Lepidico: Offer closes, oversubscribed

Via its Karibib project in Namibia, Lepidico (ASX:LPD) is a vertically integrated lithium development business. This Edison client has IP-protected tech to produce lithium – and other valuable metals – from non-traditional hard rock minerals. In this news round-up:

• Company raises A$19m in gross proceeds.
• Cash comes from existing shareholders as well as new institutions and other professional investors.
• Funds raised after its lithium hydroxide crystals declared ‘much more pure’. 
• Notable sensitivities still include the price of lithium, the price at which it raises future equity and the risk of capex inflation. 

‘One stock with plenty of news swirling about it is lithium developer, Lepidico,’ wrote Lord Ashbourne in an Edison Morning Note to investors in late October.

Just days after his comments, the company then announced it had closed its Entitlements Offer, raising A$11.7m and a top-up placement of $7.3m.

According to Managing Director Joe Walsh: ‘Final subscriptions from the share registry were just under A$10.8m, representing 92% take-up. Of this, 50% was from accepted entitlements and 42% from shareholder oversubscriptions.

‘The shortfall placement bookbuild was closed after just two hours with more than A$20m in the book and considerable unsolicited investor interest continuing to be shown after this.’

Lepidico has advised that the cash is intended for the front-end engineering and design of its Phase 1 project, as well as lender due diligence. It hopes the latter will allow it to start critical path Stage 2 works, for both its concentrator and chemical plant.

Writing in the Morning Note, Lord Ashbourne opined that the raise is unlikely to be the only equity component of a full financing solution. ‘However,’ he went on, ‘it may be the last in which existing shareholders can participate, since Lepidico simultaneously announced ‘significant interest from strategic parties’.’

This included ‘an indicative offer for a substantial equity holding in the company at a premium to the current share price’.

It is also reasonable to assume that other Lepidico news helped attract investors. Shortly after announcing the raise, Lepidico told the market that test-work from its demonstration plant delivered lithium hydroxide crystals that were ‘much more pure’ than those via the sodium sulphate route. And that its by-product trials had resulted in ‘excellent separation of potassium sulphate from impurities and high recovery of caesium’.

Having also confirmed that the independent engineer’s review of the final pilot trial, key to securing debt finance, is well underway, Lepidico’s shares rose by 16.7%.

Of course, despite the progress, investors continue to bear risk. Notable sensitivities include the long-term price of lithium hydroxide, the price at which it raises future equity and the risk of capex inflation.

For a more detailed view of Lepidico’s prospects, read Edison’s most recent update.

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