitive process begins. This happens because we have gone to stage 2 offtake discussions, we probably even know that they had the cash available. Lots of companies on nda's have seen beneath the hood and know the value. OEMs will be sniffing to secure offtake which to them is worth a lot more than the current offer. You just need to look at the shortages they have to realise they will be involved.The end result might look different... We could get a higher takeout based on npv, offtake agreement with an OEM and then taking a strategic stake...

The Fugly, the bad and the good. The board are letting the process run and they know this is not quite the end game but the pressure is no longer with them. It's embarrassing that they are accepting this low offer but it is the starting point.

I'm trying to work through the motivations here of the main protagonists.

1. Atlantic are boxed in with the JV and cash funding. The easiest way to progress is through the bid process and see if this teases out further developments

2. Huayou wants to take out Atlantic at a low valuation, probably anticipating adding a bit more later. Fyi they have a record of taking lithium mines into production in record times. 2 years down to 9 Months.

3. Elevra recognise huayou will progress quickly and will dilute them with rapid cash calls, progress with litigation if required and remove their offtake. The question is whether their offtake or equity are equally important. It is also in elevras interest to resolve the current $6m dispute than to defer it when huayou are in charge.

4. Assore - were offering conditional support for the bid to see an end to the deadlock. They want ewoyaa and have been a supportive partner which suggests they won't walk away. Ewoyaa is the jewel in the crown for them rather than Atlantic.

How does this all roll together? The pressure is on elevra to do something. Atlantic have built in their own time and space with the bid process. Elevra could counter bid but I don't think they want to dilute elevra shareholders or take out loans to fund a takeover and development. If they can sort themselves out they will get capital from assore to fund the earn in. They keep the offtake and assore get a share of ewoyaa. It's the cheapest option for both parties. They would also have to put in a further enticement to make it a superior offer, perhaps buy a percentage of Atlantic shares at a premium. This would be far cheaper than a full takeover.

This outcome removes the JV frustration for Atlantic, guarantees elevra their earn in and gives assore a roadmap to production and more importantly equity at the project level.

Elevra held all the cards in the JV talks previously and we're happy to defer. Now they have to show their cards one way or another.

@RamonM - sorry I'm catching up on all the comments from today. You mention an interesting point, what will elevra do next?

We don't know if the JV discussions have ended and whether Atlantic have pushed the nuclear button. If the Chinese bidder has deep pockets they will happily dilute the earn in and go through arbitration. Could this bring elevra back to the table and remove the JV funding hurdle called out in the rns today

@RamonM - point 2 allows for competitive bids. My interpretation is that the right of first refusal is effectively a block to data room if the bid is matched. the competitive bidder is then unable to counter as have no data. What is your interpretation?

My sense is that the board have hit the pause button on the JV discussions and are now using the bid to flush out competitive bids in a longer timeline. The independent review will discredit the current bid and lead to a competitive process.

Forgot to mention as I will get told that a bid can come through at any point but does the right of first refusal and block on the data room deter a bidder for the time being

Today's Dumb question - has a further bid been blocked until documentation is issued later in the year?

Lots of people keep mentioning Solg. The biggest difference is the capex requirement. This is much more affordable compared to many other projects. I'm surprised the JV couldnt resolve the funding gap.

@Sheriff89 - its oh so quiet, no newsflow or anything. So what is happening? Take your pick from the following

JV funding/restructure discussions

Bid (that one is for you @EarEyeAm)

Nothing

My money is on the JV restructure, its sensitive and nothing can be formally communicated until fully signed off by parties involved. Whether that is debt on the JV for peak funding, equity swap (Elevra earn in funded partially by miif), the worst case of everything failing and litigation, and every other scenario in-between. Its been telegraphed in the most recent quarterly.

I'm hoping its debt on the JV as i reckon it can be RNS'd pretty quickly once the finer points of governance between Elevra and Atlantic are resolved. MIIF are only an inform so it can be done in shorter timeframes. The Equity swap involves three parties and is much more commercially sensitive so will drag over months. If its arbitration then good luck all.

Elevras position is that this is lower down the priority. The reality is that we know they cant meet the cash calls. Their position will probably change in 12 months so they are happy to defer any decision. Plus, why would they sell to MIIF and lose equity? We all know this will eventually be a cash cow. it also puts a price tag on the whole jv and by virtue of that Atlantic which makes it harder for the board to rebuff an offer if a price tag is established.

The JV taking on debt is the price of full steam ahead. Elevra pay monthly without overstretching and Atlantic see the project move to FID. If elevra have to be dragged over the coals then we will need the offtake before fid for financing.

I can tell you what scenario I prefer. As yet there is nothing to suggest any hostilities with our friends in elevra. As an additional note, I suspect debt funding requires very little JV control update. My view is that all this is already and the finer points on governance are being finalised. This could be weeks away as opposed to months with any JV earn in updates/equity deals

1. JV takes on debt to allow elevra monthly payments. They get over the peak capex problem

2. MIIF pay their share as already known

3. Atlantic get the JV to take on additional debt, say a further $10-20m

Points 1&2 are what allow both parties to progress. More importantly Atlantic be benefits as offtake funds are not required for FID.

Perhaps someone can identify what the difference in a bid post fid is with and without offtake already in place. I suspect the latter provides significant shareholder value... Fyi my assumption has always been that we get an offtake agreement soon. I'm now wondering whether it is better to drag out

To me this is just the $6m that was previously up for debate and not the earn in.

The funding debate between Atlantic and elevra has been going on for months and really came to a head with the ratification where sh#t just got real.

This has really been a game of who blinks first with Atlantic pulling the discussion forward by trying to demonstrate that Elevra won't pay the $6m and elevra trying to convince everyone it's the economics of the project. Essentially both are trying to show they have the cash if needed but that there is a choice. That is all old hat.... They are at the negotiating table sorting out a deal.

@Servalan - Ive mentioned a way to progress below which I reckon could be done fairly quickly compared to other arrangements. Please take a look as I'm interested in others picking it apart to see if it is workable or not.

How about this as an option, and its based on the premise that Elevra want to proceed but need the capex spread out.

Elevra, commit to the capex on a monthly basis e.g. $5m per month. The JV agrees to fund a portion through debt as we reach peak CAPEX. This allows the mine to progress, Elevra continue with their payment plan and earn-in and work can be expedited without Elevra's capital constraints. This allows banks to see that JV is putting their funds in first ahead of bank loans.

Why would the JV take on the debt and pay interest? Well the alternatives are Atlantic dilution, slower move to production, retains the JV legal structure and no arbitration.

@Major-Tom

From the RNS yesterday it doesn't look like the optimisation is being contested, otherwise timelines for resolution will be further extended. This is purely about who funds what and when.

"The ratification of the Mining Lease enables us to advance discussions with all our partners in the Project relating to Project funding and the establishment of an agreed pathway to Project FID, which will be led by the learnings of the work completed through H2 2025 to identify optimisations to the Project's design and engineering.