The Offer

Company Overview

The Company was established on September 27, 2021, and is an unlisted Australian public company limited by shares that is not listed. The Company has engaged in Option Agreements with the Project Vendors to acquire 100% interest in and title to the Projects, namely the Formentera Project, the Cilon Project, and the Tomas III Project, through its fully owned Argentinian subsidiary (Patagonia Lithium Argentina S.A.). The Company has and will continue its exploration, examination, and evaluation of the Projects.

Key Highlights

Primary Offering: By offering up to 40,000,000 shares at a price of AUD 0.20 per share, the Company is seeking to raise AUD 8,000,000 (before costs). With important Cornerstone Investors, the Company has entered into Subscription Agreements to agree to subscribe for up to AUD 3,000,000 before fees through the issuance of 15,000,000 Shares. The amount to be raised under the Offer will drop to AUD 5,000,000, subject to fulfillment under the Subscription Agreements. The Company retains the ability to raise AUD 8,000,000 (before costs) under the Offer if completion under the Subscription Agreements is not achieved.

Options on the issue of the company: As of the date of this Prospectus, the Company has granted 3,500,000 Options to its founders, promoters, Directors, and/or key management staff to purchase Shares. These Options have an expiration period of three years from the date of grant and are each exercisable at AUD 0.27. Following the Offer's conclusion, the Lead Manager will also receive 2,000,000 unquoted Options from the Company to purchase Shares in accordance with the Lead Manager Mandate. These Options shall be exercisable at AUD 0.27 and expire 3 years after the date of issuance.

Industry Overview:

• The expanding use of electric vehicles (EVs) and the need to combat recent climate change are both driving up the demand for lithium, with the North American EV market alone projected to rise at a CAGR of 37.2% from 2021 to 2028. Over the following four years, the demand for lithium is anticipated to rise by more than 50% on a global scale. The global market for battery metals was estimated to be worth USD 14.5 billion in 2021, and it is anticipated to grow to USD 25.66 billion by 2028 at a CAGR of 8.5% during the forecast period (2022-2028). 
• Recently, the price per tonne of lithium carbonate battery grade output surpassed USD 70,000. Accordingly, a 10,000-ton facility will bring in over USD 700 million in income at the present exchange rate.
• Livent and Allkem are the only two manufacturers of lithium products in Argentina now. For the past four years, Exar and Lithium Americas Corporation have been constructing factories that should be operational in the upcoming year. There have been about 28,000 tonnes of lithium carbonate produced annually.

Terms of Key acquisitions:

On 19 April 2022 and 22 October 2022, respectively, the Company exercised its option to buy the Formentera Project and the Cilon Project. The Company must execute its option to purchase the Tomas III Project before the option expiration date or earlier (30 November 2022).

The Formentera Project: A USD 100,000 option fee was paid on or around December 24, 2021. A USD 2,000,000 deferred cash payment will be due within ten business days following November 30, 2022.

The Cilon Project: Option fee of USD 35,000 paid on or around June 27, 2022, and option exercise deferred cash payment of USD 165,000 due after November 30, 2022, within ten business days.

Tomas III Project: Option fee of USD 100,000 paid on around 29 December 2021, option extension fee of USD 13,000 paid on around 12 September 2022, option exercise cash payment of USD 340,000 payable within ten business days after 30 November 2022 following the Company’s mandatory exercise of the option, and option exercise share issuance of 125,000 ordinary shares (at a deemed issue price of AUD 0.20 per share) issuable within ten business days after 30 November 2022 following the Company’s mandatory exercise of the option.

