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Lithium Power International
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== Risks and sensitivities == We see a number of risks attached to the company and the Maricunga project. These include lithium pricing, project economics and funding, as well as the political situation and the overall lithium extraction regulations in Chile. We have discussed the key financial and valuation sensitivities above. We believe the main risk associated with the project is the uncertain political situation in Chile. Following the recent presidential elections, Chile’s constituent assembly is debating motions for a new constitution, which could significantly alter the existing mining legislation. Some of the proposals include nationalisation of the large copper and lithium projects and a radical change in taxation aiming at increasing royalty payments. There is also a risk the concessions in the excluded areas can be revoked. The country is expected to vote on the new constitution later this year; however, there is no exact timing on this and it could be a protracted process that will continue affecting the investment climate. At present the only two lithium producing operations in Chile are run by SQM and Albemarle. Both companies make significant financial contributions for their right to operate in the Atacama Salar. Earlier it was reported that the country announced an auction process to award five special operating licences to explore and produce 400,000t of lithium. While two of these licences were awarded to BYD and a local company, each offering to pay c US$60m, it was subsequently announced that the results of these auctions were suspended by a Chilean court. This underscores the opposition to lithium extraction in Chile, both from environmental and political points of view. While the Maricunga project is at a relatively advanced stage and noting a non-binding MOU with Mitsui, it is yet to secure a binding offtake or a strategic partner within the battery value chain. We note that the use of the salt removal plant is new in lithium brine processing, although the design of the plant is based on established technology and the use of evaporators and crystallisers is common in the chemical industry. The process was developed by GEA Messo (a well-known German engineering company), and according to the BFS was able to produce battery-grade carbonate from Maricunga’s brine (in particular, the original samples produced in 2018 indicated a 99.5% purity). The JV has undertaken a series of product tests at a semi pilot plant scale. However, given the novel processing approach for brines, additional product testing might be required to secure the offtake. [[Category:Thesis]] [[Category:Equities]] __INDEX__
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