dantes · @dantestrading
18th Jan 2018 from TwitLonger
my take on $SQM/CORFO deal
To remove the political overhang on SQM is a huge breath of fresh air for the company- after all, they were slated to effectively be done mining in the Atacama in 2022 as their lease was due to be finished.
However- I really couldn't imagine a worse outcome... save for itself no agreement at all...
Their current royalty rate of 6.8% now jumps to nearly 30% (assuming pricing of 14k+ per metric ton)
The real winner in this arbitration wasn't SQM or Chile- but rather Argentina... which has already embraced lithium mining with open arms, and today compared to even yesterday, looks incrementally better...
If you want to play SQM- avoid SQM stock like the plague- and buy their JV partners with both hands- LACDF who is their brine partner in Arg looks to be the single lowest cost/highest margin project on the planet now, and KDR who is their hardrock partner in Australia should be good too- and might even end up being higher margin then Atacama after factoring in the new royalty rates.
Don't get me wrong- even at 30% royalty, SQM will be making a handsome profit on their efforts, but it is no-where near the % returns they were making before.
Like always- best of luck to you all!
SQM pr: http://s1.q4cdn.com/793210788/files/doc_news/2018/PR_Corfo_17jan2018_ing.pdf