Another important box has been ticked by Millennial Lithium (ML.V) as it has now received the official confirmation it will be issued a Federal Fiscal Stability certificate for the Pastos Grandes project. An important step, as this establishes the tax framework for the next three decades at Pastos Grandes, which means the project won’t be facing sudden tax regime changes.
One of the main elements of the certificate is the confirmation a reduced corporate tax rate of 25% will be applied to Pastos Grandes from January 2020 on, while Pastos Grandes will be allowed appropriate tax reductions should the federal tax rate decrease during the 30 year term of the certificate.
The reduced tax rate will have no impact on the Net Present Value of the Pastos Grandes project. We checked the company’s feasibility study, and the base case scenario used a tax rate of 25% (as well as a 13% repatriation tax), so the receipt of the certificate is merely a confirmation of an assumption that was already used in the feasibility study.
Disclosure: The author has a long position in Millennial Lithium. Millennial isn’t a sponsor of the website but has been a sponsor in the previous 12 months.