Goulamina comprises a land holding of 100 km2 in the Bougouni Region of southern Mali. (Source Firefinch)

China’s Ganfeng Lithium continues to expand its reach with Monday’s announcement that it will acquire a 50% stake of a special purpose vehicle set up by Australian-listed Firefinch Ltd., which owns the Goulamina hard-rock mine in Mali. Ganfeng will take at least half of its first-phase output as part of the $130 million deal. 

Last year, a feasibility study was completed but a production start date has not been set yet. The Goulamina mine, laying about 150 km by road south of Mali’s capital Bamako has 108.5 tonnes of resources and high-grade spodumene concentrate, according to Firefinch’s presentation last month. The project is “one of the world’s highest-quality lithium assets”, and adds significant value to Ganfeng Lithium’s overall project portfolio. 

For now, Genfeng will acquire offtake rights for 50% of the mine’s first-phase annual production capacity of 455,000 tonnes of spodumene concentrate, but has the option to acquire 100% if it helps Lithium du Mali raise debt or gives financial assistance to the company. On top of these terms, Mali’s government has the right to take 1-% of the equity free of charge and pay in cash for up to 10% more. 

Ganfeng Lithium is one of the world’s largest lithium producers and could help the Mali-based company raise funds quickly. The Chinese company could help raise at least $64 million from banks or other financial institutions earmarked for development and construction of the mine, and has the option to provide the company with up to $40 million in direct financial assistance, according to a filing from Ganfeng. 

Ganfeng lithium has projects in China, Mexico, Australia, Argentina, and Ireland. The company is one of the biggest lithium miners in the world and has significant sway in the African continent with so many projects and investments in the region. The company also signed a five-year deal last December with the Manono mine in the Democratic Republic of Congo (DRC) for spodumene concentrate, but does have an equity stake in the project. 

With lithium being one of the most important elements for much of the technology in batteries powering everything from smartphones to electric vehicles, Ganfeng is mining a strategically important and economically valuable resource. Its partnerships and investments in Africa give it strong control of the mining and processing networks in the region, and it continues to expand around the world.

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above. 

Electric car lithium battery pack.

It’s going to sound like a slogan by now, but lithium is the future. The metal’s most important use is in rechargeable batteries for electric vehicles, but the applications go so much further. Lithium-ion (Li-ion) batteries are the most popular battery being made today. Research and development teams are scrambling to increase lithium-ion battery density so device manufacturers, car companies, and anyone making an electric-powered product can take advantage of this technology. 

Lithium is also used for producing optics, glassware, ceramics, HVAC systems (lithium chloride), lubricants (lithium stearate), pharmaceuticals (lithium carbonate), armour plating, aircraft, trains, and bicycles (lithium alloys). While the use case everyone is talking about and the one that will be the most important for the next decade is battery technology, lithium is not limited to tech use and has applications in every industry. 

Batteries 

Energy storage is now one of the most important areas of industry and innovation as the world moves to an electrically-powered model to accommodate developing technology and environmental concerns. The batteries of old were heavy, filled with chemicals, and didn’t hold a charge for very long periods. Lithium-ion batteries have changed all of that. 

Li-ion batteries can be recharged hundreds of times and are more stable than other types. Their energy density is higher, voltage capacity is higher, and they have a lower self-discharge rate than other rechargeable batteries. It’s no wonder everyone is scrambling to create the best batteries.

Battery Competition

At the dawn of the microprocessor, the industry raced to see who could get the most processing power out of the smallest and most efficient chips. This led to some of the legendary tech companies we have today like Intel and AMD, as they raced each other to see who could put together the best product faster. This competition brought out the best in the industry and gave us the computers, tablets, and smartphones we have today.

Batteries are in a similar stage now as the world is paying attention to the companies that are looking to provide us with energy storage solutions that have become necessary for the modern economy. The result is a race to produce the lightest, most powerful, densest, and longest-lasting battery possible. The result? Lithium-ion batteries continue to get denser and more powerful, allowing us to store more energy for longer periods for use in our devices, cars, and even homes. 

The competition happening now is driving innovation forward faster than ever before, and batteries are getting pretty good. You can now buy an electric car from Elon Musk’s Tesla with a range to take you from Toronto to Montreal with a quick recharge on the way, and all without worrying about running out of juice because of a denser and more powerful lithium-ion battery.

You can charge your smartphone from 0% to 100% in about an hour thanks to lithium-ion batteries and fast charging technology. Once you have your battery charged, it will last you the whole day, and then some. The batteries we have now are so good that they can store energy for homes to use as a backup in case of emergency. 

Products installed in homes can store energy so that when the main electricity lines go out, the battery can power a home instead. Paired with a solar roof, a home can generate, store, and use its own electricity without ever pulling from the grid. All thanks to lithium-ion batteries.

Mining Competition

The competition to develop and produce the best and most batteries has driven another area of the industry just as fast: production. Battery-makers and innovators can’t get their hands on enough lithium and demand is soaring as car manufacturers, tech companies, and battery innovators continue to race each other for supremacy. 

As a result, lithium prices have continued to rise exponentially, particularly in China due to the heavy demand for lithium-ion phosphate batteries that it seems every industry is clamoring for. This has been great for lithium miners, and most analysts and industry watchers agree that the driving forces for lithium demand are only getting started. According to Deloitte’s Electric Vehicle Trends, EV sales are forecast to grow from 2.5 million in 2020 to 11.2 million by 2025, and to 31.1 million by 2030. Lithium demand from the car industry alone is expected to drive prices at a steady rate for the next five years, and rising prices will benefit every company mining the tech metal.

Last year, in the middle of an economic crisis, lithium continued its drive higher, and the domino effect that has had for 2021 is a supported and stable lithium price for the first quarter. This is expected to continue for the rest of the year and positions miners for comfortable gains through the next 12 months. 

Off to the Races

Where there is smoke, there is fire, and miners are scrambling to compete for the lucrative lithium market. As big as it and the demand for lithium are now, this is still the infancy of the lithium mining boom, with decades of expansion to come on the backs of the electrification of the global economy. 

The Long Haul

This is just the start of a race that is sure to be a marathon instead of a 100-yard dash. Companies are only just gearing up for higher production of energy storage solutions, and the starting line is only just being crossed. Look back to the early days of Intel, AMD, or Apple, and imagine getting on the ground floor of those investments. 

As the microprocessor race has done before, the battery technology race will create an industry driving the fundamental needs of multiple other industries, as everything from transportation and logistics, to technology companies, and down to manufacturing and heavy industry require energy storage solutions. 

Key Players

The best of the best are throwing their efforts into mining lithium to match the demand coming at them now, and down the line as growth continues. Some of the top lithium miners right now include Galaxy Resources, Piedmont Lithium, Jiangxi Ganfeng Lithium, and Albemarle.

Galaxy Resources

Australian lithium miner Galaxy Resources has quite possibly given investors the most unexpected ROI in the industry over the past year. The share price return of 202% over the past 12 months is impossible to ignore, and although profits remain in progress, revenue continues to grow and prospects are bright. The Australian government has also shown a willingness to support this growing industry, by developing a 10-year roadmap for critical minerals to lower dependence on China for raw materials used in electronics and advanced manufacturing, like lithium.

Piedmont Lithium

Another Aussie miner focused on lithium, Piedmont is currently focused on establishing an integrated lithium business that will convert lithium resources found in the region into a critical component for electric vehicle manufacturing in the United States. The company’s mission statement makes it clear that they are setting themselves to capitalize on a specific area of demand (EVs) over the next decades, and they are sure to be a top pick for investors looking for exposure to the emerging and expanding demand. 

Jiangxi Ganfeng Lithium

This Chinese company is a giant in the lithium mining space, and both manufactures and sell lithium products in Mainland China, Hong Kong, the rest of Asia, the EU, North America, and in many other regions. Jiangxi is poised to be the dominant player taking advantage of the growing export market for lithium as they consistently eat up more market share every year. 

Albemarle Corporation

Mining lithium, bromine, and catalysts, this US company has a foothold around the world and competes toe-to-toe with Jiangxi Ganfeng Lithium. They have been a top lithium miner for some time now, and a favourite for mining portfolios around the world. With a market cap of $17.54 billion at the time of writing and a steady dividend, Albemarle only stands to benefit from the growing demand for lithium from every market segment they serve.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above. 

On August 29, Cypress Development Corp. (TSX-V: CYP) / (OTCQB: CYDVF) announced the successful completion of slurry rheology & filtration studies that are an integral part of the Pre-Feasibility Study (PFS) for the Clayton Valley clay-hosted lithium project, located immediately adjacent to Albemarle Corp.’s Silver Peak brine processing facilities in Nevada.

Management believes its U.S. location will become an increasingly valuable attribute. While many junior lithium companies like to name drop “Albemarle” and “Silver Peak,” Cypress owns 100% of one of just a few projects in Nevada that Albemarle might actually be interested in.

More promising results from Cypress’ expert technical team

Back to the latest news…. the outcome was the result of months of testing by laboratories and a detailed review with consultants & equipment vendors. This news represents a major milestone in the project because the results simplify the process flow sheet.

Cypress CEO Dr. Bill Willoughby commented in the press release,

A critical step for us at Clayton Valley is the separation of solids & liquids. A viable process is dependent upon the ability to separate the process leach solution (PLS) from the leached residue whether by thickeners, filters, or other means. Significant test work has allowed Cypress to identify a commercially viable process, based on filtration, to take the solid-liquid separation from the laboratory benchtop to the operational scale.”

Readers may recall that Cypress released positive results from the first & second phases of its PFS metallurgical program in February & July. Since then, work has continued on other aspects of the PFS, including recovery & concentration of lithium from solution through mechanical evaporation, membrane filtration, and ion-exchange processes.

CEO Willoughby continued,

The Cypress technical team discovered the Clayton Valley clays behave differently at varying leach conditions. By looking at the electro-kinetic potential of the clays we can select the optimal reagents & equipment. We also know under what conditions the rheology of the slurries becomes a limitation, and can design the flow sheet accordingly. With this new knowledge, we are confident we can simplify a significant portion of the leaching flow sheet.

Cypress is looking at additional steps to simplify plant design with the goal to further streamline the production process and lower costs. With metallurgical & materials handling studies completed, Cypress expects to publish a PFS during the fourth quarter.

Next major milestone is a PFS in 4th quarter

It appears the PFS has been pushed back a few months. After a recent capital raise the company is comfortably funded through delivery of a PFS later this year. Come to think of it, what’s the rush? Investor sentiment remains very weak for lithium, cobalt, vanadium & graphite juniors. As long as Cypress is funded, let them keep carrying out studies to improve the PFS! Below are some highlights from the PEA.

 

 

 

It’s important at this point to reiterate the considerable strength of management, the Board, technical advisers & retained consultants. All of these impressive people and groups are being effectively led by CEO Willoughby, who has a Doctorate in Mining Engineering & Metallurgy from the Univ. of Idaho.

Who on earth could possibly be better to run this show than a PhD in engineering & metallurgy!?! He knows what he’s doing, and he’s a driving force behind the very good results and progress his technical team is delivering.

I asked Dr. Willoughby about last week’s news, he said,

It’s a major technical problem to separate ultrafine clays particles < 5 microns from a leach solution. Our solution could put us in the forefront of clay-hosted lithium projects globally.”

Demand keeps increasing, supply increasingly uncertain

There’s a massive disconnect in the lithium world. For years, demand forecasts have been going up. The demand side of the equation — driven by both energy storage & the electrification of passenger & commercial vehicles — is likely to increase at a Compound Annual Growth Rate (CAGR) of at least 15%, perhaps 20% or more. For example, at a 20% CAGR from Albemarle’s 270K tonne figure in 2018, demand would reach 967K tonnes in 2025.

Albemarle has a particularly good graphic depicting this unmistakable trend. Four years ago they expected ~400K tonnes LCE demand in 2025. Now, Albemarle is forecasting demand of about 1 million tonnes in 2025. Likewise, Lithium Americas is forecasting between 1.0 to 1.2 million tonnes LCE demand in 2025, a range it says comes from industry producers & publicly reported forecasts.

, Finally, Fastmarkets expects LCE demand to grow from ~300K tonnes in 2019 to “at least” 1.1 million tonnes in 2025. So, a lot of forecasts in and around the one million tonne mark, but even if it turns out to be less, I think it will be a major challenge for supply to approach that level in the next six years.

The longer the project delays in Argentina / Chile brine projects, and the more project mishaps like at Nemaska, the more room there is for unconventional projects such as Cypress Development’s Clayton Valley. The market will take every battery-grade tonne of lithium chemicals produced by any company that can supply them. Lithium juniors who can make it across the production finish line will be richly rewarded.

Despite significant fiscal & political challenges in Argentina that could further delay brine projects there, and continued slow movement in project development & production expansions in Chile, unconventional projects are still meaningfully undervalued compared to brine projects.

For example, Cypress Development Corp.’s enterprise value (“EV“) is less than 1% of the after-tax NPV found in its PEA. Compare that to the average 8.2% EV/NPV on the chart below. Cypress’ EV/cap-ex ratio of 3.0 times (3.0x) is 40% better than the 2.1x average of the other unconventional projects.

Cypress has the highest after-tax IRR on the chart at 32.7%, compared to an average of 26.1% among the others. And, the company’s cap-ex at C$641 million is 21% lower than the peer average.

Finally, readers should note that the Clayton Valley project has a strip ratio of 0.1 to 1. The other three projects with strip ratios average 3.0 to 1. Cypress has 1/30th the strip ratio of its unconventional peers!