Use of proceeds:

• The Group will pay USD 340,000 (AUD 493,558) to complete the purchase of the Tomas III Project when the IPO is over. Therefore, AUD 633,658 in non-current exploration and evaluation assets will be recognized, and AUD 140,100 in previously recognized amortization will be reversed.
• The Group will additionally pay USD 2,000,000 (AUD 2,903,280) to complete the Formantera transaction, which will result in an AUD 2,903,280 decrease in other liabilities.
• The Group will spend USD 165,000 (AUD 290,216) to complete the purchase of the Cilon Project. Therefore, an asset for non-current exploration of AUD 290,216 will be recognized, together with a transfer of AUD 50,695 from assets for current exploration and evaluation.

Dividend policy: The Board expects that substantial costs will be required for the projects' appraisal and development. The first two years after admission, at least, are anticipated to be dominated by these activities. Considering this, the Company does not anticipate declaring any dividends during that time.

Financial Highlights (Expressed in AUD):

• Pre-revenue company: Throughout the time frame of 27 September 2021 to 30 June 2022, no revenue was generated. If the Company cannot demonstrate that minerals exist at the Projects, that they can be mined and sold, and that they are commercially recoverable, it will not be able to generate any revenue. The Company may generate income via the sale of its assets and/or the collection of royalties from the Projects.
• Current profitability and liquidity condition: The Consolidated Entity reported negative cash flows from operating operations of AUD 62,408 and a loss from ordinary activities of AUD 567,918 during the quarter that ended on June 30, 2022. To execute the Company's primary activities and meet the Company's working capital needs without having to raise additional capital, the Directors think that the present cash resources will not be adequate to finance the planned transactions.
• Cash balance on the completion of the offer: After the Offer is completed, Patagonia Lithium anticipates having a pro forma cash balance of AUD 3,766,509 at the end of the month of June 2022. The Company's projects may be explored and evaluated with the help of these funds, according to the directors, who also anticipate that they will be enough to cover the company's ongoing responsibilities and stated business goals for at least a year from the Offer's launch date.

Key Management Highlights

Risk Associated (High)

Investment in the IPO of “PL3” is exposed to a variety of risks such as:

• Limited history: Due to the Company's recent incorporation on September 27, 2021, there isn't much operational or financial data available to assess its current state of operations and prospects. Thus, the assessment can be based on the Company's prospects on the minimal facts the Company has available about its Projects. The Company's prospects must thus be considered in light of the risks, costs, and challenges that start-up businesses commonly face, particularly in the mining industry sector, which carries a high level of inherent risk and unpredictability.
• Investment in Argentina: The Projects are situated in Argentina, as are Patagonia Lithium Argentina S.A.'s corporate headquarters. The operations activities of Patagonia Lithium Argentina S.A. are susceptible to risks typically connected with doing business abroad, notably in Argentina. Risks specific to Argentina may include, among other things, earthquakes and extreme weather, labor disputes, corruption, unsteady political and economic conditions, civil unrest, and crime, arbitrary changes in law or policy, opposition to mining from environmental groups or other nongovernmental organizations, or changes in political attitudes toward mining activities, infrastructure, and higher financing costs.
• Exploration and developmental risk: Exploration and exploitation of minerals is a risky and uncertain endeavor. Force majeure situations, land disputes, unanticipated mining issues, and/or technical issues might hinder such an operation. Increased expenses, less production, or high running costs all have the potential to make a project less lucrative than was anticipated at the time the development choice was made. There is no guarantee that the company will carry out its present or planned processing activities as planned.

Conclusion

The company is operating in a lucrative sector where underlying commodity (Lithium) prices are in strong bull rally , however, it presently makes no money and incurring losses. As a result, the Company won't be able to create income unless it can prove that minerals are present at the Projects, that they can be extracted and sold if any, and that they are commercially recoverable. The sale of its assets and/or the receipt of royalties from the Projects are two possible revenue sources for the Company. Thus, it should be noticed that the Company's ability to make money from the operations is not guaranteed and is dependent on future uncertain events.

Hence, given the financial performance of the company for the period ending June 30, 2022, incurred net losses, and associated risks “Patagonia Lithium (PL3)” IPO seems “Neutral" at the IPO price.

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