Lithium Power International Ltd (fka LTHHF)

[Dr_Vonschellan]

Dear_LPI BoD,_did you_lying sacksofshit_sign a_NDA w/Rothschild Bank?
And did you scumbags sign this NDA without even giving us 6 years-running crapped-on shareholders the polite courtesy of telling us you were signing such a restrictive news-blacking-out document?
https://www.latercera.com/pulso/noticia/la-negociacion-a-dos-bandas-de-codelco-para-ingresar-al-negocio-del-litio/PSLOHB6IQBDCRFSSWAKLP4647Y/

Hats off to Victor Cofre on bringing us mushrooms-in-the-dark LPI shareholders right up to date on the newestbotfocking Codelco is trying ram up SQM's and LPI's bum with his latest 9/24/2023 comprehensive story in LT Pulso. See Google English translation below.

The Doctor
-------------------------

Codelco's two-way negotiation to enter the lithium business
by Victor Cofre

The state mining company (Codelco) has made progress in its negotiation with SQM to enter the Atacama salt flat, but it is far from a signed contract. The central node (ie sticking point) will be the state control that President Boric demanded, something for which he did not impose a date and which could only occur in 2031. Codelco could soon enter a new company in which it indeed jointly-participates with SQM, but without control or a majority shareholding.

Codelco has another business in progress... it has already signed an investment bank, Rothschild, to negotiate alliances in Maricunga. And there is already talk of a due diligence underway with the most advanced participant in that field: Salar Blanco (ie Minera Salar Blanco, ref LPI).

It's been a stealthy five months. The national lithium strategy that President Gabriel Boric announced on April 20, on national television, had Codelco at its center, which he entrusted with negotiating the State's participation in the extraction of lithium from the Atacama salt flat. But not only that: Codelco, and also ENAMI, would have preference for other associations in the exploitation of other salt flats. And while the strategy advances slowly - it has not yet been defined which salt flats will be competed for, nor when, nor the mechanism -, Codelco has activated its own mandates.

Silently, the state mining company chaired by Máximo Pacheco is making progress on two fronts, although nothing guarantees its success. In the Atacama salt flat, where he develops the most relevant and strategic negotiation, with SQM as counterpart. And in the Maricunga salt flat, where Codelco has assets and a Special Lithium Operation Contract (CEOL) granted by the State in 2018, and has been in active conversations with Salar Blanco (ref LPI), the company that has the most advanced project .

A week ago, Pacheco attended the mining commission of the Chamber of Deputies, where he spoke about Codelco's three objectives in lithium. One is the Atacama salt flat. “It constitutes, without a doubt, the best salt flat in the world for lithium production,” said Pacheco: it has 36% of the world reserves identified to date and a lithium concentration of 2,000 milligrams per liter, when other salt flats in the orb average between 200 and 1,000 parts.

The second target is Maricunga, with a concentration of 1,073 milligrams per liter, according to explorations carried out by Codelco, the second highest in the world. In that deposit there are 40 companies with mining interests, SQM among them, but only two private companies with projects.

The third objective is Pedernales, a salt flat located 60 kilometers away from the Salvador division, which has an area three times larger than Maricunga, but where “lithium concentrations are much lower,” Pacheco warned. It could have potential, he said, but Codelco has not done any exploration. Again, this will depend on still uncertain definitions: Boric promised to preserve for conservation 30% of the nearly 60 salt flats and saline lagoons that are in Chile. And if even Codelco does not know its potential, how will the government be able to define whether or not Pedernales is strategic or if it is useful for ecological protection or business development?

With these three salt flats, “Codelco's plate is very full,” Pacheco concluded. But he still can't take a bite of the plate.

A Bank for Maricunga

“I begin with the Maricunga salt flat,” Pacheco opened his exhibition on September 13. Located 171 kilometers from Copiapó, at 3,757 meters high, “it has almost 40 mining property owners, one of which is Codelco,” he explained.