That’s a big reason why the company has attractive op-ex & cap-ex, despite having lower grade Li to work with. Another reason is the mineralogy; the Clayton Valley project’s lithium abundance is hosted in a friendlier clay than that at some of the other projects. Friendlier meaning easier and less costly to liberate the lithium into solution.

The extreme weakness in the vast majority of lithium juniors is actually great news. Great news for any lithium company hopeful that can produce lithium next decade. Great news for investors who may want to average down in their favorite battery metals names.

Brine projects have gone from, “can’t go wrong,” to “can’t fund”

A funny thing happened over the past two years. Brine projects went from no-brainers; (lowest cost, best understood, most reliable) — to the exact opposite. Solar evaporation ponds are getting less and less popular by the week, day, hour! And, unusually rainy weather in the Puna region of Argentina has negatively impacted pond yields. Speaking of Argentina….. well just read the headlines, it’s not pretty.

Chile imposed an onerous sliding-scale royalty on realized lithium prices from production in the Atacama salar. Albemarle’s & SQM’s best, lowest cost lithium brine operations…. the world’s best, may no longer the world’s lowest cost.

Brine projects were sure things and clay-hosted lithium projects were, “maybe in 10 years.” Now? Most brine projects are dead in the water, some of them never coming back to life. Even the top-quartile, most advanced projects are not getting funded. By contrast, the prospects for clay-hosted lithium projects are better than they were two years ago, albeit also difficult to fund.

Investors would be crazy not to consider unconventional assets. Brine projects, with evaporation ponds attached, will themselves be unconventional at some point in the future. The only question is when.

In early August, Glencore announced it was shutting a major cobalt / copper mine in Africa at the end of the year. Three weeks later, cobalt prices are up 30-35%. It might not take that much to get lithium prices back on an upswing. If prices were to improve, juniors like Cypress Development Corp., trading at under 1% of third-party derived after-tax NPVs, could do quite well.

Peter Epstein

September 13, 2019

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Cypress Development Corp., including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker / dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Cypress Development Corp. are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.

At the time this interview was posted, Peter Epstein owned shares of Cypress Development Corp., and the Company was an advertiser on [ER]

While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover any future events & news, or write about any particular company, sector or topic. [ER] is not an expert in any company, sector or investment topic.

 

 

Standard Lithium Ltd. (TSXV: SLL) / (OTCQX: STLHF) shares are caught up in a battery metals sell off, but is it warranted given recent positive developments, ongoing supply challenges in the Lithium Triangle & exciting near-term Company catalysts? Its Arkansas Project could reach commercial production by 2022, and ramp up to ~20K tonnes/yr. of Lithium Carbonate, bolting onto brine streams from 3 existing facilities, to feed a central crystallizer plant by the mid-2020s. [a crystallizer is standard equipment made by multiple manufactures, used in many commercial applications, to convert a solution into a solid material] In this case, the solid material would be a high-purity, finished lithium product.

After successful bench & mini-pilot scale testing, Standard Lithium is at Demonstration Plant stage. The Demo Plant being constructed by Zeton Inc. is a 20 m x 20 m x 11 m tall, industrial-scale modular facility designed to process tail brine from the Lanxess South Plant in southern Arkansas. Lanxess is a leading European specialty chemicals company with > 15,000 employees in 33 countries. It develops, manufactures & markets a wide range of specialty chemicals & plastics. Last year, sales were nearly C$11 billion.

The Demonstration Plant is based on Standard Lithium’s proprietary technology that uses a solid sorbent material to selectively extract lithium. The Plant is designed to continuously process a flow of tail brine at 50 gallons per minute from the Lanxess South Plant, equivalent to annual production of 100-150 tonnes Lithium Carbonate. The Demo Plant is designed to be expanded to commercial scale early next decade.

Dr. Andy Robinson, Standard Lithium President & COO, commented in a June 3rd press release,

The Standard Lithium team is very pleased with both the speed of execution and the exceptional quality and attention to detail that Zeton are bringing to our Demonstration Plant. We are very confident that we will be delivering a high-quality plant to the project site in southern Arkansas, and we look forward to integrating it into Lanxess’ brine operations. We are progressing very quickly on the ground, and hope to announce real progress in project implementation in the near-future.

With all the doom & gloom around lithium pricing, even at current pricing of ~US$11.5K per tonne, 20K tonnes of Lithium Carbonate/yr. = US$230M = ~C$311M revenue at the Project level. There are possible scenarios to produce up to 30K tonnes/yr., for 25+ years by the 2H of the 2020s. Subject to a formal JV between Standard & Lanxess — in exchange for 100% funding of commercialization costs (hundreds of millions of CAD$ over several years) — by Lanxess; Standard Lithium will end up with 30%-40% of the Project. That’s a win-win for both companies in my opinion.

I believe that lithium carbonate pricing will improve early next decade, perhaps meaningfully, as forecasts for the global electrification of commercial & passenger transportation and the deployment of large-scale Energy Storage Systems, continue to rise.

On the other hand, long-term lithium supply is highly uncertain. Brine projects in Argentina & Chile are coming, but they’re delayed due to funding & other challenges. Claimed project capacities of 20-40K tonnes of Lithium Carbonate/yr. may never be attained, look at Argentina’s Orocobre Ltd., after 4 years, it’s running at ~72% of nameplate capacity.

Of roughly 12 potentially viable brine projects in Chile & Argentina, I assume 4 won’t make it and the other 8 are delayed by an average of 2 years. I then pencil in a 4-yr ramp up period to 75% of stated project capacity. Under those assumptions, if 450K tonnes/yr. was expected from the Lithium Triangle in 2025 — what we might see, instead, is 225K tonnes/yr. in 2028! This means security of supply (from the U.S., Canada & Australia) will be of critical importance. Speed to market will be rewarded handsomely with long-term contracts at strong prices.

In the chart below we see a review done by Orocobre of 2018’s expectations vs. reality, a combined 78% shortfall in hydroxide & carbonate expansions. 285.5K tonnes of new supply expected, 64K tonnes delivered. We see this year after year after year…. when will the market catch on? This can only be good news for lithium pricing going forward.

Any lithium company, be it brine, hard rock, clay or “unconventional;” that can reach production by early next decade, will be in the driver’s seat. I believe that Standard Lithium, with JV partner Lanxess could be in commercial operation by 2022. The Lanxess project has been de-risked in a number of important ways. I hope that readers & investors in lithium companies are starting to understand that risks avoided can add considerable value to a project. However, one risk still at large is technology & scale-up risk. With that in mind, I spoke at length with Standard Lithium’s President & COO, quoted above, Dr. Andy Robinson. Robinson has 20+ years’ experience as a Geoscientist and has a PhD in Geochemistry. No one is better suited to be in the position he’s in.

Please tell us about your background and what brought you to Standard Lithium.

I’m a PhD Geochemist who worked in the engineering consulting world for 10 years, and then as an entrepreneurial project developer in the mining & power space for the last decade. Robert (CEO Robert Mintak) and I worked together at Pure Energy. When we took over management of Standard Lithium in the spring of 2017, we had a very clear vision of what we wanted to build. We took our experience in the lithium business, both in terms of modern technology and project development goals, and looked for the ideal project. The ideal project had to have:

The right location for a modern approach,

Existing infrastructure at the project site – not 100’s of km away…

The right partner,

Minimal permitting & environmental risks, and

A globally significant resource

This was the only way we could realistically hope to get a project into commercial production within 5 years versus the usual 10 or more years.

How did your team choose a process technology to move forward with?

We took an agnostic approach to processing technology. The project drives the process. We started by understanding project fundamentals, then we developed a flow sheet that would work for our specific project in Southern Arkansas. Our process development work was guided by the philosophy that we didn’t just want it to work in a lab – we wanted a robust flow sheet that could work economically at commercial-scale.

Please describe the steps your team went through at the bench and minipilot plant stages.

At the bench-scale, we worked with large volumes of real brine from the project – we then tested a whole range of different technologies, ranging from those already in commercial use, through to novel and experimental technologies, to determine which general ‘suite’ of technologies would work best with our brine’s characteristics. We quickly determined that a modern alternative to the types of technologies developed in the 1970’s & commercialized in the 1990’s would be the ideal solution.

So, we spent the time at bench-scale solving chemistry problems of selectively extracting lithium from the brine – then we ran 2 programs of mini-pilot work to build our understanding of the process engineering. One was done at a batch-scale, then we scaled that up and ran it on a continuous basis. Now, in June 2019, we’ve just completed 2 years of test work on our southern Arkansas brines.

What were the key takeaways from each stage?

At the bench-scale – we learned that direct lithium extraction from the tail brine using a highly selective solid sorbent was the way to go. At the mini-pilot-scale – using both chemical & process engineers from a wide range of disciplines — allowed us to develop the simplest, most efficient flow sheet we could, at a reasonable cost. We’re using equipment and processes already in use around the world, at very large commercial-scale, in complementary existing industries.

Please describe Standard Lithium’s upcoming Demonstration Plant, what do you hope to achieve?

The upcoming Demonstration Plant will be final proof-of-concept for our Project – it’s a large Plant, that can be scaled directly to a commercial facility. It’s designed to process up to 50 gallons per minute of tail brine from Lanxess’ South Plant, and produce at a rate of 100-150 tonnes of lithium carbonate per year, so about 10 to 12 tonnes per month. We hope to scale our Demo Plant up to 9,000-10,000 tonnes/yr. during the first phase of commercial execution.

If all goes as planned, Standard Lithium could be in commercial operations in 2022? 2023? Do you have a goal? 

We’re aiming for a commercial decision in the first half next year, and our goal is to be in commercial operations by 2022. I should add that 2022 is aggressive, but achievable – as opposed to the aspirational targets suggested by other brine projects. Some of those projects are years away from a Bankable Feasibility Study, and then will require several more years to design, permit, win over local communities, obtain funding, construct solar evaporation ponds, regional infrastructure like roads, and build a processing facility.

Many companies are suggesting 3-year ramp up periods to full capacity, but if history is any guide, it will probably be longer. So, Standard Lithium could reach initial commercial operations years before some, if not most, of the brine projects in the ‘Lithium Triangle.’ If true, we would hope to lock-in long-term contracts (through Lanxess) at very favorable pricing.

Might you be able to sell lithium output into specialty nichemarkets that command premium pricing?

That’s a great question. If one looks at Lanxess’ business model, it centers around taking raw materials and converting them into a large variety of tertiary products that maximize the value obtained from their feedstock. They do these conversions using their global specialty chemicals expertise. Several niche lithium chemicals command high margins and typically are served by a small number of manufacturers. Lanxess is a leading global specialty chemical company, they know how to: a) build & operate a chemical plant, and b) extract maximum value from their chemical feedstock!

What would you like to say to readers who are still unsure about your operational flow sheet?

 We think there’s still a general misunderstanding in the lithium industry about lithium processing technology. There’s a pervasive thought that evaporation ponds are conventional and therefore ‘safe,’ and that anything different is high-risk. In reality, each evaporation pond project is unique, each has initial, and ongoing, chemical & operational challenges; Orocobre is an example of taking the traditional approach and not delivering battery-quality, or nameplate capacity.

Interestingly, FMC (now Livent Corp.) has been successfully operating an ‘alternative’ lithium-selective sorbent technology (similar to ours) in Argentina since the 1990’s. Standard Lithium (TSXV: SLL) / (OTCQX: STLHF) is not engaging in a high-risk processing technology – we’re simply making incremental improvements to what has already been done successfully for decades.

Once people see our onsite Demonstration Plant in continuous operation later this year, I think perceptions will change as to our technology being unconventional. We don’t have untested technology, we have customized technology, specifically designed with our project fundamentals in mind. The project drives the process. It took years of hard work and millions of dollars, but we think we’re about to cross the finish line regarding proof-of-concept. That should turn a lot of heads.

Peter Epstein

Epstein Research

June 6, 2019

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Standard Lithium, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Standard Lithium are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned shares of Standard Lithium and it was an advertiser on [ER]

Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

 

On May 27, Portofino Resources (TSX-V: POR) announced initial sampling results at its Yergo lithium brine project that covers the entire Aparejos Salar in the Province of Catamarca, Argentina. Yergo is within 15 km of Neo Lithium’s high-grade, PFS-stage 3Q Project. Before getting to this important company news, a quick recap of Portofino.

The Company controls 3 projects in Catamarca, covering > 8,600 hectares, via low-cost, 4-yr. options. Through the end of 2020, total cash outlays are < $65K, for all 3 projects. There are no work commitments or royalties. Portofino’s most advanced (initial drilling this summer) asset is the 100%-controlled, 1,804-hectare Hombre Muerto West project. Close neighbors in the Hombre del Muerto Salar include– Livent Corp. (formerly FMC), POSCO, and Australian-listed Galaxy Resources. POSCO paid ~$375M to Galaxy for 17,500 hectares in Catamarca province, that’s ~$21,400/ha. If POSCO, Galaxy, Livent Corp., Lithium Americas, Albemarle, SQM, Ganfeng, Orocobre Ltd. or smaller players like Neo Lithium, Millennial Lithium, Argosy Minerals, Advantage Lithium and Galan Lithium, were to pay half of what POSCO paid (per hectare) for 1/3 of Portofino’s 1,804 hectares in Hombre Muerto; that would equate to 6x the Company’s current market cap of C$1M. As a reminder, of 18 surface samples taken at the Hombre Muerto West project last year, 2 were > 1,000 mg/L Li, averaging 1,026 mg/L Li, 4 were > 800 mg/L Li, averaging 935 mg/L Li and 6 were > 700 mg/L Li, averaging 871 mg/L.

