IPO Wrap: We’re about to have a good indicator of whether lithium is really on the nose…and it’s called Leo
In 2022, 24 IPOs won and 39 fell; not too bad considering the state of the markets right now.
The big winners continue to be explorers, primarily those looking for battery metals or other forward-looking raw materials, such as copper or nickel.
The losers are almost everyone else, especially fintechs. Poor BeforePay (ASX:B4P) is down an absurd 92.67% since its IPO.
But even the hot lithium sector has been hit hard lately.
Crappy explorers can no longer advertise “lithium prospectivity” on existing moose pastures and expect a juicy rise in stock price.
Short-term producer Leo Lithium (ASX:LLL) – which listed at 11 a.m. AEST today – is no s..tco at all, but even the most profitable lithium stocks are currently hemorrhaging the market capitalization.
It will be interesting to see how the valuation assigned to LLL at the IPO is received in the open market.
Who is Leo Lithium?
Registration: June 23
IPO: $100 million at $0.70
The Firefinch (ASX:FFX) spin-off focuses on the ‘Goulamina’ lithium project in Mali, which is expected to be one of the largest hard-rock lithium mines in the world once it enters production in first half of 2024.
Goulamina is so advanced thanks to all the hard work Firefinch – then called Biriman – did during the last lithium boom.
Firefinch is to retain up to 20% of spun-off Leo, with its shareholders to receive a cash distribution of shares in the new company at no cost.
The project is being developed in a 50/50 joint venture with Ganfeng, the world’s largest lithium chemical producer. Ownership will be divided between LLL (45%), Ganfeng (45%) and the State of Mali (10%).
Ganfeng provides financing, levies and operational support to reduce development risks, making this project one of the few to come online in the next few years.
Goulamina: in figures
An October 2020 Definitive Feasibility Study (DFS) update arrived at a pre-tax net present value for the project of A$4.1 billion and an after-tax internal rate of return of 83% .
It’s high.
The capital cost of Phase 1 of the development (506,000 tonnes of spodumene concentrates per year) was estimated at US$255 million.
Stage 2, which will increase annual production to 831,000 tons, is expected to cost an additional $70 million.
The intention is to build, commission and accelerate Stage 1 before approving the Stage 2 expansion, which is expected to take approximately 18 months after the completion of Stage 1.
Ganfeng has already provided $130 million in financing as the acquisition cost for half of the joint venture.
Beyond that, Ganfeng must provide either A$40 million in debt or arrange up to $120 million in third-party debt.
This means Stage 1 is essentially fully funded through to production.
