ALKEMY CAPITAL INVESTMENTS PLC (ALK) — Research Note

Executive summary

Alkemy Capital Investments is a UK-listed pre-revenue holding company whose principal asset is Tees Valley Lithium ("TVL"), a planned lithium hydroxide refinery at Wilton International in Teesside, with a secondary Australian lithium sulphate refinery project at Port Hedland. Across the period 2021-2025 the company has progressed from concept through planning permission and a Class 4 feasibility study to a fully-funded FEED study, but remains pre-FID, pre-financing and pre-construction — it has consumed cash steadily, accumulated losses of £7.8m, and carries negative shareholders' funds of £1.18m with going concern flagged in every audit and interim. The single most important point for valuation is that ALK is essentially a long-dated option on reaching Final Investment Decision ("FID") in early 2026 and then securing ~$245m of project finance without catastrophic equity dilution; everything else is secondary.

Fair value estimate

Methodology: risk-adjusted look-through NAV. There are no earnings to multiply and no operating cash flow to discount; the only anchor is the project NPV disclosed in the FEED study.

Key inputs (cited):

• Train 1 post-tax NPV: US$475m ≈ £370m at $1.28/£ 2025-10 interims
• Train 1 capex: US$245m ≈ £190m 2025-10 interims
• TVL is 100% owned by ALK today, but the May 2025 Ara Partners exclusivity and ongoing debt/strategic-equity discussions strongly imply material dilution at project level; assume ALK retains ~50% economic interest in TVL after strategic investor / project equity is brought in 2025-05 final results.
• Probability adjustments (judgement, not from filings): probability of reaching FID 35%; probability of successful financing post-FID 70%; construction & commissioning success 75% — composite ≈ 18% success.
• Time discount: ~5 years to first revenue at 15% WACC ≈ 0.50.
• Holding-company dilution from interim equity raises to bridge to FID: assume a further 15–25% share count increase before construction is funded.

Risk-adjusted equity value:

• £370m × 50% retained interest × 18% success × 0.50 time discount ≈ £17m (central)
• Bull case (40% success, 60% retained): ≈ £55m
• Bear case (15% success, 40% retained): ≈ £6m

Per-share range (on ~10m basic shares, before further dilution):

• Low: ~60p
• Central: ~170p
• High: ~550p

Implied market-cap range: £6m – £55m, central ~£17m.

Vs. disclosed market cap £35.9m: the central case implies the stock is modestly overvalued (~−53% downside to central; ~+53% upside to high case; ~−83% downside to bear). The wide range is itself the most honest output — this is a binary asset.

Sector context

ICB classification (Basic Materials / Chemicals) is technically correct but misleading. ALK is a critical-minerals project developer in the lithium midstream — closer in DNA to early-stage mining juniors than to operating specialty chemical companies. Quality, growth and leverage profile is well below typical listed chemical peers (negative equity, no revenue, going concern). Most analogous listed comparables: Pensana Plc (chaired by the same chairman, rare earths refinery in Saltend), European Lithium, Standard Lithium, Bacanora (when listed), Vulcan Energy. Of these, only Vulcan has comparable scale ambition and Vulcan also trades on FID optionality.

Investment thesis (3 bullets at current price)

1. Strategically scarce asset in a structurally short European market. TVL would be one of the first independent European lithium hydroxide refineries, addressing >700GWh of announced European gigafactory demand vs. ~90% of refining today in China. The FEED has reduced capex to US$245m and produced an NPV of US$475m, marking TVL as Europe's lowest capital-intensity project on SC Insights' analysis 2025-10 interims.
2. Strategic capital is engaging. Exclusivity with Ara Partners (industrial-decarbonisation private equity), ABG Sundal Collier as debt advisor, Veolia as technical partner, and an exclusive feedstock negotiation with Touchstone Capital Partners for >100kt LCE feed materially de-risk the path to FID compared to 18 months ago 2025-05 final results.
3. Operating leverage if it ever operates. A built and commissioned 25kt LiOH refinery is a high-fixed-cost asset; once running at nameplate, incremental tonne economics drop strongly to EBITDA. The Class 4 study implied gross revenues per train of US$396m against $245m capex — a high-payback asset if execution is delivered 2023-10 interim study highlights.