There are two projects developed by private companies, one is SIMCO, an alliance between the Singaporean Simbalik and the Chilean Cominor, owned by Francisco Javier Errázuriz. The other is Salar Blanco, from the international firm Lithium Power International. Both groups base their projects on mining concessions prior to 1979, which, they claim, enables them to develop the business. Pacheco doesn't think so. “I must comment that, in our opinion, these non-metallic concessions of the old (Mining) Code do not have the right to lithium, due to the fact that lithium is not concessionable,” he stated ten days ago, and announced that Codelco's role will be to consolidate all in one project. “The development of lithium with 40 companies is not sustainable. Let's just forget about it,” he said.

The Maricunga salt flat has an area of 14,000 hectares, much smaller than the 280,000 hectares of the Atacama salt flat. Codelco has assets for nearly 2,500 hectares, Simco almost 1,000 and Salar Blanco 2,541 hectares with almost half before 1979. But the latter has the most advanced path: it has an approved Environmental Qualification Resolution (RCA), a procedure that can delay a mining project for several years. And his belongings are adjacent to those of Codelco. An alliance there seems more than reasonable.

For this business, Codelco recently made a key decision: hire an investment bank to advise on the negotiations. The chosen one was Rothschild, an agent with a global presence, say those who know the steps of the state company. Furthermore, people who know this business say that there are already advanced conversations with Lithium Power International and that due diligence on its assets has even already been initiated.

What is Lithium Power International? A junior company that lists its shares in Australia and whose main asset is the Salar Blanco project. This year it sold another project, its subsidiary Western Lithium, in Australia for about US$20 million (AU$30 million Australian dollars) to the American company Albemarle. And he was left alone with Salar Blanco. “This sale frees up funds for the upcoming development of the Maricunga lithium project,” the firm said in July.

In its diluted ownership, a Chilean has the largest shareholding: Martín Borda, businessman, also a shareholder in the salmon company MultiExport. After a consolidation of ownership with Salar Blanco, Borda was left with 31% of Lithium Power International in 2022. In its optimistic presentations to investors, Lithium Power states that the net present value of Salar Blanco amounted to US$1,400,000,000. But that is with the project already executed: it has already invested US$ 70 million and the construction of a project for 20,000 tonnes of lithium carbonate per year requires another US$626,000,000 (ie CAPEX). The surprising value that Lithium Power assigns to its project, however, is not consistent with its stock market valuation: the company has a capitalization of close to US$100 million (147 million Australian dollars, according to its website).

More about Mining

The doubt among investors looking at the lithium market is the final design of an alliance between Codelco and Salar Blanco and the capital commitments that a project of this style would demand from the state firm, at a time of financial tightness, a position which Pacheco contradicted: Codelco generates an annual EBITA of US$5,000,000,000. “Does anyone believe that Codelco is at risk of insolvency? It seems like a joke to me,” Pacheco snapped after a question from Deputy Gonzalo de la Carrera that day.

Furthermore, if Maricunga is considered strategic, control of the company is a sine qua non (translation: a thing that is absolutely necessary). And Salar Blanco might not want to share control of their flagship project. In recent months, the company has been trying to define the financing structure of a project that it promised to begin building at the end of 2023. To do this, it has its own financial advisor: the Australian Canaccord Genuity.

The protocol meeting of Máximo Pacheco and Ricardo Ramos, general manager of SQM last May.
Crown jewel

“It is an extremely complex negotiation,” Máximo Pacheco told the deputies of the mining commission about the management with SQM for the Salar de Atacama. If in Maricunga the Salar Blanco project aims to produce 20 thousand tons per year starting in 2026, SQM produced 168 thousand tons last year. There, SQM alone leases property to CORFO for 81,000 hectares, six times the entire surface of Maricunga. There is a reason why the presidential announcement on April 20 mentioned the only salt flat that was in Atacama. That day, Boric entrusted CORFO with ordering Codelco to find the best ways to "achieve the participation of the Chilean State in the extraction of lithium in the Atacama salt flat." Boric promised to respect the agreements signed by Corfo until 2030, but imposed a condition that was difficult to satisfy: “If a public-private company is formed to exploit lithium in the Atacama salt flat, it will be controlled by the State through Codelco.” . But if SQM doesn't want to, everything remains the same until 2030.

