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Lithium Power

EIA submission advances Maricunga project

1 Video - Sep 18

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). 

End of legal proceedings signals big step

1 Video - Jul 18

Lithium Power (ASX:LPI) has a 51% share in Minera Salar Blanco S.A. (‘MSB’), part-owner of the Maricunga lithium brine project in Chile. After three months of negotiations with Chile’s Ministry of Mines, the company has announced that legal proceedings against the Chilean government, relating to the issuing of a special lithium operation contract (‘CEOL’) covering its new mining coded concessions to an unrelated third-party, have ended. Highlights of the announcement include the following. 

  • Application for a CEOL over MSB’s new code mining concessions will now be submitted in early August. Once approved, and subject to acceptance of the environmental impact assessment (‘EIA’), this permit will be the final documentation required for the production of lithium under current Chilean legislation.
  • MSB has expressed its full confidence in, and agreement with, the new government’s vision for the future of the Maricunga salar and confirmed its intention of working closely with the government to develop the Maricunga salar in the Atacama region of Chile.

TSI’s view: the threat of Decree No. 64, which has been hanging over Lithium Power for the past six months, is the main reason the company’s share price retreated during this time. With that risk now essentially eliminated, the granting of a CEOL appears a formality, meaning the company will have the rights to mine both old and new coded mining concessions.    

In addition to the CEOL, Lithium Power has reached a number of important milestones, details of which will be released in the second half of this year. They include submission of the EIA, as well as the definitive feasibility study. Both not only further de-risk development of the Maricunga Project but should act as catalysts for the company to regain lost ground and move towards TSI’s long-term valuation target ($1.13/share). 

We maintain our belief that Maricunga is the standout lithium brine development project globally, due to its exceptionally high grade, which is the main driver for the forecast low operating costs.

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 $0.32).

Maricunga project ownership passes 51%

1 Video - Jun 18

Lithium Power (ASX:LPI) has increased its stake in the Maricunga lithium brine project in Chile. Highlights of the announcement include the following. 

  • The transaction increases Lithium Power’s share in Minera Salar Blanco S.A. (‘MSB’), which owns the Maricunga lithium brine project, to 51.35%.
  • Lithium Power acquired (subject to the JV partners’ acceptance) an extra 1.35% interest in MSB for A$2.03 million.
  • Following the transaction, Lithium Power will retain cash reserves of around A$22 million, with a further US$7 million held by MSB.
  • Lithium Power has strengthened its board by appointing MSB director and significant shareholder Mr Martin Borda and MSB CEO Mr Cristobal Garcia-Huidobro as non-executive directors.

TSI’s view: this is a positive move for Lithium Power on a number of levels: it not only gives the company effective control of the asset (ownership greater than 50%) but also highlights its long-term support for, and belief in, the Maricunga project despite an ongoing legal dispute relating to CEOL (Lithium Special Operation Contract) and Codelco, a dispute that is currently under review in the Chilean Appeals Court.

Interestly, the transaction also sets a precedent for the assets current valuation of around A$150 million (Lithium Power’s ownership A$77 million), based on the acquisition price (A$2.03 million) and the percentage acquired (1.35%). We note that this is a 67% premium compared to Lithium Power’s current enterprise valuation of A$46 million (EV = market cap. (A$78 million) – cash (Lithium Power A$22 million and MSB A$9.3 million).

In addition to Lithium Power effectively taking control of the asset, the appointment of two local directors adds intangible value as the project moves towards a development decision within the next year. While both those directors bring with them a wealth of experience and increase the company’s standing within the local community, we believe the appointment of Martin Borda adds even more weight, given the high regard in which he is held in the Chilean business community (as a co-founder and director of Multiexport Foods, one of the world’s largest salmon-farming companies, with a current market capitalisation of around CLP $440 billion.

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 $0.30), which assumes a positive resolution of the current legal dispute with CEOL/Codelco. We will review this valuation once the matter is finalised.

Key lithium export and sales license received for Maricunga

1 Video - Mar 18

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).   

Lithium carbonate sample production at Maricunga

1 Video - Feb 18

Lithium Power (ASX:LPI) has announced the production of lithium carbonate samples from its Maricunga lithium brine project in Chile. Highlights of the announcement include the following.

  • Initial lithium carbonate sample has a purity of 99.4% and very low cation concentrations. 
  • Samples have specifications similar to those produced by Albemarle and SQM in Chile. 
  • Maricunga is one of less than half a dozen pre-production brine projects to produce lithium carbonate samples.
  • WorleyParsons is well-advanced with the definitive feasibility study.
  • The project’s environmental impact assessment is progressing towards submission in the first quarter of 2018.

