RE:RE:Alex Holmes interviewed by "Mining Technology"Thanks for your detailed comments. I think many, including the Peruvian government itself, were wondering (and are still wondering) why the company did not immediately advance the (lithium) project if it already had enough resources for 40 years of exploitation, and now we have the clear answer. Although it took time to get permission from the community, the company was finally able to drill to the west, where lithium mineralization begins almost on the surface (as in Platform 14) and where there is no uranium above lithium, as almost all intercepts there have been reported saying "No surface uranium mineralization intersected as a hole started in barren rhyolite". Ulises Solis himself said in September (1):
Many people say, the Ministry of Energy and Mines included, why don’t we start to exploit it? Why don’t if we have the required framework –of course, complying with the formalities of the case. (...) We could exploit it, having the permits and everything else, as soon as possible. But for the exploitation of uranium we will always need the regulatory framework (…). However, the common ground between the media (such as America Economia (2)) and many investors is that for the exploitation of lithium the legal framework of uranium is needed, and if I remember correctly this has been somewhat suggested by PLU at the corporate level. Why does not the company deny these assumptions? I think the company is using the urgency of the lithium project to press the Government for the legal framework that also allows it to move forward the uranium project. And obviously the price got by selling PLU would be higher if you have such a legal framework, because of a higher Macusani Uranium Project valuation.
I’m not surprised that among the main companies interested in buying PLU (4) is SQM, not only because of the recent difficulties in Atacama, but also because of the great record of Chilean investments in Peru. But still I think the most likely buyer will be a Chinese company. To show you why I believe that it’s enough to see the last "geopolitical movements" of Walter Aduviri, reported by the main newspaper of Peru (3):
The regional governor of Puno, Walter Aduviri, has organized meetings with ambassadors from China, India and plans to meet with other powers, such as Russia. (...) On January 22, the president of Bolivia, Evo Morales, served 13 consecutive years in power, a record of his tenure in that country. That same Tuesday, not far away, on the third floor of a bustling corner of the “Plaza de Armas” in Puno, the regional governor Walter Aduviri received in his office the Ambassador of India for Peru and Bolivia, Mandarapu Subbarayudu. This coincidence in the calendar contains several elements around the intriguing geopolitical dynamic that Aduviri has deployed in its first weeks of management. Accompanied by the ambassador, Aduviri toured an alpaca wool processing plant, a coffee cooperative and a quinoa cultivation field, three products with which Puno seeks large markets. In the three places he visited, in brief speeches and statements with the representative of the Indian Government, Aduviri mentioned that local industries will benefit "with Bolivia's gas". Subbarayudu had a coffee, felt the wool, enjoyed eating a trout cooked with his hands and promised to spread these products in his country (…). Walter Aduviri is trying to gain notoriety for the presidential elections of 2021, and as part of this he’s approaching ideologically similar countries such as China and Russia. As he has shown products such as quinoa, coffee and wool to the Indians, I bet he will talk about lithium with the Chinese ambassador. This makes me think that in the end the Chinese will be willing to pay more for PLU than the rest of the companies, because in their case Aduviri-risks will be zero, and Aduviri will let them operate freely in exchange for who knows what.
As Ulises Solis mentioned, the Chinese are trying to buy Macusani Yellowcake directly, but the company is denying I suppose because the price offered is not high enough and because the correct way would be for them to buy the listed company in Canada, so that all shareholders can express their will. I don’t think that the Chinese will stay quiet about this, and in the face of repeated refusals from the company to sell Macusani Yellowcake directly, it is obvious which way they would go to achieve their goal. How much have they offered for Macusani Yellowcake? I guess US$ 100-200 million, or maybe more than that. So we have a company whose assets are worth more than US$ 100 million but the company itself is worth less than US$ 50 million (enterprise value). I've seen this before a few times and it always ends the same way.
I am also pleased to see that PLU wants to continue advancing the uranium project, with the intention of updating the PEA for Q3 2019, for which I guess they will make a new PP after releasing the Falchani PEA (good timing). In fact, I have noticed that in the last presentations they are giving more space to the uranium project, I think not only because of the explorations that will be carried out in H2 2019, but also because they have realized that the uranium legal framework is closer than many believe. In every event where a representative of the Government has been present (like (1) and (5)), mention has been made of the effort they are making to develop this legal framework as soon as possible, but it must be taken into account that the delay is largely due to the coordination that is needed between various State entities to produce this legal framework. As was explained by America Economia in December (2):
From the Government Palace they seem to be aligned with the urgency that Macusani needs. (...) Alfredo Rodriguez, MEM's general director of mining, affirms that they have received the bill with important contributions from different entities, such as the Peruvian Institute of Nuclear Energy (IPEN), and it advances America Economia that the elaboration of the final document of the law is in process. “With the approved law it is necessary to also approve a regulation that has precisions on the importation and safety of uranium. The law does not authorize companies to start exploitation activities; that has to be regulated by the IPEN or the National Society of Mining, Petroleum and Energy (SNMPE). The president announced that before the end of the year the law would be approved, but before it has to be taken to Congress. Hopefully they can put it on the agenda, so that this law can be approved this year”, says Alfredo Rodriguez. Beyond the resource update in March, which is quite expected by the market, I think that what is behind the recent strength in sp is what you mention, the ANSTO metallurgical work that would be completed at the end of this month, and which the most experienced investors know could completely change PLU market valuation. As in the case of uranium, although lithium grades are not extraordinarily high, it is as if they were due to the ease (low cost) with which it leaches. The pattern that has followed the sp since November 2 is very similar to the pattern that it followed from February 14, 2018 to May 11 of that same year (prior to the publication of the lithium maiden resources, which had been announced for June), and therefore outstanding metallurgical results could lead to a breakout similar to that observed from mid May 2018.
And it's Ulises Solis, not Ulysses Solis, lol. Although it is common in Peru to use English/German names this is not the case!!
(1)
https://stockhouse.com/companies/bullboard?symbol=v.plu&postid=29146806 (2)
https://stockhouse.com/companies/bullboard?symbol=v.plu&postid=29271137 (3)
https://elcomercio.pe/peru/puno/geopolitica-desplegado-walter-aduviri-primeras-semanas-gestion-noticia-606159 (4)
https://stockhouse.com/companies/bullboard?symbol=v.plu&postid=29300488 (5)
https://stockhouse.com/companies/bullboard?symbol=v.plu&postid=29276284