RE:RE:Speculators getting ready to bid for PLU's 9 concessionsDaveEllis wrote: Hi Juan,
Thanks very much for the information you post.
Do you know if PLU will be able to bid for the concessions if they did come up for auction? If so, I would have thought they should be able to out bid any competitors because the concessions are worth far more to PLU than to a new entity, for the following reasons:
- Any new entity would have trouble getting finance to develop them because they are smaller than the combined area PLU currently holds. In addition to this, the threat of a legal overruling creates an added risk to any new entity.
- On the other hand, PLU's market cap will increase by multiples if they were to re-purchase the concessions, meaning they are worth a huge amount to PLU.
These things combined suggest to me that if PLU is allowed to bid they should be able to win the bid. So this whole fiasco will maybe cost a few million dollars but shouldn't ultimately justify the massive drop in shareprice over the past few years.
Very interested if you have any thoughts on this.
Hi, Dave. I agree with your analysis, PLU would have obvious advantages if it was allowed to participate in the auction. Now, until today, I thought it wouldn't be able to participate, because that is what I understood from the 68th article of the General Mining Law (1):
Article 68th.- The areas corresponding to concessions expired, abandoned, null and waived, may not be claimed, either in whole or in part, by the previous concessionaire or by his relatives up to the second degree of consanguinity or affinity, up to two years after being published as claimable.
But today I have become aware a of Supreme Decree (
Decreto Supremo N° 025-2016-EM) that was is issued back in 2016 and according to which once a concessions is withdrawn (retired) from the Registry it does not anymore constitute an antecedent to the petition of new mining concessions, which means that the previous owner would be allowed to claim the area again (2):
Article 6th.- Applicable provisions for the withdrawal and incorporation of areas
The withdrawn areas do not constitute antecedent or title for the formulation of new mining requests.
According to the more complete version of yesterday's news that has been published online today, Ingemmet is using this article (Article 6th) of the referred Supreme Decree as the legal ground to invite Macusani Yellowcake to participate in the auction for the 9 concessions, including Ocacasa 4. That seems to be the "mechanism" Ingemmet has "engineered" to make PLU paying a "fine" and gettting back its concessions:
https://elcomercio.pe/economia/dia-1/litio-ingemmet-y-macusani-yellowcake-intensifican-disputa-por-concesiones-mineras-en-puno-informe-uranio-susana-vilca-noticia/ Ingemmet vs. Macusani Yellowcake: the story behind the mining concession litigation that has sparked the lithium rush in Puno
The Geological, Mining and Metallurgical Institute made nine concessions of the Macusani-Falchani project, rich in uranium and lithium, available to the public in November; This announcement has created a lithium rush, the result of which will be an explosion of petitions that would have adverse consequences.
This November 2nd will be an unusual day for the Geological, Mining and Metallurgical Institute (Ingemmet). As very few times before, the officials of the geological institution will have to deal with a sea of people fighting to process a mining claim. And not just any claim.
What will be available to the public from 8:15 a.m. of that day will be a portion of the most expectant mining project today: Macusani-Falchani (Puno), rich in uranium and lithium. The price to participate: US$ 3 per hectare.
Why would an area belonging to a well-known mining project be offered in this way?
The reason lies in the litigation that Ingemmet has been facing for two years with the project operator, Macusani Yellowcake, a branch of Canada's Plateau Energy.
The bone of contention is 32 mining concessions of the Macusani project, which Ingemmet has declared expired against the company's opinion.
The culmination of this litigation has been the decision of the geological entity to withdraw nine of these 32 concessions from the mining cadastre as of November 2nd.
As you can imagine, this announcement has created a lithium rush, the result of which will be an explosion of claims that would have adverse consequences.
LITHIUM AND PHOSPHATES
The first and most immediate is the threat to the health of hundreds of applicants who will flock to Ingemmet's gates to obtain a part of the mining project (more than one hectare). The fact of the matter is that there is still no procedure to apply for claims online.
And to this must be added the implications in the development of the project.
Romulo Mucho, former president of Ingemmet, warns that if the company and the geological institution do not reach a solution that excludes the dispersal of the concessions, the project "will remain trapped for ten additional years".
