I have only been heavily invested in LPI for a couple of months,...

I have only been heavily invested in LPI for a couple of months, so I do not have the credibility of a long term holder, but I also do not have the biases.

I increased my holding to an "uncomfortable level" this week (https://hotcopper.com.au/threads/ako-general-discussion.6779410/page-338?post_id=67336570), so rather than still having a very small profit, I am now deeply red. I completely appreciate that others have held for much longer and have lost a lot more than I, so I make this statement more as an observation rather than a complaint. Ultimately I am responsible for my position.

I am not a "down ramper", but I hope I am able to look at this company with an objective lens.

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First thing first, and this is something the company called out in their "INITIAL RESPONSE TO THE CHILEAN NATIONAL LITHIUM POLICY" - https://lithiumpowerinternational.com/wp-content/uploads/2023/04/Non_ASX_Announcement_Update_21042023-01.pdf , which is all of the announcements, releases and news articles coming out of Chile are in Spanish, and need to be translated to English, either through automation - which is highly prone to error or misinterpretation, or via a translator - which I do not believe we have seen.

There is a lot more information and detail to be released in the coming days and weeks, and until "the market" has had the opportunity to process and understand this information, we can expect quite a bit of volatility.

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Second, fortunes are lost and made on Fear, Uncertainty and Doubt (FUD). It is apparent that there are people who are trying to leverage this to their own ends. In saying this, where there is smoke, there is often fire, so it is important to be cautious and work within your risk tolerances.

Next, whilst I appreciate what has been said by the company, I also appreciate what HASN'T been said by the company.


Of course this announcement is good for Chile, it provides a legal framework for the government to get involved in the exploitation of the lithium, but what about the rights of the existing permitted companies?

I understand the importance of working with the government, and the impact that negative comments could have, but there are also the concerns of investors that need to be addresses.

Of course with the consolidation of entities into LPI means we can operate and communicate as a single entity, and given the consolidation happened at a much higher price than where we are at today, the directors and top 10 holders have more to lose than anyone else.

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Apparently all existing permits will be respected.

I read this morning that SQM and Albemarle respectively have leases to 2030 and 2043 (https://www.reuters.com/markets/commodities/sqm-albemarle-shares-slide-chile-lithium-nationalization-plan-2023-04-21/ ).

LPI have a fully approved 20 year, 15,200 tonnes per annum permit which has been threatened in court but upheld and confirmed via the legal process - including appeals from Codelco.



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What else do LPI and Codelco have? Vast holdings in a complementary location (this map from 2019 is the most recent I could easily find - https://lithiumpowerinternational.com/wp-content/uploads/2021/08/November-Investor-Meetings-Lithium-Power-International-Presentation.pdf).



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The next real question then becomes about how greedy Codelco and the Chilean government want to be...

Based on their legal action, we can assume they are greedy.

But does this mean they will be unjust? I think no. They have already suffered a humiliating defeat in court, and I believe this would serve to somewhat temper the ambitions of those in government.

Would it make sense for the government to "wait out" the existing leases? Not given the fragility of political life. Being tied up for years will not deliver the outcomes needed to help ensure a second term.

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Right now LPI, SQM and ALB only have certainty for what their current permits allow. Any expectation beyond that is based purely on hope.

What I feel is actually at stake is what is yet to be permitted and developed - and that is an unknown and unproven amount of lithium.

It is apparent the government want to benefit AND play more of a role in the upside of this resource.

The fact they keep promoting public / private partnerships means they do not expect to own anywhere near 100% of that in the near and medium term.

The development of a national lithium company tells me they want to own more of the vertically integrated supply chain moving forward.

It is not (yet) a communist government, they will respect the rule of law.

They will also respect the power and influence of the free markets.

I think the long term objective is to develop the vertical supply chain and perhaps own between 20% and 51% of the entire supply chain. This could include mining, processing and perhaps even battery development. It is early days, and the government can't do it all on it's own, so I think this is as much a statement of intent, rather than a declaration of war.

It will be up to companies to decide on whether the remaining XX% is worth the investment.

And let's be clear, with a legal framework in place, it will be a low risk investment, where I believe the bulk of the volatility will come from the lithium price.

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If the government wants to accelerate development to benefit the country, the best way to do so is to work with industry.

Chile also holds Free Trade Agreements with the US - who are one of its largest trading partners, and Australia.

Moving forward I believe companies have 2 options.

Option 1: They can work against the government, and produce lithium until their current permits expire (LPI = 20 years, SQM = 7 years and ALB = 20 years), and then move on (unlikely).

Option 2: They can work with government to share the spoils, and whilst their margins may be squeezed (which is a whole other discussion), the (longer) term flow of benefits are unlikely to be completely one sided.

What can the government bring?
- More land
- Increased production capacity via permitting
- More certainty given their vested interest
- Streamlined (faster?) processing of permits
- Direct and indirect (infrastructure) investment through sovereign wealth
- Unified vision and scale (if this can be executed on is another question).

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In summary, there is a lack of detail and an abundance of FUD.

I expect the company to play the long game.

I read but can't find the amount of land that LPI and the government (Codelco) have in the Maricunga, but I believe is it 2 or 3 times the area. This is significant.

I believe the best path forward would be for the government and LPI to consolidate the Maricunga into a single resource. This is the public private partnership.

The government wants to be the majority holder, so maybe a 51% - 49% split in favour of the government would be reasonable.

It would mean a smaller "ownership percentage" of a much larger pie.

The government would benefit from near term revenues.

LPI would benefit from an overall larger resource, and the ability to fast track phase 2.

It would also have access to phase 3, 4, 5 and 6 - which they probably would never have had access to.

Is it great? No

Is the language clear? No

Is it all doom and gloom? No