A Second Project, Named Project II, Looks Promising as Well….

Portofino can acquire 85% of Project II, which is 3,950 hectares in size and located 10 km from the Chile border (see map above) and 65 km northeast of Neo Lithium’s 3Q project. Historical exploration work included near-surface brine samples that averaged 274 mg/L Li, with several in excess of 300 mg/L Li. Project II captures the whole salar, has relatively easy access, and has returned consistent surface / near-surface sampling results over a wide area. The Maricunga project (BFS completed) is located just across the Chile border. Maricunga is billed as the highest grade, undeveloped brine project in the Americas.

Last, but not Least, Yergo, Subject of the May 27th News

Portofino has the right to acquire a 100% Interest in the 2,932 hectare Yergo lithium brine project. The property covers the entire Aparejos salar {see map above}. Earlier this year, surface & near-surface brine sampling & geological mapping were done. Twenty-two locations were sampled, returning values up to 373 mg/L Li and up to 8,001 mg/L Potassium (“K“). The sample sites averaged 224 mg/L Li, 4,878 mg/L K and 184 mg/L Magnesium (“Mg“.) The average Mg:Li ratio of the 22 samples is a very low 0.8:1. Due to unusually high levels of water in the salar, 16 of the 22 samples were taken from the southeast portion of the salar. Those 16 samples averaged 278 mg/L Li, 6,091 mg/L K and 86 mg/L Mg. The average Mg:Li ratio of the 16 samples is extremely low at 0.4:1. Most projects in Argentina have Mg:Li ratios of 3.0 to 3.5 to 1.

According to the press release, one sample taken from the northwestern portion of the salar returned a value of 351 mg/L Li, indicating a potential area of elevated near-surface Li brines up to 3 km in length by 1-2 km in width. Additional sampling will be required to better test the central portions of the area. Management intends to complete additional sampling once surface waters have evaporated to allow for less-diluted brine samples. Due to the close proximity of the salars comprising Neo Lithium’s 3Q Project and Portofino’s Yergo project, geologists studying Yergo believe it’s likely that they have similar geological histories and are similarly enriched in Lithium & Potassium.

David Tafel, Portofino’s CEO stated:

“We are encouraged with these very good, initial lithium and potassium sample results combined with extremely low magnesium/lithium ratios. As soon as weather permits, our geological team will continue their exploration work to follow up on the potential surface extent of the mineralization.“

Conclusion

Although the main event is drilling in June/July at Hombre Muerto West, these surface sample results from the Yergo project are certainly promising. Portofino is slowly but surely, without burning too much cash, advancing multiple projects. In a better battery metals market or a better lithium juniors market, I believe that the optionality embedded in Portofino’s 3 projects would be valued higher. Perhaps a lot higher. A C$1M market cap is a cheap entry point to see a few drill holes in one of the best lithium enriched salars on the planet. A proven salar with long-term existing production and advanced-staged development projects underway.

The following chart is another look at relative valuation. I calculated each company’s Enterprise Value per hectare. Portofino is the 2nd cheapest by this measure. To be fair, this is not the best metric, because not all hectares are of equal quality, or equally far advanced. For instance, some of the companies below have Preliminary Economic Assessments (“PEAs“) on select projects. However, I believe that Portofino’s 3 projects have the potential to be Company-makers (it’s easy to be a Company-maker when your market cap is C$1M). By contrast, some of the companies below have projects and green field properties in provinces or salars that have shown poor or mediocre drill results. Mediocre doesn’t make the grade in this market!

To be clear, Portofino Resources (TSX-V: POR) is a very high risk investment opportunity, it has not drilled a single hole yet. But several of the companies listed above have properties in less attractive salars, have experienced drilling problems, reported unimpressive grades, narrow brine intervals or announced small resources. One company reported a resource of just 66,000 tonnes of Indicated & Inferred lithium carbonate! Portofino could end up with mediocre drill results, or run into problems, but with a market cap of just C$1M, it might be worth taking drilling risk for the possibility of good, or very good, drill results, and perhaps a better lithium junior market later this year.

May 29, 2019

Peter Epstein, Epstein Research

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Portofino Resources, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Portofino Resources are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned shares of Portofino Resources and Portofino was an advertiser on [ER].

Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

 

Brian Paes-Braga is a Vancouver financier and entrepreneur, known for his notable work in founding and developing the lithium resource company, Lithium X. The company raised roughly $50 million and just two years after going public was sold to NextView New Energy Lion Hong Kong Limited for $265 million in March 2018.

Today, Brian Paes-Braga serves as Principal, Head of Merchant Banking at SAF Group, a leading structured credit and merchant banking group which builds, invests, finances and advises high growth companies. He is also on the board of directors at Thunderbird Entertainment Group and DeepGreen Metals and an Advisory Council member of the International Crisis Group, as well as supports a range of charitable organizations through his Quiet Cove Foundation.

You’ve been a successful entrepreneur for a number of years and have worked in several industries outside of the resource sector. From your experience , what are the ingredients to successfully financing and building strong companies like Lithium X?

Brian Paes-Braga: I think it starts with people and who you hire and whether there is synergy among your team members. I know we had that at Lithium X. It’s also important to respect the share structure of the company, and that means being honest with your shareholders while you continue to raise capital. Luck plays a part and we certainly were lucky in terms of timing and lithium prices when the company went public.

On the subject of Lithium X, the company was sold just two years after going public and you managed to maximize shareholder return. Was that always the plan for Lithium X or did a buyer appear at the right time?

Brian Paes-Braga: I established this company based on the belief that we need to wean the world off fossil fuels. That was the mission of Lithium X. We were confident that the buyer, NextView New Energy, shared the same commitment to developing the lithium sector. True, the $50 million we raised to secure lithium-development projects paid off when we sold the company but that wasn’t our main objective.

You pitched business mentor and renowned Vancouver mining financier Frank Giustra on the idea of building a lithium company and you also attracted another top mining figure, Paul Matysek, who had previously served as CEO of Potash One and Lithium One. How did you manage to convince Giustra and Matysek to join the project?

Brian Paes-Braga: My background as an investment banker helping resource companies raise money for projects led me to believe that lithium had the right supply/demand outlook for getting into business. I did my research on the lithium sector and the demand for lithium-based batteries in China. I think that both Giustra and Matysek saw the potential in the lithium market and were equally excited about the project. Mentors have always been very important to me. Frank Giustra was someone I had looked up to from a very young age and I’ve learned a lot from him.

You are a believer in giving back to the community through your work with various charities and your private foundation, the Quiet Cove Foundation. Can you talk about why charitable giving is important to you?

Brian Paes-Braga: At the center of my work in the business world is the desire to remain philanthropically conscious. I have now travelled the world on various mission trips close to my heart, including working with Syrian refugees in Greece and building schools in Peru. I wanted to devote more time to philanthropy and projects I cared deeply for and that was the reason we created the Quiet Cove Foundation. It focuses on supporting innovative solutions for large scale social issues. We encourage charities to think big, take risks, and disrupt the status quo.

Green shoots? Anyone seeing the green shoots of a Springtime recovery in lithium stocks? No, me neither…. However, I do note one positive development, Lithium Americas is receiving US$160M for 12.5% of its JV brine project in Argentina. That implies a C$1.7 billion valuation for the entire project, of which Lithium Americas will own half. This is the best news since POSCO paid US$280M to Galaxy Resources for 17,500 hectares in Catamarca province, Argentina. They paid US$16,000/ha for a reported 2.54 million tonnes of high-grade resources.

Speaking of Catamarca,that’s where CEO David Tafel’s company Portofino Resources (TSX-V: POR) controls 3 projects totaling > 8,600 hectares. One of the Projects is very near the projects of POSCO & Galaxy. Another is near Neo Lithium’s very high-grade 3Q project. I recognize I’m name dropping and playing the close-ology game, but Portofino has 3 shots at glory. Three legitimate chances of finding good, or even high-grade lithium deposits. Yet its market cap is just C$2M. This seems like attractive risk/reward to me.

Please give readers the latest snapshot of Portofino Resources.

Sure. Portofino Resources holds an interest in 3 lithium property groups in Argentina representing over 8,600 hectares. Our projects are located within the world-renowned “Lithium Triangle”, specifically focused in Catamarca Province, which was ranked by the Fraser Institute Annual Survey of Mining Companies, 2018, as the best mining province in Argentina. The Hombre Muerto West project is our most advanced and is within Argentina’s most prolific producing lithium brine Salar.

Portofino’s close neighbors in the Hombre del Muerto Salar include Majors– Livent Corp. (formerly FMC Lithium) and POSCO, and Australian-listed Galaxy Resources. All of our projects have been negotiated on the basis of 4-yr earn-in agreements with very low upfront costs. Between now and the end of next year, our total cash outlay is ~US$50K, for all 3 projects, and that’s not until 2020. I should add, we have no work commitments or royalties on any of our projects.

Very few lithium stocks are doing well lately, or over the past year for that matter. What’s your view of the sector?

Yes, it has been a very tough year for lithium stocks and lithium company shareholders, as the excitement for lithium projects has retreated and share trading has dried up. The market is no longer interested in companies with vast hectarage. It’s more about advancing projects with good addresses and good grades. Investors have become much more selective. However, a few companies with promising projects have begun to move up off their lows, and I believe this will continue. NOTE: {Bacanora Lithium, Lithium Americas & Neo Lithium are up an average of ~75% from their 52-week lows}

Tell us more about the Hombre Muerto West project, how many drill holes are planned?

We have a team on site that should complete a geophysical survey by the end of April. This is a follow up on encouraging lithium results achieved during last year’s surface sampling. The present program will help define the extent of brine in the sub-surface, which will be used to define targets for initial drilling. We expect to generate at least 2 or 3 drill targets from the geophysics. Drilling should commence following interpretation of the survey results.

What grades & intercept widths would your team consider to be a success?

Depending upon geophysical results, we will likely drill to an initial depth of 150m and hope for grades exceeding 400-500 ml/L lithium over 75-100m.

What excites you most about Hombre Muerto West?

Our Hombre Muerto West project is located within the best known and top producing lithium brine Salar in Argentina. Galaxy Resources recently sold a portion of their holdings in the Salar to POSCO for US$280 million (US$16,000 per hectare!). In 2018, our geological team sampled 18 sites in a near-surface auger program. Six samples were over 700 mg/L lithium and the highest sample returned 1,031 mg/L lithium plus 9,511 mg/L potassium. The samples also contained low impurity levels, including low magnesium.

Please tell us more about your second project, named Project II.

 Portofino can acquire 85% of Project II, which is 3,950 hectares in size, located approximately 10 km from the Chile border, and 65 km northeast of Neo Lithium Corp’s well known 3Q project. Historical exploration work included near-surface auger brine samples that averaged 274 mg/L lithium, with several in excess of 300 mg/L lithium.

What excites you most about Project II?

Project II captures the whole salar, has relatively easy access, and has returned consistent surface / near-surface sampling results over a wide area. In addition, the Maricunga (BFS completed) lithium project is located just across the Chile border. Maricunga is billed as the highest grade, undeveloped lithium salar project in the Americas.

Are you in discussions with any potential strategic partners?

Yes, we are having preliminary discussions, off and on, with multiple interested parties. We would like to bring in a partner on one or more of our projects. However, there is no certainty that any agreements will be reached.

Please tell us more about your third project, Yergo.

 Portofino has the right to acquire a 100% Interest in the 2,932 hectare Yergo lithium brine project. The property covers the entire Aparejos salar. Yergo is located approximately 15 km southeast of Neo Lithium Corp’s 3Q project. We completed an initial field exploration & sampling program consisting of surface & near-surface brine sampling & geological mapping. A total of 25 locations across the property were sampled. Samples have been shipped to a certified lab in Argentina. Results will be announced as soon as received.

You said that Yergo is ~15 km from Neo Lithium’s project. Neo just released a very favorable PFS. Does Yergo have anything in common with the 3Q?

Neo Lithium’s deposit is very high-grade with very low impurities. Our geological team just completed an initial sampling & mapping exploration program. We believe there are common characteristics. Once we have had a chance to review the results, we will be in a better position to comment further on commonalities.

What excites you most about the Yergo project? 

As mentioned, Yergo is close to Neo Lithium’s PFS-stage 3Q project, yet as far as we are aware, it had remained completely unexplored. Our geologists were quite upbeat after their visit and we are anxious to see the lab results of our initial sampling program.

Your 3 projects might be promising, but at 1,804 ha, 3,950 ha & 2,932 ha, are they large enough to host sizable resources? 

Our Hombre Muerto West property is relatively small, about 1,800 hectares, but could still host a sizable resource subject to ultimate grade/basin determination. However, it would make sense to consolidate our project with another in the same salar. Our other 2 projects are big enough, and in each case we control the entire salar. The advanced-stage, well regarded Maricunga project in Chile is approx. 4,000 hectares– so comparable from that perspective to both Yergo and Project II.

Why should readers consider buying shares of Portofino Resources?

 Lithium stocks are out of favor, but select stocks have moved off their lows. We have just 24 M shares outstanding and a modest market value of ~C$2M. Our 3 projects are located in close proximity to advanced-stage & producing lithium companies. Near-surface sampling at Hombre Muerto West returned some very positive results. Depending on the weather, we hope to start drilling in coming months. We have 2 exploration programs underway, the other being Yergo, so readers can expect news on both projects. We believe there’s significant upside potential in the share price.

