LTR 1.18% 43.0¢ liontown resources limited

Btw, I think BHP wouldn't make a JV with LTR if wants to involve...

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    Btw, I think BHP wouldn't make a JV with LTR if wants to involve in lithium business. BHP would prefer to buy the KV Project out and pay the price whatever it is.

    When a giant company like BHP decides to enter a a new business segment, they act very slow, they check everything in the sector, they try to buy the best available. They chose the target company, then make the due diligence for long time by making the necessary agreements. So it takes a long time to see the end decision on the news.

    I know BHP did this kind of thing in Aug. 2010. BHP wanted to get into potash fertiliser market. Yes it was not a metal but it was an underground mining product; Potash (KCl)

    BHP made all-cash offer to acquire PotashCorp for US$ 40b. However their bid wasn't successful. PotashCorp didn't sell itself at that price. (I know the whole story but it's too long to tell here)

    When I saw that on the news I worked 2 days without much sleep to find out the best potash stock in ASX I could buy in. I found ELM and I put all my money in ($200k). (It was ELM. I made 4 fold from that in 6 months after drilling and finding a lot of potash).

    • My first point is, if BHP can make a decision to enter the fertiliser market, then BHP should immediately make the decision to enter the lithium market if haven't already made it. it is obvious that lithium market is going to be much bigger than potash market. And it's a vital product for the transformation of whole economy and sub-econimies related to it.

    • Also my other point is if BHP wants to buy KV Project, then they will have to pay much higher price per Li2O content of KV resource than what Wesfarmers paid per Li2O content of Earl Grey deposit to Kidman Resources.

    Let's keep in mind that Wesfarmers made that offer in May 2019, nearly 2 years ago, when the lithium price was at the bottom and lithium companies are suffering. It's different now as you now.

    WES paid $775m for half of Earl Grey deposit.
    WES paid %545 per tonne of Li2O content.

    There was 1,417,500t L2O content in it
    (half of 2,835,000t Li2O)
    1,417,500t Li2O x $545/t = $772m

    KDR had half of 189mt @1.50% Li2O resource. (Total 2,835,000t Li2O)

    LTR has 156mt @1.50% (Inc. tantalum credits)
    LTR has total of 2,340,000t Li2O content

    The value of KV Project resource is as below if we get the WES-KID deal for benchmarking.
    2,340,000t x $545/t = $1,278m

    However I don't think LTR would sell the tonne of Li2O content for $545 now.
    We are living in different times.
    LTR would sell it at least 30% more. (may be much more but let's be conservative for now)

    $1,278 x 1.3 = $1,661m

    It implies to 90c per share.

    Btw, let's look at the thing from another point of view

    • Wesfarmers a fertiliser company, and it has entered in lithium mining business 2 years ago.
    • Once upon a time, BHP wanted to involve in fertilser business.
    • Now, if BHP is not going to involve in lithium business without much delay, and miss buying KV project
    • then there is something seriously wrong about BBHP's management IMO.

    I am also wondering what RIO, Wesfarmers, FMG and others are thinking about KV project.
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