425: Stardust Power Aims to Lead Americas Energy Future with Battery-Grade Lithium Manufacturing

Stardust Power, a development-stage American manufacturer of battery-grade lithium, is pursuing a business combination with GPAC II to become a publicly listed company and establish a significant lithium refinery in Oklahoma.

Summary

• Stardust Power is an American manufacturer focused on producing battery-grade lithium for energy storage and other technologies.
• The company plans to build a lithium refinery in Muskogee, Oklahoma, with a potential capacity of 50,000 tons annually.
• Stardust Power entered a definitive agreement with GPAC II on November 21, 2023, to become a publicly listed company on Nasdaq under the ticker symbol 'SDST'.
• The transaction is expected to provide up to $50 million of gross proceeds to Stardust Power through a PIPE or similar financing transaction.
• The company aims to use sustainable processes, including renewable energy and water recycling.
• Stardust Power anticipates benefiting from up to $257 million in incentives from the State of Oklahoma, subject to meeting milestones.
• The company is also seeking federal grants and loan program incentives.
• The pro forma enterprise value of the transaction is approximately $493 million.
• Stardust Power's existing shareholders will roll 100% of their equity and will own a pro forma equity ownership of 84.5 % at close.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for Stardust Power, highlighting its strategic location, sustainable processes, and potential for growth in the lithium market. However, it also acknowledges the risks associated with being a development-stage company and the uncertainties surrounding the business combination and financing.

Positives

• Stardust Power's strategic location in Oklahoma provides access to resources, transportation, and a skilled workforce.
• The company is focused on sustainable lithium production processes.
• The potential for significant state incentives could reduce the refinery's costs.
• The company has secured partnerships with experienced engineering and technology firms.
• The management team has experience in finance, construction, and lithium extraction.
• The company is eligible for up to $257 million in incentives from the State of Oklahoma, contingent on meeting specific milestones.

Negatives

• Stardust Power is a development-stage company with a limited operating history.
• The company's ability to secure additional financing is not guaranteed.
• The company's eligibility for state and federal incentives is subject to meeting specific requirements.
• The company's success depends on the demand for electric vehicles and battery-grade lithium.
• The company's success depends on the ability of their partners for lithium extraction from brine and their ability to secure capital for the implementation of brine processing plants.

Risks

• The proposed business combination may not be completed in a timely manner or at all.
• Stardust Power may not be able to secure government benefits described in the presentation.
• The anticipated growth of the lithium industry may not be achieved.
• The company's future performance is difficult to evaluate due to its limited operating history.
• There is no guarantee that the company's development will result in the commercial production of lithium from brine sources.
• The company faces numerous risks related to exploration, construction, and extraction of brine by its suppliers.
• The company's long-term success will depend on its ability to generate revenues, achieve and maintain profitability, and develop positive cash flows from its battery-grade lithium production activities.
• The company may be unable to qualify for existing federal and state level grants and incentives, or the grants and incentives may not be released as quickly or efficiently as anticipated.
• The company is dependent upon key management employees.
• Lithium prices are subject to unpredictable fluctuations.
• The company's business and operations may be significantly disrupted upon the occurrence of a catastrophic event, information technology system failures, or cyberattack.
• The company identified material weaknesses in its internal control over financial reporting.

Future Outlook

Stardust Power aims to become a leading domestic supplier of battery-grade lithium, contributing to U.S. energy independence and benefiting from the increasing demand for lithium-ion batteries in electric vehicles and other applications. The company plans to scale up production in phases and pursue vertical integration.

Management Comments

• Oklahoma Governor Kevin Stitt: 'As we see more energy manufacturers moving to our state, due in part to our competitive, performance based incentives, Stardust Powers new lithium refinery will create hundreds of new jobs while cementing Oklahomas place as the best state in the nation for critical mineral manufacturing. Im proud to welcome Stardust Power to Oklahoma, and I applaud their commitment to American energy dominance.'

Industry Context

The presentation highlights the increasing demand for lithium driven by the growth of the electric vehicle market and the need for a secure domestic supply chain. It also mentions government initiatives and incentives aimed at supporting the development of battery manufacturing and critical mineral production in the United States.

Comparison to Industry Standards

• The presentation includes a benchmarking analysis comparing Stardust Power's EV / Total Stated Capacity to other publicly listed lithium companies.
• The US Listed Public Comps have a mean of 9.0x and a median of 9.5x.
• International Public Comps have a mean of 13.9x and a median of 10.0x.
• Piedmont Lithium's Lithium Carbonate Equivalent (LCE) is calculated based on 60ktpa of LiOH at a 0.880 to 1 LCE ratio.
• Liontown Resources Lithium Carbonate Equivalent (LCE) is calculated based on 6.74t of SC6.0 to 1.00t LCE.
• Core Lithium's Lithium Carbonate Equivalent (LCE) is calculated based on 180ktpa SC at 5.5% or 7.35t of SC to 1.00t LCE.

Stakeholder Impact

• Shareholders: Potential for increased value through public listing and growth of Stardust Power.
• Employees: Creation of new jobs in Oklahoma.
• Customers: Access to a secure domestic supply of battery-grade lithium.
• Suppliers: Opportunities to partner with Stardust Power in the lithium supply chain.
• Creditors: Potential for new financing opportunities.

Next Steps

• Complete the business combination with GPAC II.
• Secure additional financing through a PIPE or similar transaction.
• Obtain necessary permits and approvals for the lithium refinery.
• Begin construction of the refinery in Muskogee, Oklahoma.
• Negotiate final, binding terms related to current non-binding memoranda of understanding and letters of intent for the supply and offtake agreements.
• Commence commercial production of battery-grade lithium.

Key Dates