April 12, 2019

Peter Epstein

Disclosures: The content of this interview is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Portofino Resources, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Portofino Resources are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned shares of Portofino Resources and Portofino was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

Lithium stocks were hot a year ago, now they’re not. Brine projects in Argentina commanded rapt attention, now no one cares. Clay-hosted Lithium projects were non-starters 2-3 years ago, now they’re in the “maybe” column. Clay-hosted Lithium projects are “unconventional,” meaning untested, and therefore difficult or impossible to fund. However, “unconventional” need not mean difficult to move forward or impossible to fund. What if I told you about a company with a project that had relatively low-grade Lithium, is pre-PEA, and is located in southern Arkansas? Sounds attractive, right? No, it sounds highly….. “unconventional.” Last I checked, Arkansas was not in the heart of the Lithium Triangle.

Sometimes unconventional is not all bad. Standard Lithium (TSX-V: SLL) / (OTCQX: STLHF) is a company like no other, and that’s a good thing. Although pre-PEA (PEA now underway), Standard’s 150,000 acre Arkansas Lithium project, called the LANXESS project, has been de-risked in a surprising number of important ways. For instance, while other mining juniors talk about being near, “past producing mines,” the LANXESS project is currently in operation, at massive commercial scale — but producing Bromine from brine, not Lithium (yet). It is a past-producer, but also a present & future producer!

The LANXESS project is hardly early-stage. All of the project’s infrastructure is in place and currently in use. Power, rail, gas, water, tanks, chemicals, pumps, tankers, trucks, drilling equipment, wells, roads, pipelines, etc. 24/7/365, dozens of wells are pumping billions of gallons of brine (salty water), annually, containing Bromine, Lithium and other elements, through 3 nearby processing facilities. The LANXESS project happens to be smack in the middle of North America’s largest brine production & processing facilities. These facilities have been in operation for decades.

Think about the risks avoided here. The Project is in the U.S., thousands of experienced workers are in place working, there’s no discovery or resource expansion risk (the resource is already large enough), the Project is by and large already permitted, it’s in environmental compliance. There’s local community support (no Aboriginal or First Nations issues).

Year-round operations, port access in the Gulf of Mexico, workers go home each night (no fly-in / fly-out). Best of all, the Project is in commercial-scale operation right now, albeit for Bromine. These are logistical items that Lithium companies in Argentina & Chile, not to mention Australia & Canada, would die for, milestones that can take years and hundreds of millions of dollars to obtain.

Not only are operations in place at a large commercial scale, but pumping history, hydrology & geology is all readily available to Standard Lithium for review. This and other data enabled the Company to estimate a 3.1 M metric tonne Lithium Carbonate Equiv. (“LCE“) Inferred resource at the LANXESS project. So, we can be reasonably certain that there’s considerable resource size. However, to be safe we await the Inferred resource being converted to Measured & Indicated, which is expected later this year.

One might think that pulling Lithium out along with the Bromine would be straightforward, it’s not, it proved to be quite a technical challenge. However, a challenge on the verge of being solved, as Standard Lithium is operating a mini pilot plant that has already produced battery-grade Lithium Carbonate. However, this process needs to be scaled up very significantly.

I’ve mentioned several ways in which the Company’s Project is de-risked, taking that theme to a whole new level is a prospective JV with LANXESS (hence the project name). Standard Lithium signed a MOU with LANXESS in May 2018 and a JV term sheet in November. LANXESS is a giant German chemical conglomerate that would provide substantial help on the technical, operational, sales / marketing and R&D fronts.

Assuming reasonable project economics, LANXESS has committed to finance 100% of the commercialization of the Project. LANXESS’, (through its wholly-owned subsidiaryGreat Lake Chemicals, operations in Southern Arkansas encompass more than 150,000 acres, 10,000 brine leases & surface agreements and 250 miles of pipelines. LANXESS extracts brine from wells located throughout the area and transports it to 3 Arkansas processing plants through a network of pipelines.

Executing the JV would be huge, LANXESS would own a majority of the Project, but funding is without question the largest risk factor these days. LANXESS funding would be the biggest de-risking event of them all. Several world-class brine projects in Argentina are all but stalled due to a lack of project funding. That’s even though those projects are “conventional” proposing to use conventional solar evaporation ponds. And then there’s Quebec’s Nemaska Lithium, they were billed as fully-funded, until they found a ~C$400M hole in their funding basket. Nothing against Nemaska, Lithium projects are complex and unique. Delays and cost over-runs are the norm.

Standard Lithium’s processing technology, if operating at commercial scale, would process enormous volumes of brine in days vs. over a year for solar evaporation ponds. The technology is designed to be easily and conveniently scalable, it’s modular. If need be, the Company could plan production based on market conditions. Management is not going to run into a ~C$400M cap-ex problem, the amount of operating data available is immense and remember, most of the infrastructure is already in place.

So, what does all of this mean for Standard Lithium? Assuming LANXESS comes on board (LANXESS named Standard Lithium and the Arkansas lithium project during the opening minutes of their 4th Quarter earnings call), they have many risk factors covered, including the biggest risk, project funding. Instead of facing the daunting task of having to raise hundreds of millions in equity capital to fund a commercial development, the Company is probably looking at raising closer to C$25M over the next 18 months. They just closed an C$11M bought deal financing.

Risk Factors

The main risk factor is scaling their proprietary technology from pilot to commercial-scale. With regard to this risk, I think it’s a question of when, not if, the Company achieves this milestone. A moderate delay would be disappointing but would not deliver a fatal blow. Standard Lithium hopes to eventually reach a run-rate of ~20,000 tonnes/yr. LCE. That will likely take several years, after first achieving limited commercial production potentially as early as 2021. Ultimately, production of 30,000+ tonnes/yr. LCE for decades is a possibility, by optimizing the well fields and tapping into the Company’s nearby TETRA Project area.

What might the mid-year PEA show? We don’t know yet, but we can make some educated guesses. Cap-ex? In Argentina, the average Lithium brine project cap-ex requirement from among 6 well known projects is C$540 M. The LANXESS project will be built in stages, so the cap-ex will be substantially lower. Remember, most of the infrastructure is already in place and in operation.

Op-ex should be on the low side as well. For example, the Company has ready access to some of the cheapest chemical reagents in the world. And, the Lithium operations will be sharing some costs with the Bromine operations. Brine exits the Bromine operations at 70 degrees Celsius, so no extra energy needs to be added as it enters the Lithium facilities. Management’s goal is to be in the bottom quartile on the cost curve.

Look at “conventional” brine producer Orocobre Ltd., it’s in year 4 of commercial operation, but is still running at ~70%-80% of nameplate capacity. This is no knock on Orocobre, they were the first new brine project in Argentina in 20 years, it just demonstrates how very difficult each unique brine (chemistry) project is. And the weather, it has been surprisingly rainy this year and last, which is bad news for solar evaporation ponds. Global warming?

In the early-to-mid 2020s there will be fierce competition for scarce resources in Argentina (labor, executives with brine project building experience, consultants, water, power, mining services & equipment, environmental work & construction activities (at 4,000 meter elevations), access to governmental agencies for permits & approvals). Among the 6-10 brine projects in Argentina at PEA-stage or more advanced, several might never reach production. Several others could be delayed by 1,2,3,4 years in reaching nameplate capacities of 20k-35k tonnes/yr. LCE.

Conclusion

Standard Lithium (TSX-V: SLL) / (OTCQX: STLHF) will not be fighting for scarce resources, (another risk avoided) there should be no operating or infrastructure bottlenecks, the weather is not a factor. There won’t be cost blowouts. If a Bank Feasibility Study calls for first production in mid-2021, and LANXESS is committed to project finance, operations & off-take, it will likely happen pretty much on time and on budget.

For hard rock producers in western Australia my understanding is that the situation is a lot better, but we could still see bottlenecks as many hard rock producers try to ramp up supply at the same time. Instead of companies failing, perhaps we will see a wave of M&A in western Australia.

That higher degree of certainty is worth a lot in the wild west of Lithium project development. And, if the brine projects in the Lithium Triangle can’t deliver close to nameplate capacity in the early-to-mid-2020’s, there’s going to be tremendous demand for Standard Lithium’s output, and Lithium prices will likely be high. Who knows, maybe even the “unconventional” clay-hosted Lithium producers will have their day in the sun?

March 29, 2019

Peter Epstein

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Standard Lithium, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Standard Lithium are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned shares of Standard Lithium and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.

 

by Peter Epstein

CEO Robert Mintak has 2 unconventional lithium projects in the U.S., one of which he believes is de-risked more than most lithium projects around the world due to infrastructure, permitting, jurisdiction and other key factors.  While Robert can’t know for sure until Standard Lithium releases a Preliminary Economic Assessment (PEA), it seems likely that cap-ex will be low compared to conventional brine projects.  For reasons explained below, op-ex is likely to be in the bottom half of the industry cost curve.  The Company’s goal is to be in the bottom quartile.

Standard Lithium is on a clear path to signing a JV with giant German chemical company, LANXESS.  If the JV is consummated, LANXESS will be committed to funding commercial development.  This would be a tremendous de-risking event for the project and for Standard Lithium.  Funding has been a huge challenge for lithium brine projects around the world.  Please continue reading to learn more about this unique U.S. lithium project which could reach initial production in 2 years, 2021.

Peter Epstein: Please explain Standard Lithium to readers who are unfamiliar with your company:

Robert Mintak: We are an integrated technology and specialty chemical company. We are listed on the TSX-V as a mining exploration company but we are not exploring, you won’t see any new mineral discovery announcements coming any time soon. Our business model is simple and somewhat unconventional compared to our peers, we believe the fastest way to go into production and to limit investor risk is to form strategic partnerships that allow us to piggyback off the existing infrastructure and investment of massive operating commercial brine assets in the USA.

I have been involved in the lithium sector for the better part of the past decade. My experience and successes in the lithium sector have been in forging strategic relationships and partnerships with large multinational companies and stakeholders. Previous to Standard Lithium at Pure Energy I brought POSCO, Tenova Bateman, SRI and Tesla to the table, at Standard Lithium we have continued that dynamic with the agreements and partnerships executed including NYSE listed Tetra Technologies and of course our announced planned JV with LANXESS.

Epstein: How is your proprietary process different from lithium brine operations like those found in Argentina?  

Mintak: First, I would like to state that the project drives the process Every lithium brine project globally is by and large wholly unique. Not only the chemistry of the brine, when developing the process flow sheet, as a project builder you need to consider access to and cost of, chemical reagents, water, power.

Permitting, extraction & re-injection of brine, access to land and a skilled workforce arefundamental considerations before you even begin bench-scale testing. Trying to force an extraction technology on a project is akin to the square peg round hole analogy.

Going back to your question, our patent-pending selective extraction, technology, we call “LiSTR” vis-a-vis a typical Argentine brine project that would use either solar evaporation ponds or a modified version of solar evaporation with ion exchange.  As I mentioned, the project drives the process.

Mintak: It rains in south Arkansas, the land is hilly and forested, evaporation ponds are not an option. There has been significant work done over the years, by researchers, universities, large chemical companies etc. on lithium extraction processes and so we stand on the shoulders of giants or as we like to say, ‘we are boldly going where others have already gone’.

A unique advantage in south Arkansas is access to large volumes of raw brine to process test. Unlike our peers, we can literally open a spigot and fill large IBC’s or totes with brine and ship to our facility for process testing. We do not need to permit a well, or get extraction permits. This cut months off the development timeline and allowed us to test a number of existing extraction processes including, but not limited to; solvent extraction, a variety of ion exchange resins, nanofiltration, and floatation.

Through this test work, we have developed a proprietary process that uses a solid ceramic adsorbent material with a crystal lattice that is capable of selectively pulling Li + ions from the waste brine after it has gone through the bromine-extraction step. The ceramic adsorbent materials are mounted in stirred-tank reactors that contain brine. In the second step, the adsorbent releases the Li + ions for recovery. Importantly, the Li-extraction process takes advantage of the fact that the brine leaves the bromine process heated to ~70°C.

This means that no additional energy is required, the reaction kinetics for the adsorption is suitable. The process is capable of reducing the time required for Li extraction from many months (with the evaporation ponds) to hours, and is capable of producing a high-purity lithium chloride solution for further processing into battery quality compounds. The LiSTR process is designed to be scalable at each stage, from bench scale – mini-pilot- demonstration – commercial. We are using technologies and processes used in other industries, we are not reinventing the wheel, just turning it.

Epstein: How might your cap-ex compare to that of lithium brine projects?  For instance, there are 6 projects at PEA-stage, or more advanced, with an average cap-ex of C$540M:

Mintak: We have not published a PEA, so I cannot comment directly on cost comparisons other than pointing to the existing infrastructure at the project. The well-fields are in place and currently producing and circulating 125 million barrels of brine annually. The pipelines are in place, as is power and water. Road and rail is at the site. This is a bolt-on technology to existing chemical plants. 

Epstein: How might your op-ex/tonne compare to that of lithium brine projects? 

Mintak: Again, we have not yet published a PEA, but we are targeting the lowest quartile cost of production for lithium carbonate. We have confidence that this is achievable as the primary cost inputs are very attractive in south Arkansas, power and water are plentiful and inexpensive. Chemical reagents are produced in or shipped in close proximity to south Arkansas, the region is well connected to the Houston shipping channel. At the project level, we can leverage the buying power of a global chemical company when procuring materials and service agreements. 

Epstein: Please describe who LANXESS is.  In what ways (if any) is LANXESS already helping you? 

