Lithium Power (ASX:LPI) has announced the submission of an environmental impact assessment (EIA) to the Chilean Environmental Authority (CEA) for its Maricunga lithium brine project in Chile. Highlights of the announcement include the following.
- The EIA was submitted to the CEA after more than two years of preparation.
- A comprehensive report (11,400 pages), the EIA includes complete environmental baseline studies, hydrological and hydrogeological modelling, human, archaeological and fauna and flora characterisation, and impact evaluation.
- Under Chilean law, the CEA must provide feedback on any major deficiencies in the EIA within 40 days of its submission.
- Final approval for the EIA is expected by the end of 2019, once the CEA has comprehensively reviewed all sections.
- Lithium Power expects to receive a construction sanction decision as early as 1Q 2020.
- The definitive feasibility study (DFS), meanwhile, remains on track for completion before the end of 2018.
TSI’s view: while submission of an EIA may not excite investors, it is a critical phase in the project’s development, particularly with respect to salars, which can be located in environmentally sensitive areas. In light of this, Lithium Power left no stone unturned in completing the study (hence the 11,400-page document), having employing highly regarded globally consultants to prepare it. We hope, therefore, that feedback from the CEA will be minimal.
In addition to the EIA, Lithium Power remains on track to release its DFS before the end of the year, with offtake and financing anticipated during the first half of 2019.
Finally, market sentiment with respect to the resource sector has been muted in recent months, particularly for lithium stocks. Despite this, demand for quality brine assets remains high – as the divestment by Galaxy Resources (ASX: GXY) of its non-core Argentinian tenement package in the northern basin of the Salar del Hombre Muerto has shown. It was sold to POSCO for US$280 million (A$388 million). In our opinion, that package, while prospective, is not on a par with Maricunga, and is at an earlier stage of development. Nevertheless, it sold for more than twice the market’s current valuation for the Maricunga project (LPI market cap – A$75 million for a 51% interest).
The information in this email should not be the only trigger for your investment decision. We strongly recommend you seek professional financial advice whenever making financial investment decisions.
Valuation: we maintain our valuation for Lithium Power of $1.13/share (share price $0.28).