For Peru it could mean a lost opportunity, since Macusani not only houses lithium and uranium, but enough potassium sulfate (potash) to supply the domestic demand for fertilizers, explains Mucho.
"Lithium (and potassium) offer the brilliant opportunity for Peru to advance more than it can advance with copper", he says.
Ulises Solis, general manager of Macusani Yellowcake, comments that Ingemmet's decision has caused the company's shareholders to look more cautiously at their investment in Puno because, although the withdrawal of the nine concessions does not diminish the surface of the project's central objective (Falchani), does deprive the company of new areas of expansion.
“Of these nine concessions, two have been found to have uranium and one to have lithium. As for the others, it is not that they do not have, but that we still had to explore them”, he explains.
He adds that the dispersal of the concessions will not only harm the company but also the people who will obtain the concessions because they have been judicialized.
To this should be added the administrative chaos that will be generated, since the concurrence of so many applicants will create conflicts and will force Ingemmet to organize an auction.
But how did this situation come about?
HISTORY OF A DELAY
The story goes back to June 2018, the month in which the annual window for the payment of the validity fee (amount that mining companies pay to the state to keep their concessions in good standing) closes.
Due to strange circumstances, Macusani Yellowcake approached the payment window at the last minute. According to Ingemmet, extemporaneously. According to the company, in the last minute, but within the hour.
Sources close to the process report that Oscar Bernuy, then president of Ingemmet, opened an internal investigation to find out when the company paid.
The investigation determined that Macusani untimely paid the fees of 32 concessions, so they were expired.
As expected, Macusani took the case to the highest administrative body in the mining sector, the Mining Council. After almost a year of deliberations, however, this instance confirmed the expiration ordered by Ingemmet.
Faced with this, the company went to the Judiciary and obtained a Medida Cautelar for 17 of the concessions. According to Solis, the company was in the process of obtaining another Medida Cautelar for the remaining 15, when Ingemmet decreed the withdrawal of nine of them (September 30th).
Ingemmet explained to "Dia1" that it has acted in accordance with the law, since "the nine concessions are extinguished in the administrative sphere and do not have a Medida Cautelar ordered by the Judiciary".
However, there are three details that deserve clarification.
One is the media campaign launched by Ingemmet a few days ago, promoting Puno's lithium potential. An initiative that seems made expressly to encourage the bid for the Macusani concessions.
Another is the apparent hurry of Susana Vilca, President of Ingemmet and former Minister of Energy and Mines, to make valuable concessions available to the public when there is not yet an online system for online claims that avoids crowding of the public.
And the last, and no less thorny: What is the link between the mentioned public servant and the company?
CONFLICT OF INTEREST?
Various sources consulted for this report coincide in pointing out that Susana Vilca served as an advisor to Macusani Yellowcake in the crucial months in which the company discussed its case in the Mining Council.
They even detail that the official visited that institution twice to advocate for Macusani Yellowcake and ask that the late payment of validity rights be forgiven. The curious thing is that this advice is not consigned in the Sworn Declaration of Interest (DJI) presented by her in the State Transparency Portal.
Asked about it, Vilca replied that she only interacted with representatives of Macusani Yellowcake, but that she never advised them or provided professional services, which is why she does not mention it in her DJI.
“In the specific case of Macusani Yellowcake, and during the period in which I did not exercise any public function, I have held meetings with their representatives and advisers to coordinate different issues around the scope of their action (Puno Region), however, I haven't agreed with them the provision of professional services nor the conditions of the latter, given that the issues required by the company were of a legal nature, a specialty that does not correspond to my profession”, she explained.
On the contrary, Macusani Yellowake assured "Dia1" that Vilca did advise them in the litigation with Ingemmet.
Between these contrary versions, mining specialists advise Ingemmet to reach an agreement to avoid damage to the mining project.
“I understand that Macusani was late, for minutes or seconds, for the payment [of the validity fees]. But that can be fixed. Ingemmet can still negotiate with the company so they pay a fine to correct their mistake. Or sell them the concessions again”, advises Romulo Mucho.
In fact, Ingemmet points out that the areas published as 'notice of withdrawal' can be requested by the same owner, because according to article 6th of Supreme Decree No. 025-2016-EM, "the removed areas do not constitute antecedent or title for the formulation of new mining requests".