Mintak: LANXESS is a global specialty chemical company based in Cologne, Germany. They operate 74 chemical plants around the world, 19,000 employees. 2017 revenue around $11 billion. They acquired Chemtura in 2017 for $2.57 billion which included the Arkansas bromine business.

Current land operations in southern Arkansas encompass more than 150,000 acres, 10,000 brine leases, and surface agreements and 250 miles of pipelines. Their three bromine extraction plants currently employ approximately 500 people and they process and reinject 125 million barrels of brine annually (over 5 billion gallons)

We have signed a binding MOU and a general term sheet for a planned JV with LANXESS for the phased development of the south Arkansas project with the goal of producing battery quality lithium materials on a mass scale from brine that is a by-product of existing bromine production facilities run by LANXESS and from 30,000 acres of undeveloped brine leases that Standard Lithium holds.

As part of the binding MOU, we will locate and operate our pilot plant at one of LANXESS’ chemical plants in south Arkansas. We will connect the plant into their brine pipeline system, post bromine extraction, and demonstrate (on a continuous basis) our selective lithium extraction process. We will also be locating our AI-powered lithium carbonate crystallization pilot plant at the site in south Arkansas.

The MOU we have struck with LANXESS allows us to leverage their massive infrastructure investment to de-risk our processing technology without having to spend 10’s of millions of dollars on resource development and the years of time that would entail.  The planned JV with LANXESS includes a commitment from them for commercial project financing (subject to proof of concept and a positive PFS). That is a very important differentiator between Standard Lithium and our peers.

Epstein: In addition to LANXESS, you have been working with a number of other parties, please explain.

Mintak: As a development company, managing the runway and executing on our business plan requires strategic planning. We have taken the stance that we can accomplish more and in a more cost-effective manner, through strategic partnerships and agreements. In south Arkansas, we secured the only available large brine lease package with our agreement with NYSE listed Tetra Technologies.

For our pilot plant development, we are working with two global brands, Salt Works Technologies in Richmond B.C. and Zeton in Burlington Ontario. For analytics and research, we are working with two professors from the fine chemical/pharma departments at the University of British Columbia.

Epstein: What’s the status of your pilot plant, and what are the next steps?

Mintak: Two pilot plants. We have two pilot plants in development. “LiSTR”, the selective extraction demonstration pilot plant is under construction in Burlington Ontario. Zeton is a global leader in pilot plant construction. The plant will be shipped from Zeton to south Arkansas in Q2 of this year and will be located at LANXESS’ Southern Bromine Extraction plant.

The site has virtually everything required to operate in place; steam, water, power, and the demo plant will connect to the existing brine feed and disposal pipeline system. We intend to run this plant in a continuous operating state, not in a batch process. We expect to run the plant through Q3/4 of 2019 and Q1 of 2020. The results of this work will feed into a Feasibility study targeted to be completed in Q2 2020.

The second pilot plant is our “SiFT” Lithium Carbonate Crystallisation Pilot Plant which is being built by Saltworks Technologies Inc., at their facility in Richmond, British Columbia, Canada.  The crystallisation technologies used today in the industry were developed in the mid-twentieth century and are suited for producing technical grade compounds. As higher and higher purity compounds are needed by cathode makers the industry needs to evolve.

Mintak: The SiFT process has been developed by Prof. Jason Hein at the University of British Columbia and introduces advances and technologies from the pharma and fine chemical world to the lithium battery material world. It integrates Artificial Intelligence (AI) enabled high-speed, multi-image photo-microscopy and computer image recognition for crystal size and shape that acts like an auto-pilot, continually monitoring and optimizing the process. We have an operating prototype pilot plant that we are currently testing. The next step is to build a demonstration-scale plant that we will ship to Arkansas in the Q3 of 2019.

Epstein: Most conventional brine projects are planned for about 20,000-30,000 tonnes of Lithium Carbonate Equiv. (“LCE)/yr. Will your project be able to scale up to that range? 

Mintak: Yes, that is an achievable production target based upon current commercial brine production volumes, with an expansion opportunity from our undeveloped brine leases.

Epstein: Please describe Standard Lithium’s near-term catalysts.

Mintak: The immediate near-term catalysts to watch for are a PEA in late Q1 or early Q2 and of course, our pilot plant(s) being moved to site and commissioned in the first half of this year. Investors can also expect further details on our strategic agreement with LANXESS

Thank you Mr. Mintak for a detailed review of Standard Lithium (TSX-V: SLL) / (OTCQB: STLHF).

Peter Epstein – January 25, 2019

DisclosuresThe content of this interview is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER](together, [ER]) about Standard Lithium, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Standard Lithium are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this interview was posted, Peter Epstein owned shares in Standard Lithium and it was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic. [ER] may buy or sell shares in Standard Lithium and other advertising companies at any time.

Hard rock lithium deposits are going to fill the demand as they are more evenly geographically distributed across the globe and are less dependant on a changing climate for production than lithium brine production. They are more and more filling the supply gap.

According the United State Geological Survey’s 2018 Mineral Commodity Summaries, Australia was the largest producer of lithium.  It produced 18,700 MT of lithium last year, up 3,300 MT from the previous year. The 34-percent increase has been attributed to two new spodumene operations that ramped up production to meet strong demand.

Hard rock lithium mining relies on traditional methods of drilling and processing, and presents a more reliable method of mining and opens up deposits closest to major markets within.  Hard rock mining is giving countries a competitive advantage over countries dependant on lithium brines for production, as it did with Australia.

Here are five exploration companies that are currently looking for the next hard rock deposit.

Azincourt Energy (TSX-V: AAZ)

The company controls 6,368 hectares of pegmatite-rich ground in Manitoba, with historical Li20 numbers & drill-ready targets. Crews are on the ground, beginning prep work for the 2018 work program. Mapping/sampling will get underway, then min 3000m of drilling. Azincourt’s Lithium Two project is adjacent to QMC’s Cat Lake Lithium Project

http://azincourtenergy.com/

Quantum Minerals (QMC.V)

The company’s properties include the Irgon Lithium Mine project, a Rare-metal (Li-Ta-Cs) deposit within the Irgon pegmatite located immediately north of Cat Lake Manitoba. The deposit contains an estimated resource of more than 1.2M tonnes of spodumene-bearing pegmatite grading 1.5% Li2O.

https://qmcminerals.com/cat-lake-lithium-project/

Far Resources Ltd. (CSE: FAT)

Far Resources, an exploration and development company, will become a leader in  the energy metals sector by defining a lithium resource with their Zoro project located in the Snow Lake region of Manitoba.  In 1956, the lithium deposit was considered an historic “reserve” based on the drilling of 1.8 million tonnes grading 1.4% Li2O to a depth of 305 m.

https://www.farresources.com/lithium-projects/

MGX Minerals (CSE: XMG)

MGX Minerals Inc plans to drill the company’s Case Lake lithium project in May. Drilling will total 8,000 metres followed by an additional 7,000 metres of planned drilling in the fall. There have been 8,400 metres of drilling completed at Case Lake to date. Substantial spodumene mineralization intersections have included:

  • PWM-17-34: 1.81 percent lithium oxide (Li2O) over 17.0 metres;
  • PWM-17-33: 2.11 percent Li2O over 11.0 m;
  • PWM-17-10: 1.74 percent Li2O over 15.06 m;
  • PWM-17-08: 1.94 percent Li2O over 26.0 m.

The Case Lake property is located in Steele and Case townships, 80 kilometres east of Cochrane in Northeastern Ontario close to the Ontario-Quebec border. The Case Lake pegmatite swarm consists of five dikes. MGX currently has a paid-up 20-per-cent working interest in Case Lake and four other lithium hardrock properties in Ontario controlled by Power Metals

https://www.mgxminerals.com

Power Metals (TSX-V: PWM)

The Cass spodumene pegmatite swarm is located 80 km east of Cochrane and 100 km north of Kirkland Lake, NE Ontario. It is accessible year-round by road via the Translimit Road which connects Ontario and Quebec.

https://www.powermetalscorp.com/

Cypress Development Corp. (TSX-v: CYP) / (OTCQB: CYDVF) / (Frankfurt: C1Z1) killed it with their maiden NI 43-101 compliant lithium resource estimate yesterday!  The whisper number was 4 to 6 million Inferred tonnes of Lithium Carbonate Equiv. (“LCE“), (which would have been a tremendous result), but Global Resource Engineering Ltd. determined there’s an estimated 6.54 million metric tonnes LCE.

Perhaps even more exciting than the size of the resource, (we knew it would be large), was something I never even considered, 44% (2.857 M tonnes) of the resource is in the “Indicated” category…. I thought it would 100% Inferred.  That just goes to show how strong the continuity of the lithium zones are in this giant, thick, tabular formation — where 21 of 23 drill holes ended in mineralization.

In the boxed paragraphs above, notice the added level of evidence or “confidence” (highlighted in green) needed to be designated an Indicated resource vs. Inferred.  The sizable Indicated portion will make it easier and less costly to reach PEA stage (expected in Sept/Oct).  Importantly, Cypress is funded through PEA, especially as a wave of options & warrants will likely be exercised on the back of this news.

Putting this into perspective, consider that Lithium Americas’ (formerly Western Lithium) (TSX: LAC) / (NYSE: LAC) clay-hosted Li project (then called Kings Valley) also in Nevada, had the following maiden mineral resource estimate:

It had an impressive 53% of its total resource classified asIndicated, but the absolute size of the resource was 24% & 16%, respectively, the # of tonnes of LCE in Cypress Development’s maiden Indicated & Inferred resource.

Bacanora Minerals’ clay project in Sonora Mexico had the following maiden resource:

Bacanora Minerals’ (London: BCN) maiden resource was 25% the size of Cypress Development’s Inferred resource.  However, Bacanora had no tonnage at all in the Indicatedcategory.

Fast forward to today, Lithium Americas’ project now hosts a combined Measured & Indicated resource just shy of 6 million tonnes LCE, plus an Inferred inventory of about 2.3 million tonnes.  Recall that LAC has a clay-hosted lithium project, also in Nevada.  An entirely new (will replace the prior) Preliminary Feasibility Study (“PFS“) on LAC’s clay project is expected in June.

Likewise, Bacanora’s net attributable resource has soared to 4.1 million tonnes LCE (Measured & Indicated), and 3.2 million tonnes (Inferred).  Bacanora’s BFS-stage clay project is in Sonora Mexico.

Near-term Catalysts to Keep Market on its Toes

Readers should know that there are important near-term catalysts leading up to a PEA as soon as August, (I’ve been saying in September/October).  First and foremost, ongoing metallurgy test results will be released.  The full maiden mineral resource technical report will be filed on sedar this month.  And, assays from up to 30 new drill holes are coming this Spring & Summer.  Management expects to be in talks with prospective strategic partners, but there’s no rush because, as mentioned, Cypress is funded through PEA.

Cypress should be able to substantially upgrade its NI 43-101 compliant Indicated & Inferred resource to the MeasuredIndicated categories, potentially ending up with a resource around the same size and level of confidence (albeit lower grade) as Lithium Americas’ & Bacanora’s.  In fact, in today’s press release management stated that it believes 30 additional drill holes would be sufficient to upgrade the Inferred portion to Indicated.

Cypress’ Indicated-only portion at nearly 3 M tonnes LCE is larger than most hard rock, and many brine projects around the world.  Cypress is trading at and Enterprise Value (“EV“) to tonne LCE ratio of just C$3.5(share price C$0.33 intra-day May 1st) and that’s on a fully-diluted share count.  Compare that to C$18/t for Lithium Americas (I assume 25% of LAC’s EV is attributable to its Nevada clay project), C$27/t for Bacanora, and an average of C$92/t for several other global hard rock and brine projects (most peers in the chart below are more advanced than Cypress).

The graph below, from a recent Lithium Americas’ corporate presentation, shows where clay-hosted lithium projects fit into the conventional world of hard rock (mostly in western Australia) and brine (mostly in Chile & Argentina).  Generically speaking, clay is right in the middle on both operating costs and lithium grade.  What the chart doesn’t show is that the most significant clay projects (BCN’s, LAC’s and now CYP’s) are quite sizable – much larger than the average conventional lithium project.

To recap, this is a major advancement for Cypress.  It puts them on the map, not just U.S. & North American maps, but global maps.  A KEY TAKEAWAY is that the amount of TIME & CASH needed to drill out the entire resource for a Bank Feasibility Study (“BFS“) next year should be relatively low, especially compared to the time & capital deployed by Lithium Americas & Bacanora to get to PFS & BFS, respectively.  Cypress is now (in my opinion only) in a position to deliver a BFS in mid-to-late 2019 at a total cost (including company overhead) of < C$10 million.

Also of major importance in today’s press release, 

  • Preliminary test work conducted at SGS Canada Inc (Lakefield) and Continental Metallurgical Services, LLC has shown the material exhibits high lithium extractions with short leach times. Lithium extractions of greater than 80% can be achieved in 4 to 8 hours using conventional dilute sulfuric acid leaching.  Currently, Hazen Research Inc is conducting additional leach tests and preliminary results confirm high lithium extractions for new mineral zones.
  • The presence of acid leachable lithium presents a significant cost savings by avoiding calcine and regrind of material during processing.  Preliminary results also show the consumption of sulfuric acid and other reagents are relatively low.
  • The production of high-purity lithium carbonate was demonstrated in the laboratory using conventional recovery methods.
  • The large tonnage of the deposit lends potential to target higher-grade lithium mineralization for the PEA…. {since the scale is so large, there’s a chance the Company can capture higher-grade lithium values (in a subset of the overall resource) for the upcoming PEA}

Improvements in metallurgy to, “greater than 80% extraction” (I’m assuming in the low 80%’s) was reported in the press release.  The last news on that front had stated, “up to 80%.”  Also noteworthy was that management produced a small amount of high-purity lithium carbonate using conventional recovery methods.

