PEA Sensitivity Analysis - Medium Scenario, page-7

Inside2020 - basically an NPV is projected cash inflows minus projected cash outflows for the project and from looking at the graph on page 266 of the PEA report the NPV is US$2.033 billion at 25k production per annum. Extrapolating the graph to 30k and 35k annual production provides an NPV of approximately US$3.0 billion and US$4.0 billion respectively. These are GIGANTIC numbers and dwarf those in Neo Lthium's 3Q project PEA which arrived at an NPV of US$1.889 billion for annual prodcution of 35k - please note these are all pre-tax numbers. What amazed me about LPI's PEA is that these outrageously brilliant numbers are parked obscurely at the back of the report - I could not believe how understated the PEA findings were in the ASX release and the PEA report. I firmly believe that LPI has purposely understated the potential returns of this project, for what reason, who knows - they have definitely presented a BASE CASE for the project in these documents. Maybe the DFS due for release in 2018 will trumpet the project's enormous potential financial returns, and provide for a larger initial production rate of 25k. After all, the latest tally of global gigafactories is 26 and they are going to need an awful ot of lithium to produce all those batteries.

Comparing the LPI and Neo Lithium PEA's, I found some anomalies which indicates LPI or Neo Lithium is using some rubbery numbers. For example, looking at the opex costs, the energy cost to produce a tonne of Li carbonate is almost three times higher at Maricunga, yet there is a transmission line at the front door at Maricunga. Manpower costs are two and half times higher in Chile than in Argentina - I find that hard to believe. Catering and camping services at Maricunga are nearly double the cost of the 3Q project and maintenance is a whopping 600% higher at Maricunga. WT.... something does not add up here. Is is all down to economies of scale - I very doubt it.

In closing, with 26 gigafactories having already been announced and more to come, there will be ample opportunity for LPI, through a range of off-take agreements, to cater for an increase in initial production.