LI3 Energy Inc (fka LIEG)

[Dr_Vonschellan]

I been Fulin around with_the_numbers.__Soooo_let’s_play_What-if_again
The Fulin Group from Mianyang China is a $2,560,000,000 manufacturing conglomerate employing 10,000 people with 73 subsidiary companies under its control. For our purposes we want to be and remain very cognizant of Fulin’s Yema Global automobile subsidiary which manufactures a super sleek very-sexy electric bus very popular in Asia and especially in smog-filled "breathe the filthy disgusting local air at your own risk" Beijing.

So here's What-If scenario number 1

Fulin obviously wants into the Maricunga NewCo JV and I think we should encourage/undertake to get their big Fulin foot in the door by offering to them the outstanding 13.8% share in the Maricunga NewCo JV for the super cheap price of $7,500,000 payable to MSB and LIEG (perhaps via LPI). Some of you may argue that this price should be quadrupled to $30,000,000 under new happy times Pinera-government era, but this is a pointless premature short-sighted stab into Fulin’s bum for no good overall benefit given Fulin wants to buy more JV ownership from MSB and LPI under Pinera-Regime-Pricing. Initially the NewCo JV would become a 4-way partnership with starting first out-of-the-gate ownership percentages along these lines:
MSB 32.3%
LIEG 17.7%
LPI__36.2%
Fulin 13.8%
Total 100%

However, Fulin has indicated they want a minimum involvement in the JV of 20% and could be agreeable (read that, politely demands) to boosting that involvement up to something closer to 50%. To this request from Fulin I would recommend that MSB sell at Pinera-era pricing a 14.6% share of the Maricunga NewCo JV at a price to be determined by those two individual companies. Next, I would recommend that LPI sell at Pinera-era pricing of 18.5% share of the Maricunga NewCo JV at a price to be determined by those two individual companies. Incidentally, there is nothing stopping MSB or LPI from trading their JV-shares to Fulin in exchange for stock certificates in the Fulin Group in lieu of a whopping big pile of green cash today. As an example, MSB has stock certificates in LPI.
The resulting partnership in the JV would then be:

MSB 32.3% minus 14.6%____= 17.7% Revised status of shoes = always clean as a whistle and super shiny
LIEG 17.7% minus 00.0%____= 17.7% Revised status of shoes = most times clean (FYI, no upfront whopping big pile of green cash here)
LPI 36.2% minus 18.5%_____= 17.7% Revised status of shoes = semi dirty, semi salty
Fulin 13.8% + 14.6% + 18.5% = 49.9% Revised status of shoes = very dirty, very salty
Total_____________________100%

In this new 4-party JV partnership Fulin would be completely responsible for the $257,000,000-Plus CapEx (Capital Expenditure) spanning the entire proposed 26-year LOM (Life of Mine). In practical terms Fulin becomes the project’s exclusive “In-House Banker” and manages/provides this entire budget including in-house finance charges. The JV will of course be responsible to repay on the principal under a standard arrangement.

Next, it could be proposed that all the LCE (Lithium Carbonate Equivalent) for the first 5 years of mining up to 25,000MT/year will be sold to Fulin at 66% of market value (that’s a 34% discount). For example if LCE is selling for $14,000/MT then Fulin’s price is $9,240/MT FOB Maricunga.

After the 5th year Fulin’s discount drops from 34% down to 17.7% until end of mine life if Fulin remains a partner in the JV.

All LCE produced for export over the first 25,000MT per year (beginning with year 1 of production) will be sold at market value with Uncle POSCO having first right of refusal on this excess amount. Uncle POSCO’s discount will be 17.7% off market value price of the LCE for a period of 5 years (continuous once initiated).

So with this scenario in place let’s re-look at the revised ongoing periodic handy-dandy Excel spreadsheet and see what we (LIEG) would be worth in December 2017 and March 2019. I am changing the spreadsheet line “Estimated Income 44% of EBITA” to “Estimated Income 70% of EBITA” since all the CapEx sourcing/management/overhead costs are now bore in China by JV partner Fulin. I am also changing the spreadsheet line “Local royalties/community payment/Tax = 35%” to Local royalties/community payment/Tax = 21%” since we can be sure the Centrist Lefties are not going to be in power within the executive branch for the next 4-8 years in Chile and Pinera has strong pro-business policies/thoughts on these local hidden blood-thirsty taxes stifling new business development in Chile-at-large.

Lithium Carbonate Equivalent = 2,150,000 Tonnes
Price Li2CO3 discounted 34% to Fulin for 5 years = $9,240 /Tonne Ref
26-year life span of mine LOM = 26 Years
Life of mine Gross value = $19,866,000,000 (Note: warped/discounted by $10B based on first 5 years used for this Scenario #1)

Tonnes production 100% capability per year = 83,000 Tonnes
Tonnes production 55% w/Conversion per Yr = 45,650 Tonnes
Tricky Dicky Fudge Packer factor (SUBTRACT) = 46.0% (This could go way way way down in our favor under President Pinera)
Tonnes LCE production capability per year = 25,000 Tonnes (Salar is so deep that we could easily go 80,000 tonnes if allowed without missing a beat)
Mine gross revenue per year = $231,000,000

Operating Expenses per Tonne itemized
Chemicals & reagents $1,615
Salt Removal $244
Energy $183
Manpower $274
Employee services $305
Maintenance $122
Transport & sales $183
G&A $122
Operating Expense per tonne $3,050 = ($76,250,000)
Maintenance per year. See above. = $0
Depreciate Capex of US$257M over 26 years = ($9,885,000)
Revenue after expenses ST = $144,865,000
National Royalty 3% = ($4,346,000)
Local royalties / community payment / Tax 21% = ($30,422,000)
EBITA = $110,097,000
Estimated Income 70% of EBITA 70% = $77,068,000

LPI income per year__17.7% = $13,641,000
MSB income per year 17.7% = $13,641,000
Fulin income per year 46.9% = $36,145,000
LIEG income per year 17.7% = $13,641,000
_________________100.0%__$77,068,000

Value of LIEG at Cap Rate 7.0% = $195,000,000

Number of LIEG shares = 556,124,331
Projected value of LIEG share March 2019 = $0.350 PPS

Interest Rate = 5.0%
Nper. Number of months in study = 14
Minimum appreciation per month per share 6.5% = $0.023 /mon/share
Future Value 2019 = $0.350 PPS
Type (payment at beginning) = 1
Value of LIEG share December 2017 = $0.058 PPS

The Doctor

PS, it's all not that complicated actually... anyway I think you all knew subconsciously a year ago we were fast headed into this possible arrangement given the increasing air pollution in Delhi India, Moscow, and Beijing China threatening thousands of human lives every single day now.