Hi Speedyl, thank you for your questions. The share price action of LPI has been somewhat disappointing in recent months after almost breaking 70 cents in late 2017, but if you look at the graph of AGY on the right hand side of HC, you will see the recent LPI trend is not much different to AGY. Most lithium stocks have been on the nose of late. I also think some investors are waiting finalisation of the 50% buy-in to Maricunga BUT there could also be opportunity for LPI to increase its equity in the project at a later stage. Might I add, 50% of something special is much better than 90% of something ordinary.
Considering the market cap of AGY and what it has to offer compared to LPI, one would have to be a complete idiot to think AGY offers more upside. I say this because AGY's resource at Rincon is appalling compared to Maricunga in terms of grade and quality. The drilling results released last week were awful and almost uneconomical when you consider the grade and the paltry pay intervals - notice how they hid the terrible result of the third drill hole for 3 months. However the high level of contaminents would be my biggest concern. To be able to achieve the same level of lithium production, AGY's pond area will need to be three to four times as large as LPIs. That translates to enormous capital costs and increased operating costs. In terms of the size of AGY's lithium resource, you will be lucky to get 500k of contained lithium. With additional exploration to be undertaken, LPI is looking at a total resource of 4 to 5 million tonnes - that is world class in terms of size and grade.
LPI constructed a number of development ponds in early 2017 and we will know on Monday if the world renowned chemical engineering consultants LPI have employed have been successful in producing battery grade LCE including an optimised flowsheet. Unlike AGY, once LPI constructs its ponds, they will at least know what is going into them. That's another point, the brine flow rate at Maricunga is 45 litres per seconds whereas it is 20 litres a second at Rincon. Mmmmmmmm, I wonder which is better?
LPI's management is very experienced and is following the resource development process bible line by line, page by page - a little boring but they are thorough. It has been indicated that the approvals process under the new Chilean government will be streamlined and you must remember that taxes in Chile are LOWER than those imposed on companies operating in Argentina - I can provide the data for you if you like.
It has been indicated that the end-users will fund development of the Maricunga project which means no further dilution for LPI shareholders with the company having $40 million in the bank. Mmmmm, that's another importnat point. Currently there are less than 300 million shares on the LPI register while AGY has over 900 million issued shares. I wonder which company's market cap has more upside? Now that is a tough one.
After 40 years in the resources sector, I know that a global company is going to have much greater faith investing their capital in a company with a known LARGE, HIGH quality resource, than a company with a relatively small, poor quality resource. We will know Monday if LPI has succeeded in producing battery grade LCE, before AGY I would suggest.
LPI Price at posting:
44.0¢ Sentiment: Buy Disclosure: Held