Key risks (3 bullets)

1. Existential funding risk and material going-concern uncertainty. Auditor explicitly drew attention to going concern in 2024 and 2025; the group has negative equity of £1.18m, ~£1.2m of short-term borrowings (some at 28% interest from Riverfort), £1.6m of trade & other payables, and ~£0.7m of cash at 31 July 2025. Without continued working-capital placings (executed at progressively lower prices: £1.40, £1.00, £1.25, £1.50) the company cannot survive 12 months 2025-10 interims; 2025-05 final results.
2. Dilution at both holding and project level. £250–300m of project equity/debt is required for Train 1 alone; even if Ara invests, ALK shareholders are likely to be substantially diluted at project level and possibly at HoldCo level if Ara takes equity in Alkemy. The repeated working-capital placings have already diluted ~13% over 18 months 2025-02 placing announcement; 2025-10 interims.
3. Lithium price risk and execution risk. The NPV is highly sensitive to long-term LiOH price assumptions (study referenced US$25,000/t — well above current spot levels). Lithium prices have been volatile and the project remains at FEED — no construction, no commissioning, no offtakes are binding (Wogen heads of terms and Touchstone are non-binding; Recharge Industries / Britishvolt MoU collapsed) 2024-05 annual report; 2025-05 final results.

Operating leverage

Today, operating leverage is zero in practice — there is no operating asset to leverage. The narrative leverage is prospective: at nameplate, a single lithium refinery train is a classic high-fixed-cost industrial facility (energy, reagent, maintenance, plant headcount are largely fixed once running). The Class 4 study implied gross revenue ~$396m per train against ~$245m capex and clearly attractive operating margins, suggesting EBIT margins likely in the 40–55% range at scale assuming current consensus LiOH pricing. Theoretical incremental contribution margin on the first commissioned train would be very high (after-tax NPV $475m on $245m capex implies ~3-year payback). However, none of this is yet expressed in financial statements; today's "operating leverage" is engineering-document leverage. For this investor's "long-tail of outcomes" criterion, ALK delivers leverage of the binary kind (zero or a multibagger) rather than the gradient kind (a beat that converts to multiples of profit on already-deployed fixed costs).

Value-trap signals

• Negative shareholders' funds of £1.18m at 31 July 2025; accumulated losses £7.8m on a company that has never had revenue 2025-10 interims.
• Repeated equity raises at falling prices and high-cost short-term borrowing (Riverfort at 28%, director loans rolling) 2025-05 final results.
• Significant related-party transactions — Chairman is paid £8k/month via Selection Capital plus £24k director fees; CEO of TVL is paid £20k/month via Supply Tactics (which she 50% owns); director's daughter on group payroll. Each individually small but the pattern matters in a £36m mcap pre-revenue HoldCo 2025-05 final results note 18.
• Slipping timeline — the FID was originally targeted for late-2022/early-2023 (per the 2022 reverse takeover prospectus), then 2024, then "early 2026". Class 4 study delivered in April 2022 but no major change in capex/NPV until October 2025 FEED update.
• Customer commitment is thin — every major commercial agreement is "MoU", "non-binding heads of terms", or "exclusivity to negotiate". Britishvolt/Recharge MoU is dead. No binding offtake, no binding feedstock supply 2024-05 annual report.

Earnings vs. expectations

Not applicable in the conventional sense — ALK has never reported revenue or EBITDA against guidance or consensus. The relevant analogue is milestone delivery vs. communicated timeline, where the record is one of consistent slippage: target FID slipped from 2023 → 2024 → early 2026; mezzanine financing targeted for "early 2024" (Dec 2023 placing release) never materialised in that form; Britishvolt offtake MoU lapsed when Britishvolt failed. Set against that, the FEED has now been funded and is underway, the strategic-investor process with Ara is real, and the FEED outcome (lower capex, higher NPV) is a positive surprise vs. the 2022 Class 4 study. Net: a pattern of missed timelines but improving fundamentals at the project level.

Conviction

2 — low. The filings disclose the technical project metrics clearly, but the gap between disclosed project NPV and equity value is dominated by unmeasurable probabilities (FID success, financing terms, dilution split with strategic partners, long-term LiOH price). Any fair-value point estimate is a wide range with weak conviction at any point in it.

• Anchors: FEED-updated capex and NPV are disclosed; ownership structure is transparent; share-count and balance sheet are unambiguous.
• Limits: unknown final ownership of TVL post-Ara; unknown LiOH price assumption embedded in NPV; binary FID outcome; opaque dilution scenarios.

Fit with this investor's mandate (overall score rationale)

This is a poor fit for the strategy described. (1) AI-receiver exposure is essentially zero — lithium goes into EV batteries and grid storage, with at best a tangential connection to data-centre power. (2) The valuation discipline pillar is violated: paying £36m mcap requires heroic assumptions on FID, project financing, dilution and LiOH price — there is no fair-price case here. (3) Operating leverage is theoretical and several years and several hundred million of capex away. (4) Downside protection is the opposite of "acceptable" — negative equity and going concern doubt mean permanent capital loss is a credible outcome. Overall score should land in the low double-digits to low triple-digits.