Analyst comment: this is another significant milestone in the development and validation of Maricunga. It further confirms our belief in it as a standout lithium brine project globally.

As is the case with most commodities, offtake negotiations with reputable partners are not meaningful until metallurgical testwork is complete and samples production-tested. And it’s potentially even more important for lithium brine projects, given that so few have produced lithium carbonate (LPI estimate – less than six).   

Lithium Power’s samples are likely to be sent to potential offtake partners, at which point negotiations may intensify. There is also the possibilty other potential offtake partners or corporate parties may emerge from the woodwork as well and request a sample. 

Further information from the company regarding potential offtake negotiations is probable in the near future. Before then, however, Lithium Power will submit its environmental impact assessment. Given the eventual surface area that Maricunga will cover, as well as its location, the importance of this assessment cannot be underestimated. We’re pleased that the company is using tier-1 environmental consultancy MWH, which has extensive experience within the project area.

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 of Lithium Power to $1.13/share (share price $0.46).   

Lithium carbonate sample production at Maricunga

1 Video - Feb 18

Lithium Power (ASX:LPI) has announced the production of lithium carbonate samples from its Maricunga lithium brine project in Chile. Highlights of the announcement include the following.

  • Initial lithium carbonate sample has a purity of 99.4% and very low cation concentrations. 
  • Samples have specifications similar to those produced by Albemarle and SQM in Chile. 
  • Maricunga is one of less than half a dozen pre-production brine projects to produce lithium carbonate samples.
  • WorleyParsons is well-advanced with the definitive feasibility study.
  • The project’s environmental impact assessment is progressing towards submission in the first quarter of 2018.

Analyst comment: this is another significant milestone in the development and validation of Maricunga. It further confirms our belief in it as a standout lithium brine project globally.

As is the case with most commodities, offtake negotiations with reputable partners are not meaningful until metallurgical testwork is complete and samples production-tested. And it’s potentially even more important for lithium brine projects, given that so few have produced lithium carbonate (LPI estimate – less than six).   

Lithium Power’s samples are likely to be sent to potential offtake partners, at which point negotiations may intensify. There is also the possibilty other potential offtake partners or corporate parties may emerge from the woodwork as well and request a sample. 

Further information from the company regarding potential offtake negotiations is probable in the near future. Before then, however, Lithium Power will submit its environmental impact assessment. Given the eventual surface area that Maricunga will cover, as well as its location, the importance of this assessment cannot be underestimated. We’re pleased that the company is using tier-1 environmental consultancy MWH, which has extensive experience within the project area.

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 of Lithium Power to $1.13/share (share price $0.46). 

Updated virtual site trip

1 Video - Dec 17

Updated virtual site trip to the Maricunga lithium project in Chile.

Preliminary Economic Assessment – Valuation Update

1 Video - Dec 17

Lithium Power has release a positive Preliminary Economic Assessment Study.  This video:

  • Reviews the results
  • Provides a valuation update

Resource upgrade at Maricunga Project – Valuation & Analysis

1 Video - Jul 17

Lithium Power has increase the resource the Maricunga Project by 270% to 2.1Mt LCE. This video provides analysis on:

  • Key highlights of the upgrade;
  • Valuation update; and
  • An update on the lithium market.

Initiation Report

7 Videos - May 17

Lithium Power is an ASX listed company and is developing a world class Maricunga Lithium brine project in Chile.  The report includes:

  • Valuation & Investment Analysis;
  • Site trip and review of the planned Lithium operation;
  • Highlight the key elements for a lithium brine project; and
  • Review of the lithium sector.

Archive

Maricunga Project – Virtual Site Trip

1 Video - Jan 17

Site trip to the Maricunga Lithium Brine Project in Chile.  Video includes analysis on the:

  • Region & surrounding infrastructure;
  • Review of the on-going development work; and
  • Planned mining & processing options.

What to look for in a lithium brine project

1 Video - Jan 17

Highlight the key attributes of a lithium brine project.  Topics discussed include:

  • Difference between brines and hard rock sources;
  • How brine projects are formed;
  • Where they are located; and
  • What are the key attributes that make a brine project economical.

What is lithium?

1 Video - Jan 17

Review of the fundamentals for lithium. Analysis includes:

  • Sources & uses;
  • Supply – Current & future; and
  • Demand – Current & future.