Bottom line, there’s an increasing chance that due to favorable mineralogy, Cypress Development Corp. (TSX-v:CYP) / (OTCQB: CYDVF) / (Frankfurt: C1Z1) will be able to avoid certain significant steps in Bacanora’s process flow sheet.  That could mean NOT having to do a pilot plant, potentially saving ten(s) of millions in cap-ex and 1-2 years of project development / construction time.

Cypress’ resource is at or near surface, down to over 120 meters (and is mostly open at depth), the anticipated strip ratio is essentially zero (call it 0.1 to 1).  By contrast, Bacanora’s strip ratio is expected to be 3.9 to 1.  That represents a huge difference in mining costs.  As a reminder, the biggest advantage the Company has over both Lithium Americas & Bacanora is that over 75% of its resource is hosted in non-refractory clay.  That’s why management believes it might not need to operate a pilot plant (avoiding calcine & regrind of material during processing would make the flow sheet a conventional leach process).

Management has delivered a blockbuster maiden resource, > 6 million tonnes of LCE (combined Indicated & Inferred).  Therefore, Cypress need never worry again about resource size, they already have huge scale and could potentially reach BFS-stage much faster and considerably cheaper than LAC & BCN did. 

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER](together, [ER]) about Cypress Development Corp.including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Cypress Development Corp. are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed / registered financial advisors before making investment decisions.

At the time this interview was posted, Peter Epstein owned shares and/or stock options in Cypress Development Corp. and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic. 

Argentinian lithium producer Orocobre (TSX: ORL) recently reported lower than expected lithium production in its third fiscal quarter because weather interfered with its evaporation rates of its lithium brines.  This reveals two problems with lithium brine production: reliability and geography. Another source of lithium is rising to met these problems, hard rock lithium mining.

One analyst pointed out that Orocobre’s production problems “clearly demonstrate” that production is not a straightforward process. “Weather events are beyond the control of Orocobre, but this reaffirms that there is still room to improve on the robustness of operations and reduce production variability from we ather impacts,” the analyst stated.

The company reported a 25-per-cent lower evaporation rate compared with the same quarter in 2017 which caused production problems and lithium output to fall 29 percent to 2,802 tonnes of Lithium Carbonate equivalent, from 3,937 tonnes in the December quarter. Its February rates were the lowest since 2011.  

Weather has clear impacts on the production at lithium brine operations and with global demand for lithium on the rise, more reliable and consistent methods of production will be required.  Lithium brine operations are limited to select climates and regions that can support sufficient weather to ensure economic processing.

Demand for the metal is set to grow by 600,000-800,000 tonnes of lithium carbonate equivalent over the next 10 years, Daniel Jimenez, senior commercial vice president at SQM, said.

The global lithium industry will need $10 billion to $12 billion of investment over the next decade to meet surging demand amid the electric vehicle boom,  Daniel Jimenez of Chilean miner SQM said.  

Not all lithium is equal and not all lithium is mined the same way. There are two significant sources of lithium, Lithium Brines and Lithium-Cesium Tantalum Pegmatites (hard rock).

According the United States Geological Survey’s 2018 Mineral Commodity Summaries, Australia was the largest producer of lithium.  It produced 18,700 MT of lithium last year, up 3,300 MT from the previous year. The 34-percent increase has been attributed to two new spodumene operations that ramped up production to meet strong demand.

Australia hosts the Greenbushes lithium asset, which is operated by Talison Lithium, a subsidiary jointly owned by Tianqi Lithium (SZSE:002466) and Albemarle (NYSE:ALB). Greenbushes is the longest continuously operating mining area in Western Australia, having been in operation for over 25 years.

These production figures helped to push Australia as the top lithium producing country and it shows how hard rock lithium mines have the potential to disrupt traditional sources of lithium from older operators of lithium evaporation ponds.

Hard rock lithium deposits are not limited to select climates and regions and are going to help fill the demand as they are more evenly geographically distributed across the globe and are less dependant on a changing climate for production.

 

 

 

 

How can I say there will be millions of tonnes of LCE?  Given the dimensions of the mineralized zones, average zone thickness and lithium grade — an educated guess gets one to at least 4 million tonnes LCE.  I could play around with the math, but suffice it to say that whether the figure is 4 or 5 or 6 million tonnes, it would be a very large resource by global standards, {see chart below}.  NOTE:  {LAC’s Nevada clay project is shown in chart at 25% of LAC’s market cap…. its flagship asset is a JV with SQM in Argentina}

Make no mistake, Cypress is earlier-stage than the others, and its deposit is hosted in clay, meaning it’s unconventional (not a brine or hard rock pegmatite deposit).  So, a discount to peers is warranted.  But, is the current discount, as shown by [EV/tonne], too large?

News from Lithium Americas to Draw Attention to Nevada in June

Lithium Americas (TSX: LAC) has a clay-hosted lithium project, also in Nevada, with a recently updated Measured, Indicated & Inferred (“MI&I“) resource of 8.3 million tonnes LCE.  An entirely new (will replace the prior) Preliminary Feasibility Study (“PFS“) on LAC’s clay project is expected in June.  This report will contain valuable information directly applicable to Cypress’ Preliminary Economic Assessment (“PEA“), expected in September/October.

I believe that if LAC’s PFS is strong, they will spinout their Nevada clay project to try to attract market valuations like those of Bacanora Minerals (London: BCN) and Australian-listed Global Geoscience (ASX: GSC), which have an average market cap of ~C$400 M.

LAC has a ~C$600 M market cap, but the majority of that valuation is attributable to the company’s Argentinian JV brine project with SQM.  Therefore, a direct valuation comparison with Cypress is difficult to do.

To be clear, there’s no meaningful commercial-scale production anywhere in the world from clay-hosted, or other unconventional lithium deposits.  But, Lithium Americas and Bacanora have done a tremendous amount of work over the past decade, including pilot plants, on their Nevada & Sonora Mexico clay projects, respectively.  Standing on the shoulders of LAC & BCN, Cypress is benefiting greatly from this prior and ongoing body of work.

It’s worth noting that the Cypress’ Li grades are significantly lower than those of Bacanora’s & Lithium Americas’ clay projects.  However, what if, due to favorable geology, Cypress is sitting on a lithium resource that’s easier to extract & process?  That may actually be the case, but it’s still too soon to know.

Suffice it to say that management is looking into various scenarios, and they’re excited about early findings.  For one, management notes that its deposit does not contain significant amounts of hectorite or smectite, clay minerals that require high temperature calcining to extract lithium, and have made Lithium Americas’ and Bacanora’s projects challenging to advance into production.  NOTE:  {Bacanora appears to be over the hump, production is expected in 2020}

Cypress believes its deposit contains clay minerals in which the lithium is soluble by conventional acid leaching.  If true, it would eliminate significant steps in its process flow sheet.

Bottom line, there’s a decent chance that due to unique mineralogy, Cypress will be able to avoid certain steps in Bacanora’s process flow sheet.  That could mean not having to do a pilot plant, potentially saving ten(s) of millions in cap-ex and 1-2 years of development time.  Again, LAC & BCN led the path, having done an incredible amount of leg work on metallurgy.  Therefore, Cypress could potentially reach BFS-stage faster and considerably cheaper than LAC & BCN. 

Cypress has a strong management team and Board.  If the maiden mineral resource report delineates millions of tonnes of LCE, the Company should be able to attract additional high-quality execs and advisers as needed.

Cypress is fully-funded through PEA.  Additional funding through delivery of a BFS (assuming no pilot plant is necessarywould probably amount to less than C$10 M.  Conceivably, Cypress could publish a BFS in 2h 2019.  I recognize that I’m getting ahead of myself with talk of a BFS next year, but it’s not a long shot, it’s a perfectly reasonable possibility.

Bacanora Minerals has Blazed a Path for Cypress

In reading Bacanora’s Sonora project (December, 2017) BFS, I noticed that the life-of-mine strip ratio is expected to be 3.4:1.  That compares to virtually no waste removal for Cypress’ deposit, call it a strip ratio of 0.1:1.  Offsetting this strip ratio advantage, Bacanora has a much higher lithium grade, but the combination of virtually no waste removal, favorable mineralogy, and project location represent substantial advantages for Cypress.

What if Cypress could develop a flow sheet with operating costs in the same ballpark as Bacanora’s?  In my opinion, that would mean an after-tax NPV well into the hundreds of millions of CAD$.  Alas, we will have to wait for Cypress’ PEA this Fall.

Cypress at C$0.30 per share is trading at an Enterprise Value (“EV“) (market cap + debt – cash) of between C$3.5 – C$5.2 per tonne of LCE (assuming a maiden resource of 4 to 6 million tonnes).  Cypress’ fully-diluted EV is ~C$21 M, with zero debt and ~C$3 M in cash (assumes all warrants & options are exercised).  The best comp is clearly Bacanora, trading at an EV/t ratio of ~C$28.  It has a MI&I resource of 7.3 million tonnes and a strong BFS (after-tax NPV(8%) of ~C$1 billion).

Bacanora’s BFS incorporated an US$11,000/t price.  Also in the BFS, a corporate tax rate of 30% (vs. 21% in the U.S.), a mining royalty of 7.5% (no Federal or State royalties for Cypress), and a 3% gross revenue royalty to an investor in BCN (no private royalties payable by Cypress).  Conducting business in Nevada, (USA) has its advantages….

There are several near-term industry catalysts for unconventional lithium juniors.  Bacanora expects to be in production by 2020.  Lithium Americas is publishing a new PFS, in June (replacing the old).  In my opinion, LAC might spinout its clay project in 2h 2018.  If it does, there would be 3 main publicly-listed, unconventional junior peers, each with market caps over C$100 million.

Good news from LAC, BCN or GSC.ax is good news for Cypress.  This lithium industry segment de-risking would arguably have the greatest impact on Cypress because it has a dramatically lower valuation to begin with.

Global Geoscience & Lithium X Corp. Suggest Possible Upside in Cypress

Global Geoscience is publishing a PFS on its unconventional asset, a lithium/boron project with economics of something like 55%/45% lithium/boron.  That PFS will be big news because the company did not first generate a PEA, as is typically done.  GSC.ax believes that there will be no need for roasting or calcining, which may also be the case with Cypress.  As the market has come to understand that GSC.ax will reach production in 2 years, it now trades at an EV/t ratio of C$114.

Notice on the chart above that Lithium X Corp (PFS stage) was taken out by a Chinese group at an EV/t ratio of C$120.  Think about that for a moment, GSC.ax is trading at C$114/t, Lithium X was acquired for C$120/t, Bacanora is trading atC$28/t…. should Cypress be valued at C$3.5 – $5.2/t?  While clearly not an apples to apples comparison, the dramatic difference in valuations might be excessive.  I leave it for readers to decide.

In any event, by the time the PEA comes out in Sept./Oct., readers will know considerably more about Cypress’ metallurgy and process flow sheet.  There need not be additional equity raises before delivery of a PEA, especially as in-the-money-warrants get exercised.  The stars seem to be aligned for Cypress Development Corp. (TSX-V: CYP) / (OTCQB: CYDVF) / (Frankfurt: C1Z1).  Readers should consider taking a closer look, here are links to additional information:

corporate presentation     latest news     capital structure     the project     photo gallery

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER](together, [ER]) about Cypress Development Corp.including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Cypress Development Corp. are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed / registered financial advisors before making investment decisions.

At the time this interview was posted, Peter Epstein owned shares and/or stock options in Cypress Development Corp. and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic. 

 

February 2018 saw 84 deals close in the Canadian financial markets for an aggregate C$367.0 million at an average of $4.5 million, down 15.2% over January 2018 when 105 deals closed for an aggregate C$432.8 million at an average of $4.32 million.

February saw 14 brokered deals close for an aggregate $250.0 million at an average of $17.9 million. This was up 54.3% from the nine brokered deals in January that closed for an aggregate $162.0 million at an average of $18.0 million.  

Within the brokered deals, six bought deals closed in February for an aggregate of $136.7 million deal at an average $22.8 million, an increase of 29.1% over the five bought deals that closed in January for an aggregate of $105.9 million deal at an average $21.2 million.

95 deals opened in February

The top ten deals by size closed in February totaled $230.1 million with gold leading the field taking three spots of the top four spots and five of the top ten. Battery metals cobalt and lithium took three spots.

The top ten deals by size closed in January totalled $241.3 million with graphite, copper and tin leading the field. Gold took three spots of the top ten with cobalt also figuring.

February saw 56 gold deals close for $229.2 million at an average of $3.4 million, up 119.1% in total value terms from the $104.6 million raised in 44 gold deals in January at an average of $2.3 million. The top ten gold deals in February totalled $184.7 million, some 76.5% of the total.

Base metals accounted for $73.6 million of the funds raised in February, some 30.5% of the total, with the top ten deals accounting for $36.7 million with zinc and copper featuring heavily.

Battery metals accounted for $74.8 million of the funds raised in January, some 31.0% of the total and where the top ten battery raises brought in $73.6 million with three cobalt, five lithium one copper and one graphite raises.

#1 Torex Gold $61.7 million

Torex Gold Resources (TSX:TXG) closed a C$61.7 million offering underwritten by a syndicate led by BMO Capital Markets on a best efforts basis.

