Lithium Power International (ASX:LPI) firms up Maricunga Lithium Brine Project fundamentals


by Jessica Amir

Lithium Power International Limited (ASX:LPI) CEO Cristobal Garcia-Huidobro and Richard Crookes, Executive Director of Finance, provide an update on the company’s South American Maricunga Lithium Brine Project.

Jessica Amir:
Thanks for tuning into the Finance News Network, I’m Jessica Amir. Today I’m with Lithium Power International (ASX:LPI) CEO, Cristobal Garcia-Huidobro and the Executive Director of Finance, Richard Crookes. Gentlemen, welcome to the Network.

Cristobal Garcia-Huidobro: Good morning, thank you.

Richard Crookes: Thank you.

Jessica Amir: First up, you were both recently appointed to the board in October last year and the company’s achieving quite a lot but just bring investors and potential shareholders up to speed with what has been taking place.

Cristobal Garcia-Huidobro: We are really very excited this year. It’s been quite a start for the year. We just released our Definitive Feasibility Study, our DFS a couple of days ago after a long time of work with an international engineering company, WorleyParsons (ASX:WOR). The outcomes from the DFS were really positive so we are very happy with that.

On the other side of the company we have been working really hard with the Australian team in order to come up with a very interesting development plan for our Australian assets that we are expecting to be able to release and disclose very soon.

Jessica Amir: Now let’s dive into the results from the Definitive Feasibility Study from the Maricunga Lithium Brine Project in Chile. What can you tell us?

Cristobal Garcia-Huidobro: Well as you know Maricunga is probably today the most advanced lithium project which is not under the ownership of one of the established producers in Chile by far. So probably we are four or five years ahead of anyone else and the outcomes were really good. We have a project our DFS is supporting now, 20 years production for 20,000 tonnes of lithium carbonate per year which is something very good. Our reserves are basically exceeding what we were expecting and in terms of the economics of the project those are really,really attractive.

We have an NPV of over $1 billion and with a return on investment (ROI), which is like 29 per cent annually, which is really good for these times. It’s almost a half a billion dollar project in CAPEX which compares very favourably with all the other projects now. And in terms of production costs we are being positioned probably in the first 10 per cent of the most efficient producers in the world. So basically Maricunga is proving to be all that we were expecting and we are really, really happy. As you know, we submitted our Environmental Impact Assessment (EIA) last year by the end of the year to the authorities. So basically that is also under process and we are expecting to have very good news by the end of this year.

Jessica Amir: So now over to you Richard. What does this actually mean for the company, the DFS results?

Richard Crookes: Well now that we have the financial numbers to a high degree of confidence, the CAPEX and the OPEX, it certainly allows us now to talk with potential financiers with a high degree of confidence disclosing real numbers. We are very confident that we have world class operating costs that allow 60 per cent operating margin which evidently supports debt finance. There is still equity interest from our existing shareholders, institutional shareholders. Of coursethere are a number of other streams of finance that we are looking to commence discussions on with strategic end users of lithium and other corporates. The beauty of having a high quality DFS completed by WorleyParsons and other top notch, first rate engineering groups is that it will withstand the scrutiny of any financial investor, coming in to look at our project. So we will commence now with a datareum and we’ll already have some parties involved. For example, we previously announced that Fulin Group has had some interest in working with us. And there are another group of potential strategic partners, who we would now like to introduce into the project, into the datareum, to hopefully provide some sort of competition around financing.

Cristobal Garcia-Huidobro: We have been receiving several approaches from different financial institutions. As you know, in Chile all the major financial institutions are present so we decided not to move forward with them until we have our DFS ready. So now everything is being activated again and the idea is to be able to get a pre-closing during 2019 on a binding basis. Which of course is going to be subject to our ability to get the environmental approval by the end of the year. The idea is for the company to be ready to take the final investment decision no later than the first quarter of 2020 to start construction.

Jessica Amir: And Richard, another reason you were brought into the mix at LPI was to secure key project finance, as well as firm up more strategic relationships. And plus you’re also in talks about potential offtake partners. So how’s that all going?

Richard Crookes: So as well as following up on the informal approaches we already have, I’ll be looking to establish some new relationships with potential Asian offtakers and strategic partners, who also come with capital. And we’ll be looking to secure some offtake to underpin the finance, going forward.

Jessica Amir: Now let’s change pace and talk about financing and share price. What can you tell us?

Cristobal Garcia-Huidobro: The company today has a very, very strong financial position. We have a lot of cash in our accounts. So we are basically fully funded until the end of all the developments, both for the assets in Chile and Australia. Stock price has been a little bit down and today it is really undervalued if you compare it to the NPV that we just released in our DFS. Usually companies with this level of development will be trading at around 30 to 40 per cent of the NPV you are showing. So LPI stocks today are really an opportunity and we really expect to have very positive news during the year. I’m pretty sure it’s going to put the stock in a different position.

Jessica Amir: What can we expect in terms of news flow over the next 12 months?

Cristobal Garcia-Huidobro: After releasing the DFS, we will be focusing on finishing the technical side, finishing all the works for the detailing, preparing us to be ready with the construction documents for the engineering, procurement and construction (EPC). Also as we already told you, be able to close on a binding basis this letter of intent with the financial institutions for financing so we can be ready by the end of the year once we get, which is going to be our major milestone this year, to get the environmental approval just to be able to take the next investment decision for construction.

And in terms of our Australian assets we will have very interesting news here. We have been working really hard on a very consistent development plan for the assets in Western Australia. This will have a very positive effect on the company as we are going to diversify our asset base. We will have brine from one side in South America and we will have hard rock here in Australia.

Jessica Amir: Cristobal Garcia-Huidobro, thank you so much for your time and thank you Richard Crookes.

Cristobal Garcia-Huidobro: Thank you Jessica.

Richard Crookes: Thank you.


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