RE:RE:RE:Alex Holmes interviewed by "Proactive Investors" at PDACFunt times indeed, which can be noticed by the sudden increase in the posts frequency both here and in ceo.ca. I think that the majority of investors have taken advantage of this decrease in the price to average down, but it is difficult for the same investor base to force the price upwards. What is needed for this is evidently fresh money, from institutional investors for example, and such fresh money will only enter when the risk falls below its maximum allowed threshold.
Nor has I been surprised by the market reaction to the resource update, it is obvious that many investors were waiting for that news to go out and sell; I think that this gave support to sp in the last weeks. While the initial production is maintained at 50-60 ktons LC, then greater resources do not dramatically increase the value perceived by the market.
It seems to me that investors are currently projecting quite modest data from the metallurgy tests, so I agree with you about these having a considerably greater effect on the project valuation. That is, most investors must be taking Haywood's cost estimates of more than $6000 dollars per ton of lithium carbonate, which together with a production of 50 ktons per year and a price of $16,000 dollars per tonne results in a value of C$3 per share. If we correct these results using a price of $9-10 thousand dollars per ton of carbonate, uncertainty regarding the approval of the uranium legal framework and the election of an anti-mining regional governor then the result is what we already know.
The metallurgical results will not only allow us to know the real costs of producing lithium carbonate, but also the costs of producing lithium hydroxide. And I think this is the reason for the delays in these metallurgical tests. If they manage to produce lithium hydroxide without raising costs much (for example from $3000 to $4500 per ton), then we’d have an additional optimization to that obtained by reducing the “strip ratio”. It seems that the market still does not understand that this deposit is very different from spudomene, and as Alex Holmes said it could be called “solid brine”, so the opex would be much closer to that of brines than to that of rocks and the Falchani project would quickly ascend through the pipeline of projects.
Although I do not want to insist too much on this, I still believe that the election of Walter Aduviri as regional governor continues to influence the risks perceived by the market. In this sense, I believe that the statements made by Alex Holmes that “we have held several meetings with him” and “he has understood the benefits of the project”, if proven, could increase the value perceived by the market and attract more investors. Nevertheless I see it difficult for Aduviri to publicly show his support, not only for the fear of disappointing his Aymara colleagues, but because the latest news shows a child, disoriented Aduviri who is still behaving as if he were a candidate. However, his rapid decline in popularity and the number of trials he’s accumulating make me think that he will not last long in office. In fact, I would be surprised if in 2 years Aduviri remains the regional governor of Puno.
Regarding the legal framework of uranium, since last year it was clear that the Central Government led by Vizcarra would make its best efforts to develop it, but it is not entirely clear if Congress will pass the law quickly. And this is where the skepticism of many investors regarding the approval of this "radioactive legislation" (lol) lies, since there is always the possibility that the opposition sector (basically leftists) carries out a campaign against uranium and manages to put public opinion against the project.
But anyone who knows Peru and the legislative process knows that with the right strategy Government can pass almost any law through Congress (which is not necessarily good!), as long as it does not touch certain sensitive issues, such as the minimum wage, political parties, the civil union or of course the benefits of the congressmen! The important thing is to choose carefully the moment and the form; for example, many important laws have been passed in other occasions as part of broader legislative packages. In particular, I believe that Government should propose this legislative framework as an “additional regulation” rather than as a “new law”.
The debate regarding this “legislation” will coincide with other PLU announcements, in particular with the publication of Falchani's PEA. Both factors will bring great notoriety to the company's projects in Peru, and only then will all the details including the exploitation of uranium be discussed. I think that will be the moment when the projects will face the “litmus test” of public opinion in Peru, and evidently some investors are skeptical about the final result of what they consider an overexposure. But again the result may surprise them; if the public opinion turns in favor of the project, these investors will return and we will quickly start to get buyout offers from the mayor lithium players.
Regarding this issue of “public opinion”, let me abound a little more. Since the project was publicly announced I have been monitoring the different opinion forums and spaces of ideas exchange in Peru, and I can tell you that, although the level of misinformation is somewhat alarming, in general I have not found any significant opposition to the projects of PLU. There are some skeptics about lithium due to the “oversupply”, other pessimists (due to the election of Aduviri) who believe that “exploiting uranium in Puno” is like “walking the tightrope drunk”, and others who are very excited about the potential of the project to reduce poverty in Puno. However, the vast majority assumes that the project will be successful, and that the Government's efforts should focus on obtaining maximum benefits and minimizing harmful effects, such as pollution. Even the opponents of the project maintain an attitude of resignation, because they believe that nothing will prevent the corrupt government from opening the doors to the foreign company in order to get their “slice”.
And just to finish, I agree with you, such Board and shareholders we have! I think that alone should be enough for investors to think twice before overlooking an investment opportunity like this.