Although I respect most of your views Freeflyer, you of all people should know that the market is not necessarily right all of the time (how do you think value investors like the great warren Buffett made all of their money, swimming against the tide I.e betting against the majority of the market, buying when the stock goes down). They made money, capitalising on other investors fear and uncertainty which is what is currently happening in Chile lithium stocks (It may be warranted but lets wait till all the facts come out). Haven’t you ever heard the quote, be greedy when others are fearful… If and when more details are shed to light around the intricacies of the arrangement, then you will know which investors were right, only time will tell. A days trade never tells you the full story, I have seen plenty of stocks fall but come up just as quick when the real facts are announced.
The market hates uncertainty and hence the major sell off. Investors are worried about the operating contracts not being renewed but I think this is the myopic view. It is clear that it is intended for there to be state and private participation moving forward, the big question is the composition of that agreement/contract, I.e what form will it take. Will it be under a joint venture agreement or profit sharing agreement and what % and what consideration is to be provided. At the end of the day an agreement is formed by two parties ultimately agreeing on the terms so it is not like the state can be too overzealous otherwise no agreement will be formed. It also should be noted this legislation still needs to be passed through the senate so if it is too socialist, it will fail. If you have been watching the whole Chilean dynamic over the past 18 months then you should know that the copper suggestion by Boric was ultimately shot dead in the water and now it is business as per usual. The only outstanding matter is the royalty deal which will be significantly watered down from what was originally proposed I.e the government has had to comprise to ensure that a workable agreement between state and private parties are reached. You need many private players and the state in order to run a country so don’t discount the fact that the big private players in town dont have a massive say or part to play in this lithium policy.
At this present time, I look at it as a positive for LPI as we aren’t in production yet. I don’t mind us doing some form of JV with the state via Codelco contributing 30% equity to gain a share of the project and therefore get this project to production (I actually don’t think it would have happened otherwise). There are always nervous nellies in the market but I am still waiting on further details before making a decision. The worst decision you can make is an irrational one and being a sheep, following the crowd. Based on the details provided thus far, I don’t see how you could make an informed decision to sell. The media like to spruik the nationalisation headline to create more fear and uncertainty but I will wait for the next few weeks to assess the facts and actual details of the proposal. It is too unclear at this stage. The market may be right in the next few weeks or it is wrong, only time will tell. I don’t have an ego so am happy to say I was wrong once I know all the details but at this stage no one is right or wrong. Cheers, CP.
LPI Price at posting:
32.5¢ Sentiment: Buy Disclosure: Held