#2 Orla Mining $30.8 million

Orla Mining (TSXV: OLA) closed a C$30.8 million offering underwritten by a syndicate led by GMP Securities on a bought deal basis. Each unit included half a warrant that expires in 36 months.

#3 eCobalt Solutions $29.9 million

eCobalt Solutions (TSX: ECS) closed a C$29.9 million offering underwritten by a syndicate led by TD Securities on a bought deal basis. Each unit included half a warrant that expires in 18 months.

About Oreinc.com:

Oreninc.com is North America’s leading provider of relevant financing information in the junior commodities space. Since 2011, the company has been keeping track of financings in the junior mining as well as oil and gas space. Logging all relevant deal and company information into its proprietary database, called the Oreninc Deal Log, Oreninc quickly became the go-to website in the mining financing space for investors, analysts, fund managers and company executives alike.

The Oreninc Deal Log keeps track of over 1,400 companies, bringing transparency to an otherwise impenetrable jungle of information. The goal is to increase the visibility of transactions and to show financings activity in a digestible format. Through its daily logging activities, Oreninc is in a position to pinpoint momentum changes in the markets, identify which commodities are trending and which projects are currently receiving funding.

Website:  www.oreninc.com

‘In order to produce half a million cars a year…we would basically need to absorb the entire world’s lithium-ion production.’ –  Elon Musk

“The skillsets that young people should learn about mining should apply to everything. We just need to do a better job of explaining to people in urban environments that the human activity of mining is absolutely fundamental to the way this planet is going to evolve. Completely and totally fundamental.” – Robert Friedland, Ivanhoe Capital

The future envisioned by industry leaders hinges heavily on the production of new materials to power and build the future.   Leaders such as Elon Musk have been developing the blueprint for the future with electric cars, battery grids and renewable energy solutions.  While, other leaders such as Robert Friedland are looking to supply the materials to build this future.  Mr. Friedland makes the case and understands the story that is unrolling in real time.   Mining is the critical component to meet the world’s demands for a sustainable future.  The prerequisite for this future is mining and with every mineral discovery and development project, this future is coming closer.    

Mr. Friedland is not the only miner that realizes the economy of tomorrow will require the development of new mining assets.  Azincourt Energy Corp. (TSX-V: AAZ) is a Canadian junior exploration company that has been actively building their mining asset portfolio in anticipation of the future demand for minerals that will provide clean energy; from lithium to uranium to cobalt.    

Azincourt Energy Chairman, Ian Stalker is an experienced mining executive that sees the writing on the wall when it comes to the materials and fuel that future technology will require.  Mr. Stalker is a senior international mining executive with over 45 years of hands-on experience in resource development.  Over his career Mr. Stalker has directed over twelve major mining projects, from exploration drilling to start-up, including gold, base metal, uranium and industrial minerals.  He is currently CEO of LSC Lithium (TSX.V: LSC), and Chairman of Plateau Uranium (TSX.V: PLU), and is the former CEO of UraMin Inc., the London and Toronto listed public uranium company that was acquired by Areva for US$2.5 billion in August 2007.  In a recent press release, Mr. Stalker outlined the current strategy for Azincourt.

“The lithium market is obviously very strong right now, and the near-term future for lithium demand remains extremely positive.  Our decision to expand Azincourt’s focus to include lithium and other materials is something we feel strongly about.  To get a foothold and exposure in this environment, at this time, is an important and strategic step for us.”  

Azincourt recently acquired five lithiums projects in located in the Winnipeg River Pegmatite Field, Manitoba, Canada.  Two of the projects, the Lithium One and Two projects, are adjacent to Quantum Minerals Corp.’s Cat Lake lithium project which includes a historical estimate from drilling in 1947 that defined 545,000 tonnes of 1.4 percent lithium oxide (Li2O).  Drilling could prove up this ground.

Two other of the acquired lithium projects, the Lithman West and East projects are adjacent to the Tanco Mine lease property.   These projects are part of the Winnipeg River pegmatite field which hosts numerous lithium-rich pegmatites or “hard-rock” lithium such as the Tanco pegmatite that has been mined at the Tanco mine since 1969 for spodumene, a major component for hosting lithium (Li), and other rare earth ores.

Azincourt  has scheduled exploration work to begin in the spring of 2018, with a field program that includes detailed mapping of the known pegmatite outcroppings on the Lithium One and Lithium Two projects. This will be followed immediately by a comprehensive chip sampling program designed to generate targets for the drill programs anticipated at both properties during the summer of 2018.

Previous work in 2016 produced twelve samples between a range of 0.02 per cent to 3.04 per cent Li2O from the Eagle pegmatite, and up to 2.08 per cent Li2O. Select sampling will concentrate on the Eagle and FD5 pegmatites at Lithium Two, and on the Silverleaf pegmatite at Lithium One, which returned values as high as 4.33 per cent Li2O in the 2016 exploration program (see press release dated Feb. 1, 2018).

On Feb. 8, 2017, the company signed a non-binding letter of intent to acquire the BullRun erythrite project, a prospective cobalt property located six kilometres northwest of the town of Cobalt, Ont. (see press release date Feb. 8, 2018).   Alex. Klenman, President and CEO of Azincourt Energy commented on the company’s strategy with this acquisition.   

“We’ve been looking into adding a potential cobalt property as we grow our project portfolio, so we’re pleased to move to LOI on this. We are going to immediately begin a comprehensive due diligence process to gain as much understanding as we can on the potential of the project, and we hope to progress to the definitive stage in due course.  In addition, we are actively reviewing other potential projects that will continue to strengthen the company in the growing clean energy space. We haven’t filled our want list yet, so we remain very active on the acquisition front.”

True to the company strategy, Azincourt announced a new project that is adjacent to the western edge of Plateau Uranium’s (TSX-V: PLU) Macusani Project in Peru.  This project contains the high-grade Falchani discovery that includes consistent 3,000-3,500 ppm Li over 100m intercepts at depth, and U3O8 grades up to 500 ppm over 50m intercepts at surface.  The plateau features areas of uranium-rich surface mineralization as well as lithium mineralization at depth.    

Initial leach test results conducted by Plateau Uranium in December showed that 77-80% of contained lithium can be extracted from Falchani. Plateau’s Macusani Project is fast becoming one of the world’s largest undeveloped uranium-lithium districts.   Although Macusani started life as a pure uranium story, exploration and metallurgical work has unearthed the lithium resource at depth.

The company has been developing two projects in the Athabasca basin, in Northern Saskatchewan, home to the largest and highest grade deposits in the world, the Preston Project and the Patterson North Lake Property.

The Preston project comprises a large land position (approx. 121,249 hectares) strategically located to the south of NexGen Energy’s (TSX-V: NXE) Rook 1 project hosts the high grade Arrow deposit, as well as proximal to Fission Uranium’s (TSX: FCU) Patterson Lake South project host to the high grade Triple R deposit.   The company has 15 drill target areas associated with eight prospective exploration corridors that have been successfully delineated through extensive geophysics.

The second project, The Patterson Lake North property “PLN” lies next to the northern edge of the  Patterson Lake South property, owned by Fission Uranium Corp. (TSX-V: FCU) where uranium mineralization has discovered over 2.24 kilometres (east-west strike length) in four separate mineralized “zones.”

To date Azincourt has spent $3 million earning into PLN. Prior to Azincourt’s involvement, Fission spent approximately $4.7 million on exploration on PLN.   There are three separate target areas that are drill-ready.   

Azincourt Energy Corp. recently completed a private placement for gross proceeds of $1,655,000. In addition, the company has received an additional $1,215,009.48 in gross proceeds from the exercise of warrants over the past several weeks.  

“We have more than enough funds to meet existing work requirements on our lithium and uranium projects for the next year or so, and further, the additional funding means we have upward flexibility in how we approach our work programs and portfolio expansion. Simply put, we can put more dollars into the ground, and into acquisitions,” said Mr. Klenman.

With ~69 million shares outstanding,  cash in the bank,  the company trading at 19 cents, the company has plenty of exploration news on the way, shares in Azincourt present a current opportunity.    

While inventions and ideas grab the headlines, little attention is given to the fundamentals of building a clean energy future. Azincourt Energy Corp. (TSX-V: AAZ) has put together an impressive portfolio of mineral projects from lithium, uranium to cobalt; the minerals that will fuel the future. Azincourt Energy is in the early stages and with news on the way, investors should pay attention.

Clicker Here to Visit the Company’s Web Page: http://azincourtenergy.com/

*** The mineral reserve estimate cited above as part of the Lithium Two project is presented as a historical estimate which does not conform to current National Instrument 43-101 standards. A qualified person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves. Although the historical estimates are believed to be based on reasonable assumptions, they were calculated prior to the implementation of National Instrument 43-101 standards. These historical estimates therefore do not meet current standards as defined under sections 1.2 and 1.3 of NI 43-101; consequently, the issuer is not treating the historical estimate as current mineral resources or mineral reserves.

***MiningFeeds.com was compensated for the creation and publication of this article. This does not constitute investment advice. 

By now, most readers invested in the Lithium (“Li“) sector know about brine deposits, especially those located in South America’s “Lithium Triangle” (Chile, Argentina & Bolivia).  And, many are familiar with conventional hard rock mining for Li, most of which takes place in western Australia.

However, readers likely know very little about a third source of potential Li supply; from claystone deposits.  One small company betting on a technology solution to unlock its mineral wealth is Cypress Development Corp. (TSX-V: CYP) / (OTCBB: CYDVF).  49.5 M shares outstanding @ C$0.185 = C$ 9 M market cap.  C$1.5 M in cash

Cypress controls 100% of the contiguous Dean and Glory claim blocks covering an area totaling 4,220 acres in Clayton Valley, Nevada, immediately east of Albemarle’s Silver Peak Li operations and Pure Energy Minerals’ project (PEA-stage, C$330 M after-tax NPV(8%) on its southwest boundary.  Management believes that the consistent nature of the currently known Li mineralization is highly encouraging for both the potential size and potential resource extraction methodologies.  (see corporate presentation, but please return!)

To date, all of Cypress’ drilling has been on the Dean property where a 9-hole drill program was completed earlier this year.  But, a recent press release explains that Cypress plans to drill 12 holes totaling 4,000 feet.  The 2017 fall program will be divided between the Dean and Glory projects…. Upcoming drill results represent an important near-term catalyst for the company.

 Li Prices up 200% — a Game Changer For Unconventional Li Deposits 

What readers have probably heard about what I call “unconventional Li deposits” (i.e. not brine or hard rock) is true, there’s currently no meaningful commercial-scale production from claystone deposits anywhere in the world.  However, it’s very important to recognize one crucial observation…. Li prices have roughly tripled in just the past 2 years. In fact, spot prices in China have quadrupled, (see chart below) currently perched above US$ 20k/metric tonne, at or near all-time highs.

Today’s very strong Li prices are a game changer, greatly incentivizing the world to invent a better mousetrap.  The exciting thing in my view is that more and more mousetraps are being built and tested.  Not just methods to extract Li from claystone, but dozens of Li brine processing technologies, some of which could be amenable to unconventional Li deposits.

Simply put, if or when a commercial technology or technologies to exploit unconventional Li deposits is developed, the value of claystone properties such as those held by Cypress could soar.

We’ve seen this movie before….  Consider the oil shale industry 10-15 years ago when the benefits of horizontal drilling were first becoming known.  Speculators started grabbing acres surrounding known fracking hotspots, (not knowing how much, if any, hydrocarbon abundance was in place) initially paying $100-$200/acre.  Within a few years, the best located acres were trading at $10,000-$20,000/acre.

Unlike outright speculation on oil shale, in Cypress’ case we already know there’s Li in the ground, possibly high-grade compared to brine deposits, possibly large tonnage compared to hard rock deposits.  What we don’t know yet is if it’s technically and environmentally feasible to separate the Li from the clay, mud and other materials and profitably sell it.  So, again, that’s the primary risk of investing in Cypress Development Corp.  A big risk, but a known risk that can be weighed against other risks that Li juniors face.

There is another notable risk factor.  Access to water in Nevada is extremely important.  In Clayton Valley, and many other arid parts of the State, it can be very difficult to obtain water rights.  However, Cypress might not have the same risk exposure as peers looking to exploit traditional brine resources.  The Company does not propose to tap Li-saturated brine that a neighboring party could claim to own or control.

Cypress will need access to process water, not the minerals (lithium/boron/potassium) in the water– a big difference.  And, the amount of water required would presumably be far less (and probably recyclable) because Cypress would not be filling giant solar evaporation ponds like Albemarle’s nearby Silver Peak processing facilities.

Neighbor Lithium Americas’ Delivering New PFS in Mid-2018…

So, how close is the industry to solving these complex technical & environmental challenges of commercial extraction of Li from claystone deposits?  In my opinion, closer than many might guess, but with the important caveat that each deposit is unique.  For example, Lithium Americas (TSX: LAC) / (OTCQX: LACDF) has a clay deposit, the Lithium Nevada project, (formerly Kings Valley) that was actively explored, developed and promoted in 2009-2013, when the company was called Western Lithium USA Corp.

A Preliminary Feasibility Study (“PFS“) on Kings Valley was completed in 2012, and a pilot plant running Kings Valley ore operated successfully in Germany for years.  A substantial amount of effort and capital was deployed, but with a Li price in the US$5,000/t area, LAC decided not to pursue the project.  Fast forward to 2017, LAC is developing a new production flow sheet that will incorporate a number of operational improvements, but by far the biggest enhancement to the project’s actual economics will be a much higher long-term Li price assumption.