The fires opened on Friday, May 26. That day, Pacheco received the general manager of SQM, Ricardo Ramos, at Codelco and the face-to-face began. This was an almost protocol meeting: the first meeting between the negotiating teams took place on Monday, June 5, in the offices of Carey, advisors to Codelco, which also signed the investment bank Morgan Stanley as an advisor. SQM works with Bank of America and its local law firm is Claro y Cía., where meetings have also been held, alternating the location of the meetings.

According to several people familiar with the matter, the talks are far from over, but there has been progress that no one wants to go into too much detail. Both parties declared strict confidentiality. The process is complex and has advances and setbacks, with definitions that impact other definitions. On the negotiating table, for example, is increasing SQM's production quota between now and 2030, when its contract expires.

“As of December 31, 2022, there are only 8 years left in the validity of the CORFO Contracts and we have extracted approximately 38% of the total accumulated limit allowed for the extraction and sale of lithium,” said SQM in its 2022 annual report, the so-called 20F. .

SQM and Albemarle - the other tenant of property in the Atacama salt flat - contributed more than US$5,600,000,000 to the Treasury last year, in the midst of a historic price boom. That could put urgency in increasing production: other countries are increasing their supply and the price has fallen sharply.

The Control

But the central point of the entire discussion will be obtaining control of the new company that is CORFO's tenant... Codelco wants control immediately and SQM is refusing that. Why give up, more than seven years in advance, control of an asset that you control until December 2030? At Codelco they respond like this: due to the expectation of continuing to participate in the Atacama salt flat - which contributed 80% of its income in 2022 - beyond 2030. The threat was directly stated by Pacheco ten days ago. He said in Congress: “The board authorized starting negotiations with CORFO to define the terms of a lease contract starting in 2031, where the lessee, which until now is SQM, would start in 2031 Codelco. And that is the conversation we have with CORFO today.” His words surprised several investors: the contract establishes the option of bidding for a new lease contract no later than 2027 and SQM could demand that this, in order to preserve fiscal coffers and an international competitive process, be done via tender. And not a direct route to Codelco. CORFO, however, is protected by the same contract: it can bid, but is not obliged to do so. “What if the government changes direction in 2026 and decides to go back on that decision and put out to tender the contract beyond 2030 to the highest bidder?” asks an investor.

In any case, some admit that it will be difficult to obtain control - or the majority shareholding, which is different - before January 1, 2031. According to some sources, there is consensus between the parties on this. One solution is for Codelco to become a minority owner of a new lithium subsidiary of SQM and then increase its participation until it reaches 50% plus one share. When? 2031. Or before; It will depend on the negotiations. What is this thesis based on? In that the presidential mandate is to achieve control, but Boric did not impose a peremptory date. No official document indicates when this should happen, recalls a person who has known about the negotiations. The letter of May 26 that José Miguel Benavente sent to Pacheco, among his orders, requests that “Codelco, as a company of the State of Chile, achieve control of the company that is formed for these purposes.” But he doesn't say when.

Others doubt it: control will be before 2030, they say. To do this, of course, it will be necessary to distinguish what everyone understands by control. And the discussion about control is more complex than 50% plus one share of a public limited company. The securities market law says that control of a S.A. It is obtained by securing “the majority of votes at shareholder meetings and electing the majority of directors” or by having decisive influence, which is when a shareholder has between 25% and 40% and there are no other partners who exceed their percentage. But there are other ways too. The same, for example, that SQM has, which has two series of shares: A, which elects seven directors, and B, which elects only one, and where both have the same economic rights. “Control a business you don't know?” says someone about Codelco's claims to illustrate how key it is to define control.

What is relatively clear is that Codelco will not have preeminence over SQM at the beginning of an eventual alliance. Its only contribution will be the contract beyond 2030 - in addition to, in the name of CORFO, allowing production to be increased - and it would hardly be able to contribute with millionaire fresh resources.