Open Letter to Alpha Lithium Corporation Shareholders from Caravel Capital Investments Inc. 

Dear Fellow Shareholders of Alpha Lithium Corp,

Caravel Capital is an investment fund that, collectively with its principals, owns over 4,500,000 common shares of Alpha Lithium Corp (“ALLI”). We write to you regarding Tecpetrol’s current offer to acquire ALLI for C$1.48 per share in cash. We support Tecpetrol’s revised C$1.48 offer, as we believe it fairly values the company. We urge all shareholders of ALLI to support Tecpetrol’s revised C$1.48 offer by tendering their shares before the October 3, 2023 deadline. We believe this is the only logical conclusion shareholders of ALLI will reach after reviewing the facts of the past nine months.

To be clear, we have no agreements or understandings with Tecpetrol; we simply want to express our views as major shareholders. We also urge the ALLI board of directors to endorse Tecpetrol’s revised offer and remind them of their fiduciary obligation to protect the interests of all shareholders. Recent trading activity has demonstrated that ALLI shareholders stand to incur substantial losses if Tecpetrol’s offer expires unsuccessfully.

ALLI has been exploring strategic alternatives for its assets, specifically its Tolillar project in Argentina, since late 2022. In the spring of 2023, ALLI’s board formed a fairness committee and hired Credit Suisse to assist in the process of soliciting potential buyers of ALLI’s assets or for the entire company in an outright sale. Caravel has had numerous conversations with ALLI’s management, members of its board, and its financial advisors. We have also reviewed the disclosures made by ALLI and Tecpetrol since the initial hostile bid of C$1.24 was announced in May of 2023.

Here are the subsequent facts as we know them:

1) Tecpetrol has raised its initial offer to C$1.48 per share in cash. This transaction would remove future financing risks, including substantial future dilution related to advancing ALLI’s assets into commercial production, given the funding gap of over C$ 700 million. Shareholders will be materially responsible for this cost.

2) ALLI and its advisors have been unable to find another buyer for ALLI’s shares at superior terms than those offered by Tecpetrol, despite having had nine months to do so. Despite earlier speculation of an asset sale for Tolillar at a C$400 million price tag, the fact is that no such transaction has ever materialized. We believe an asset sale was primarily being pursued to try to deal with Canadian regulators, who would undoubtedly have scrutinized and likely blocked an outright corporate sale of ALLI to buyers in certain foreign jurisdictions, including China.

3) In the unlikely event that ALLI received a C$400 million offer for Tolillar, the distribution of these proceeds would carry its own issues aside from Ottawa’s close scrutiny. The proceeds of such an asset sale to taxable Canadian shareholders were ALLI to distribute them, would largely be deemed a non-eligible dividend. Non-eligible dividends are taxed at 47%, not the capital gains rate of 26.5% that Tecpetrol’s offer provides. 

This would result in approximately C$1.17 per share in after-tax proceeds to shareholders, assuming the fully diluted shares outstanding of 212 million. Furthermore, we are skeptical that ALLI management would willingly distribute all or most of the proceeds from such a sale to shareholders, given their desire to continue advancing the company’s Hombre Muerto project. We believe this would not be in shareholders’ best interests.

Given ALLI management and its advisors’ inability to produce a superior proposal over the last 180 days, as well as Tecpetrol’s “Best and Final” language used in their revised offer, Caravel Capital intends to support Tecpetrol’s C$1.48 offer to common shareholders. We urge ALLI’s shareholders and board of directors to support Tecpetrol’s revised C$1.48 per share offer. 

Lastly, we encourage any concerned shareholders to contact us.


Glen Gibbons, PM

Caravel Capital Investments Inc.