With the nearly 40% rise in SP on Friday, now is the time to refocus on the top 10 reasons why LPI is such a golden investment opportunity:
1) Maricunga’s DFS has been completed and the Environmental Impact Assessment has been approved. The project is now at the financing stage and represents good upside at the US$1.3bn pre-tax DFS valuation assigned to it by the project investigators.
2) Maricunga is a low-cost lithium brine project, with the 2019 DFS suggesting 20,000 tpa of LCE could be produced at US$3,772/t LCE without potassium chloride credits. This makes it potentially one of the lowest cost producers globally.
3) The potassium credits from Maricunga could be valuable, given rising demand for potash in fertilizers. Maricunga contains at least 5.4 million tonnes of potash.
4) Maricunga does not have political risk, with Chile a politically stable and economically free country with a long history of encouraging mining investment. Brine lithium in Argentina and elsewhere arguably comes with much more political risk.
5) Maricunga’s mine life is arguably longer than 20 years. There is potential to markedly expand mine life. The January 2019 resource estimate of 2.07 million tonnes of Lithium Carbonate Equivalent (LCE) for just the Measured and Inferred categories only estimated from surface to 200m depth, leaving room to expand this respond down to 400 metres
6) LPI is collaborating with Codelco on financing of the Maricunga Project. This large Chilean company brings the project considerable prestige given the long-standing importance of Codelco to Chile’s economic direction, as well as the company’s considerable balance sheet.
7) There is strong potential for lithium prices to improve in the medium term, mainly because of the long-term prospects for electric vehicles. In 2018 there was about 270,000 tonnes of lithium demand and some estimates that suggested this will rise to about 1 million tonnes in 2025
8) LPI has other quality lithium projects in its portfolio. The Tabba Tabba and Strelley Lithium Projects in the Pilbara region of WA lies near FMG’s Tabba Tabba lithium discovery, while the Pilgangoora project lies near the Pilgangoora discoveries of Pilbara Minerals (ASX: PLS) and Altura Mining (ASX: AJM). Important, the Greenbushes Lithium Projects cover a large area of ground near the Greenbushes Lithium Mine. We see these projects ultimately delivering value to LPI given the favourable geology.
9) LPI has a quality leadership team. LPI’s CEO, Cristobal Garcia-Huidobro, former ran CENTINELA, a Santiago-based investment company, before he started work on development of Maricunga. Chairman David Hannon, a Sydney-based investor, founded Atlas Iron. Richard Crookes, Executive Director, Corporate Finance, brings years of mining project finance experience including a 12-year stint at Macquarie Bank. CFO Andrew Phillips brings corporate governance skills. The LPI board, which includes Hannon, Garcia-Huidobro, Crookes and Phillips, also features former Newcrest CEO Russell Barwick, the Chilean businessman Martin Borda and the Sydney businessman Ricky Fertig.
10) LPI is undervalued on Pitt Street Research numbers, with the stock currently trading below the valuation range of A$0.72-$0.83 per share. They see LPI being re rated by the market on the back of a project financing package for Maricunga as well as recoveries in lithium prices.
There will most likely be more reasons, but these are the main ones for my investment. This might turn out to be a diamond in the short term.
