425: Stardust Power and Global Partner Acquisition Corp II Discuss $490 Million Business Combination

Stardust Power and Global Partner Acquisition Corp II executives discuss their $490 million business combination and Stardust's plans to build a lithium refinery in Oklahoma.

Summary

• Stardust Power and Global Partner Acquisition Corp II (GPAC II) announced a $490 million business combination in November.
• Stardust Power plans to build a lithium refinery in Muskogee, Oklahoma, within the South Side Industrial Park of Fort Muskogee.
• The refinery site was chosen for its central location, logistical efficiency (access to highways, rail, and the largest inland water system in the US), and strong partnership with the Oklahoma government, including up to $257 million in incentives.
• The refinery will have two production lines totaling 50,000 tonnes per annum, with a phased approach to reduce risk by developing the first line and using its revenue to build the second.
• Major construction is expected to start at the end of the year or early next year.
• Stardust Power intends to use recycled wastewater from oil and gas producers as feedstock for the refinery, aligning with sustainability goals and potentially generating carbon credits.
• The company is seeking DOE and DOD grants and benefits from the Inflation Reduction Act, which creates a premium for American-manufactured lithium and tax incentives based on production.
• GPAC II chose Stardust Power due to its growth-oriented story, strong management team, and commitment to navigating the challenges of the energy and entitlements sector.
• The company is aiming to raise a PIPE (private investment in public equity) of between $100 and $150 million.
• The CapEx requirements for the refinery are estimated to be over $1.2 billion, which will be phased out to reduce risk.

Sentiment

Score: 8

Explanation: The document presents a positive outlook for Stardust Power, highlighting its strategic location, government support, sustainable practices, and strong management team. The focus on domestic lithium production and the potential for significant growth contribute to the positive sentiment.

Positives

• Strong central location in Oklahoma with excellent logistical efficiency.
• Strong partnership with the government, including up to $257 million in incentives.
• Access to a skilled workforce in energy engineering.
• Phased approach to refinery development reduces risk.
• Use of recycled wastewater aligns with sustainability goals and potentially generates carbon credits.
• Benefits from the Inflation Reduction Act, creating a premium for American-manufactured lithium.
• Strong support from oil and gas producers for wastewater recycling.
• Exceptional feedback from the market for the PIPE offering.
• Multiple opportunities for financing the company's growth, including project financing and government grants.

Negatives

• Spot market prices for lithium are volatile.
• The refinery project has a large CapEx requirement of over $1.2 billion.
• Developing this type of project in the United States today is not easy.

Risks

• The proposed business combination may not be completed in a timely manner or at all.
• Failure to satisfy the conditions to the consummation of the proposed business combination.
• The effect of the announcement or pendency of the proposed business combination on the Company's business relationships, performance, and business generally.
• Risks that the proposed business combination disrupts current plans of the Company and potential difficulties in the Company's employee retention as a result of the proposed business combination.
• The outcome of any legal proceedings that may be instituted against GPAC II or the Company related to the agreement and the proposed business combination.
• Changes to the proposed structure of the business combination that may be required or appropriate as a result of applicable laws or regulations or as a condition to obtaining regulatory approval of the business combination.
• The ability to maintain the listing of GPAC II's securities on the Nasdaq.
• The ability to implement business plans, forecasts, and other expectations after the completion of the proposed business combination, and identify and realize additional opportunities.
• The impact of the global COVID-19 pandemic.

Future Outlook

Stardust Power aims to build a resilient American supply chain for critical minerals, driven by increasing EV adoption and national security priorities. The company anticipates strong demand for battery-grade lithium products and sees now as a great time to develop and build its lithium refinery.

Management Comments

• Roshan Pujari: 'We are developing what will be one of, if not the largest lithium refineries in America.'
• Roshan Pujari: 'We prefer the use of lithium brines over a hard rock because it has a smaller carbon and environmental footprint.'
• Chandra Patel: 'We focused on this particular opportunity because of that general thesis and this management team and what it's been able to accomplish already in this sector.'
• Chandra Patel: 'One doesn't control market timing, but one controls the people you work with.'

Industry Context

The announcement comes amid growing interest in securing domestic lithium supplies for electric vehicle batteries and other applications. The Inflation Reduction Act is incentivizing domestic production, and geopolitical tensions are further emphasizing the need for resilient American supply chains.

Comparison to Industry Standards

• The document mentions Hatch Engineering as one of the best engineers in the space, suggesting that Stardust Power is aligning itself with industry leaders.
• The plan to build a 50,000 tonnes per annum lithium refinery positions Stardust Power as a potentially significant player in the American lithium market, aiming to be one of the largest in the country.
• The focus on sustainable practices, such as using DLE (Direct Lithium Extraction) and recycling wastewater, aligns with the growing industry trend towards environmentally friendly lithium production.

Stakeholder Impact

• Shareholders: Potential for value creation through the business combination and the development of a significant lithium refinery.
• Employees: Job creation in the construction and operation of the refinery.
• Customers: Access to a reliable and sustainable source of American-made lithium.
• Suppliers: Opportunities for oil and gas producers to generate revenue from wastewater recycling.
• Creditors: Potential for project financing and other debt arrangements.

Next Steps

• Complete the business combination between Stardust Power and GPAC II.
• Secure the necessary financing, including the PIPE offering, project financing, and government grants.
• Begin major construction of the lithium refinery at the end of the year or early next year.
• Develop the first production line and use its revenue to build the second.
• Establish partnerships with oil and gas producers for wastewater recycling.
• Secure long-term supply agreements with EV manufacturers and other OEMs.

Key Dates