Hello fellow LPIers. Long time no post on this site and this will be a one off. Given the hysteria, misinformation and wild speculation in the print and social media, I thought it best to put some perspective on what the real situation is in Chile. Commentators have NOT differentiated the different situations industry stakeholders find themselves in. This is not advice but my strong opinion based on seven years of LPI ownership.
The Chilean Government's lithium policy is a clunky first attempt at trying to place the state as a player in the global lithium industry. Different to the nationalisation of its copper industry in Chile in 1971 and the formation of state-owned copper company Codelco in 1976. That nationalisation failed and Codelco now controls less than 30% of Chile's copper industry. An industry dominated by the private sector. The Government did not have the skills or resources to develop the industry. The same situation applies but in more profound in terms with its lack of lithium industry skills and resources. I understand Codelco's lithium division has a workforce of one.
Will the proposed lithium policy be amended down the road or replaced with something more workable? A strong chance, and when governments change, the new administration usually likes to put their own stamp on things. It might not even make it through the current Congress or Senate. And if the polls are accurate there is very little chance of the Boric Government being reelected. But we are stuck with what we have to work with for the meantime.
What does it mean for LPI? I don't see it greatly impacting LPI's plans for the Maricunga and here is why. Contrary to the government owning the mining leases at the Atacama through CORFO, LPI owns its mining concessions, old code and new code, at Maricunga. LPI also owns the land occupied by the old code concessions. We have all the permits and most importantly, a multi-decade lithium metal production quota from CCHEN - a quota which can be automatically doubled because of the 90% increase in the old code resource since the granting of the quota and the higher production efficiencies that are expected to be achieved by the LPI processing plant (the original CCHEN quota based on a production efficiency of 58% while the plant is expected to be 70% efficient). Unlike SQM and ALB, LPI has property and mining rights at Maricunga. The very recent Chilean Supreme Court's rejection of Codelco's appeal to effectively extinguish the old code mining rights at Maricunga will stand us in good stead. I see LPI proceeding with stage 1 unemcumbered unless it invites Codelco to the party (which I doubt).
In terms of stage 2, LPI was through its 2019 MOU with Codelco, planning to JV with Codelco on development of the salar. As we all know, Codelco dragged its heels and the Maricunga project was split into stages to allow Codelco to complete an exploration program and other studies on its mining concessions at the other end of the salar. As the new policy stands, we would be looking to JV with Codelco, most likely with the NLC (thank God) for stage 2 and beyond. Stage 1 should continue under LPI unless agreed otherwise between parties.
What should not be forgotten is that the majority of the Maricunga salar is surrounded by National Park, barring the north-west portion, which just so happens to be where LPI's concessions are mainly located. The LPI Board and management made the astute decision to buy a large area of development land adjoining the salar to accommodate its camp and production facilities. The only such site in the Maricunga salar area. In 2022, the LPI Board made another astute decision when its purchased the water rights at the northern end of the salar, enough to be able to produce 110,000 tonnes of BGLCE annually using the stage 1 plant configuration. In effect, and a lot of non-holders wont like this, LPI CONTROLS the future development at the salar because of purchase of these assets. I am quite comfortable with a future stage 2+ JV with the NLC, but nothing will happen at Maricunga without LPI's involvement - unless we are taken over.
I am still fully invested in LPI having not sold a single share. I don't frequent HC anymore because of the uninformed trolls and non-holders that plague this thread.
One last thing. As Australians, we have a very powerful fallback option and that is Australia's Free Trade Agreement Australia has with Chile. LPI does have strong protections written into a number of provisions of the FTA and the Chilean Government is aware of that.
I am sure matters will be clarified for LPI shareholders shortly. The best of luck to all holders going forward.
LPI Price at posting:
32.5¢ Sentiment: Buy Disclosure: Held
