Lithium Power (ASX: LPI) shares are up 19% on the confirmation that there might be a bid for the company. The background here is the interests in Chilean lithium - the salars up in the north of the country. LPI has rights there and the Chilean government has turned socialist again and thinks that ownership of those resources by the State is a good idea. Of course, they’re economically wrong in this but then that’s the way with socialists everywhere. In this short term what it means is that Codelco, the state owned copper mner (and an inefficient one to boot) might make a bid for Lithium Power.
This first surfaced in a Bloomberg report: “Codelco, the world’s biggest copper producer, is nearing a deal to acquire Lithium Power International Ltd. that could value the Sydney-listed firm at nearly A$315 million ($202 million), according to people familiar with the matter.
The Chilean state-owned firm is in advanced discussions to buy out Lithium Power at about 50 Australian cents per share, representing a 43% premium to its Wednesday closing price, the people said. The companies are working on finalizing a deal, they said.” That’s the sort of reporting that will have the stock exchange inquiring as to whether Lithium Power would like to announce anything.
At which point: “Lithium Power International Limited (ASX: LPI) (“Lithium Power” or “the Company”) refers to recent media speculation (including as published by Bloomberg on 11 October 2023 ("Bloomberg Article")) regarding discussions between Corporación Nacional del Cobre de Chile (“Codelco”) and Lithium Power about a potential transaction.
Further to the Company's announcement on 28 September 2023, Lithium Power reconfirms that it continues to be in discussions with Codelco regarding a potential transaction, but these discussions remain incomplete and no agreement on terms has yet been reached. Codelco is continuing to undertake its due diligence investigations.”
And yes, they confirm that talks are at the 50 cents a share level. Which, given that Lithium Power is currently at 41 cents might be something we’d like to bet upon. It would be a bet, of course, not an investment, but it is there if we want it.
If we were terribly cynical we’d start to wonder who leaked that information to Bloomberg. For one way to make sure that Codelco considers a nice high price for the take out is to push the share price up so that Codelco has to pay a nice, high, price to be able to complete. But that would be cynical, to think that way.
As to why Chile is being silly about this. Instead of trying to own the lithium they should just tax it more. Let other people invest their capital, struggle with the market and production and all that. But charge them a higher mining royalty. Govrenments aren’t good at running mines so they should extract the value in tax, not profits. But try telling a socialist that.
