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Lithium Power - Key lithium export and sales license received for Maricunga

Mar 2018

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Summary - Key lithium export and sales license received for Maricunga

Lithium Power (ASX:LPI) has been awarded an export licence for the production and marketing of lithium from its Maricunga lithium brine project in Chile.  Highlights of the announcement include the following. 

  • The Chilean Nuclear Energy Commission (CCHEN) has awarded LPI’s 50%-owned Minera Salar Blanco (MSB) an export licence for the production and marketing of lithium for 472,868 tonnes of lithium carbonate equivalent (LCE). 
  • The CCHEN can increase the approved extraction quota upon MSB advancing the deep drilling exploration program scheduled for 2018. 

Analyst comment: whilst we never doubted this licence would be granted, as Chile is a pro-mining jurisdiction,  and already the largest lithium producer globally, there was some skepticism in the market if, when and how this would occur.  

However with this approval now grant, which we understand is the first of its kind in more than three decades, for a non state owned development company/asset, we believe this should now see interest in LPI/Maricunga increase significantly, particularly regarding the projects offtake. 

Prior to the granting of this licence, the uncertainty would have given potential offtake partners leverage in negotiations, therefore making it difficult for LPI to secured optimal terms (ie: development financing).  However as this licence is now granted and given the quality of the Maricunga project, which we believe is the best development lithium brine project globally, offtake negotiations are likely to significantly intensify in the near term, whilst new potential offtake partners or corporate parties may emerge from the woodwork.

In addition, we note the licence is for the total amount extracted/produced from the Maricunga, not a specific amount per annum (ie 20,000t LCE per annum).  This opens up the potential for production to be increased in the future, which would further increase share holders value.

Valuation: we maintain our valuation of Lithium Power to $1.13/share (share price $0.43).