As I write this, LAC just committed to delivering a brand new PFS by June 30, 2018, and commented,

“While proprietary, much of our work relies on the application of commercially available solutions that could be deployed quickly and reliably.”  Also, according to LAC management, “…the Lithium Nevada Project’s Li clay resource is the largest known lithium resource in the U.S.”  

This suggests, in my opinion, that LAC will be putting out a PFS next year that contains a Net Present Value (“NPV”) in the hundreds of millions of U.S. dollars.  The market will take notice, and since LAC’s market cap is currently ~C$ 1 billion (due almost entirely to the company’s JV with SQM on a world-class Li brine project in Argentina), LAC should meet with success in attracting global battery & car manufacturers, among others, to the table to talk about strategic investments and off-take agreements.

Will Global Geoscience & Bacanora Prove Clay Deposits Economic? 

Bacanora Minerals (TSX-V: BCN) has done a tremendous amount of work on unconventional Li deposits.  In its case, in Mexico, on the Sonora Lithium clay deposit.  Management is close to delivering a Bank Feasibility Study (“BFS“).  Bacanora has been operating a pilot plant for over 2 years and reportedly has the kinks worked out.  Japanese trading giant Hanwa is a strong financial backer and has a robust off-take agreement in place with Bacanora.

Nevada neighbor Global Geoscience Ltd. (ASX- GSC) is an Australian-listed junior with a clay deposit in Nevada.  It is finishing up a PFS on its Rhyolite Ridge Lithium-Boron Project that has an estimated 3.4 million tonnes of Li carbonate.  Unlike Cypress’s project, Rhyolite Ridge’s economics rely on the co-production of boric acid.  This is not necessarily a good or bad thing; it just highlights that each project is unique.  GSC shares have nearly quadrupled in the past year

Bacanora’s market cap is ~C$ 190 M.  Global Geoscience’s market cap is ~C$ 310 M. Both are making steady progress towards unlocking the value of their unconventional Li deposits.  I believe that positive developments for these and other unconventional Li companies will provide a flow of really good news for Cypress.  The Company has about 49.5 M shares outstanding post the recently closed capital raise.  Its market cap is just ~C$ 9 M.

 I strongly believe that with big news from Lithium Americas, Bacanora Minerals and Global Geoscience next year, Cypress will be on the radar screens of a number of global Li players, both financial & strategic companies. 

 MGX Minerals (TSX-V: XMG) is another technology-backed unconventional Li deposit winner that grabbed the attention of investors in 2017.  Its stock price is up ~500% in the past year.  MGX is harnessing technology to extract Li from oilfield brine wastewater.  Like LAC, BCN & GSC, MGX is not in operation.  MGX’s market cap is about C$ 80 M.

Cypress; in the Right Place at the Right Time and a Cheap Valuation

First Cypress has to prove up an attractive maiden resource, then it simply needs to continue following in the footsteps of Lithium Americas, Bacanora & Global Geoscience as those companies publish a PFS and/or a BFS, lock-in large strategic/financial partners and off-take agreements.  But fear not, none of the clay deposits will be in large-scale production anytime soon, so they won’t even put a dent in a possible supply crunch around the turn of the decade, and won’t put a cap on Li prices!

Make no mistake, Cypress’ projects are earlier-stage than the companies I’ve mentioned, but in some respects might not be higher risk.  For example, the Dean and Glory projects would probably have lower strip ratios than many global Li projects (both conventional & unconventional).

 Management Team is Amazing for a Small Company

Typically, small companies have trouble attracting big talent, but not so in this case.  Why? Because smart people saw the opportunity, they saw what I’m describing in this article, basically, they saw the writing on the wall…. there’s not going to be enough Lithium!  All potential commercial-scale Li sources will be pursued to the ends of the earth.  And, with the Li price at US$20k/t+ vs. US$5k/t, the “when” can’t come fast enough.

That’s why Bill Willoughby, PE, PhD joined the Company this year.  What better person to have as CEO than a rock star, PhD mining Engineer during a once in a lifetime opportunity like this?  (the paradigm shift from ICE- powered to EV).  Bill has nearly 30 years’ experience at natural resource development companies.  Will this be his greatest success to date?  Dr. Willoughby was kind enough to provide the following quote, an exclusive for this article,

 “We feel our project is unique due to its location and physical traits. To our knowledge, Clayton Valley has the only deposits of lithium claystone that are situated next to an existing brine operation. Besides location, our deposit is shallow, flat-lying soft rock in which the lithium appears readily soluble. With the large apparent size, we’ve seen from our drilling and the lateral extent of the deposit, we believe all these factors combine to a unique opportunity to develop a significant new source of lithium.”

In addition, the Cypress team has used, and continues to work with, very well-known and respected ALS / Chemex in Reno, NV and SGS lab in Ontario.

 Cypress is sitting on Libearing property that could be worth a hell of a lot more than its C$ 9 M market cap.  This will not be an overnight success, a near-term commercial-scale producer, but actual production is not what’s required for a higher valuation.  What’s needed is a credible path towards that end, management is on that path and working diligently.

All 9 previous holes at Dean encountered significant Li values within claystone, which ranged up to 1,790 ppm Li (1,790 mg/L Li) and averaged 900 ppm Li (900 mg/L Li) throughout the average drill-depth of 243 feet.  Mineralization outcrops at surface, and average Li mineralization thickness is greater than 210 feet.  The program covered an area measuring about 12,000 feet in length by 4,000 feet in width.  The Li-bearing claystone is considered open in all directions.

South of the Dean claim block, extensive sampling by Cypress on the Glory claims identified Li mineralization in surface exposures of claystone which ranged up to 3,800 ppm Li (3,800 mg/L Li) over 9,500 feet along the same trend encountered on the adjoining Dean claims.  Results suggest a strong possibility of continuous mineralized volume of a highly leachable Li-rich claystone at surface on the Glory project.

The goal of the work on both properties is to substantiate the potential to produce Li directly from the mineralized claystone with a low-cost and environmentally friendly approach, without the need for roasting or other costly mining and complex treatments.  Cypress is proceeding with additional leach studies to determine the amount of Li extraction possible from the claystone and provide further data on the feasibility of a large-scale leach extraction method.

So, to recap so far; in my opinion it seems reasonable that Cypress will be able to come up with a maiden mineral resource estimate in the next 6 months.  Further, based on historical samples, drilling and other exploration, there’s reason to believe that the maiden resource could be sizable and relatively high-grade.  The claystone mineralization is soft and near-surface, so there’s no doubt that ore would be easy and low-cost to extract.  The main risk is that there is no known technology that can process Cypress’ Li deposits cost effectively and in an environmentally friendly manner.

From the latest Cypress press release, quote,

Cypress believes its claystone deposit in Clayton Valley has the potential to contain a significant resource of lithium, and may have physical and logistical features that could make it a productive, long-term source of lithium.  In addition to the ongoing drilling program, Cypress is continuing studies to determine the exact nature and distribution of the lithium mineralization in the claystone, and identify an effective means of extraction.”

 Conclusion

Boy this time next year, there could be two half-billion dollar Li clay projects in Nevada! Either or both project owners might have lined top Battery or EV manufacturers to drive them forward.  Notice I haven’t even mentioned Nevada’s Tesla, there’s no need, it could be anyone, literally dozens and dozens of companies.  If so, will tiny Cypress Development Corp. (TSX-V: CYP) / (OTCBB: CYDVF) still be valued at C$ 9 M?

Although years away from commercial-scale production, Cypress is year(s) ahead of unconventional Li deposits that have not been staked, permitted for initial exploration, sampled or had preliminary testing or metallurgy done….  Remember, each deposit is unique, and most high-grade Li deposits might not be nearly as amenable as Cypress’ Dean and Glory projects to potential exploitation due to distance from infrastructure, depth of deposit, grade, continuity, chemistry (concentration of coincident deleterious elements) jurisdiction, and other factors.

 Cypress Development is a company worthy of further investigation by readers.  Here are some places to go for further information.

Corporate Presentation                                                               

JuniorStockReview by Brian Leni P.Eng

Ahead of the Herd article by Rick Mills

The Stateside Report by Vince Marciano

Energy & Gold Ltd. Website by Scott Armstrong

Disclosures:  The content of this interview is for illustrative and informational purposes only.  Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research[ER] including but not limited to, commentary, opinions, views, assumptions, reported facts, estimates, calculations, etc. is to be considered implicit or explicit, investment advice. Further, nothing contained herein is a recommendation or solicitation to buy or sell any security.  Mr. Epstein and [ER] are not responsible for investment actions taken by the reader.  Mr. Epstein and [ER] have never been, and are not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and they do not perform market making activities. Mr. Epstein and [ER] are not directly employed by any company, group, organization, party or person. Shares of Cypress Development Corp. are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they consult with their own licensed or registered financial advisors before making investment decisions.

At the time this article was posted, Peter Epstein owned shares in Cypress Development Corp. and the Company was an advertiser on [ER].  By virtue of ownership of the Company’s shares and it being an advertiser on [ER], Peter Epstein is biased in his views on the Company.  Readers understand and agree that they must conduct their own research, above and beyond reading this article. While the author believes he’s diligent in screening out companies that are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. Mr. Epstein & [ER] are not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article. Mr. Epstein & [ER] are not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. Mr. Epstein and [ER] are not experts in any company, industry sector or investment topic.

James Xiang, CEO of North American Lithium

Not every discovery becomes a mineral resource, not every mineral resource becomes a mine and not every mine turns a profit; mining is a tough business. It takes a keen eye for opportunity to identify troubled mining projects worth salvaging and then navigating a mining company to profit. It’s a talent that James Xiang has proven, which has led to his reputation as an astute and competent company builder — a reputation he hopes to build further with North American Lithium (NAL).

A native of China, James Xiang has been making his mark in Canadian and international business circles as an entrepreneur, investor and a mining leader since immigrating to Canada in 2001 to pursue his education while exploring new business opportunities. He has carved out a niche in the mining industry, supported by his ability to connect global investment partners with local leaders to drive successful projects.

His first foray into the mining industry was with a China based Nickel-Copper project, GobiMin, which he brought to Toronto for listing on the Toronto Stock Venture Exchange.  After listing, he served as CFO in charge of all the public company matters, including reporting, investor relations, various financing and forming a team in Canada and coordinating with the Chinese team.

In less than one and half years, GobiMin grew its market cap by 10 times, with the projects generating solid production cash flow and expanding its resource base. During the financial crisis in 2008, almost every resource company saw their shares prices decline. GobiMin, however, was able to sell its main project to a Chinese company with significant capital gain, which proved Xiang’s unique strategy to leverage North American and Chinese markets.

James Xiang was also instrumental in the turnaround of Canadian Royalties Inc. in 2014.  As the company’s BOD member and key leader, Xiang re-built the company’s senior management and corporate strategy, which ultimately led to a company turnaround that caught the attention of the market, especially Investissment Québec, which partnered with Xiang at NAL.

Xiang currently serves as Chief Executive Officer and Director of North American Lithium (NAL), a North American near-term lithium producer formerly owned by RB Energy.  The company is aggressively working to bring its fully-permitted lithium mine in Val-d’Or, Quebec to commercial production.  Xiang and management have implemented an operational turnaround at North American Lithium, having brought in lithium experts, re-engineered the project, permitted and remediated all legacy environmental issues.   With this hard work, the company achieved a milestone last month as it began its first production of salable lithium concentrates.

We recently sat down with James Xiang to discuss the global market for lithium and how he and his team have progressed after two years of restructuring of North American Lithium.

Thanks for joining us, James. We’re curious about lithium mining and the current thinking around the lithium market. What has the investment climate been so far to help NAL achieve production at its lithium mine in Quebec?

James Xiang: I appreciate the opportunity to talk about a project that has excited many people – our management team, as well as our investment consortium. It’s hard not to be enthusiastic, given the trends pushing demand.

Lithium, as you know, is the lightest metal with the highest energy density, allowing it to supply efficiently the maximum amount of energy storage per kilogram of material. What does that mean? Well, it’s ideal for a variety of industrial uses, but is best known for its use in batteries, particularly those used to power cell phones and tablets and also implanted medical devices.

We all know the strong demand for these technologies, so it’s no surprise that lithium demand is on a steep upward curve, too. Some reports project annual consumption to double to ~300,000 metric tons in 2020 from 2012 levels. Demand is growing by 12 percent annually, surpassing availability by 25 percent. So you can see how we’re positioning ourselves for the trends, with ~$500 million invested so far to bring the mine back on line.

What stage has NAL reached in bringing commercial production online?

James Xiang: We have brought in some of the top names in the business and over the past two years we have been re-engineering, re-testing and devising solutions to some of the issues that marked past commissionings of the mine. For example, we’ve done a thorough audit of material handling practices, which revealed solutions specifically for cold-weather storage and handling issues. Our thoroughness has paid off. The mine is now in operation and the first production of salable lithium concentrate began this August. We are pushing the production to commercial level in the next few months.

Currently, you are mining spodumene to extract lithium but what about production of lithium carbonate?

James Xiang: That’s the next phase. Our back-end review of operations found flaws in the hydromet plant, leading us to undergo further studies on what a restart of the plant will take. Its complete re-engineering should be completed early next year, so that we will be able to move into production of lithium carbonate in 2019. Then we expect to ramp up to full capacity of some 23,000 tonnes of battery grade of lithium carbonate in long term.

Why will your NAL’s current team succeed now where others have fallen short?

James Xiang: Well, timing is important. Being able to achieve operational efficiencies is, too. Our team is all local, seasoned experts with track records of diagnosing project issues and fixing them, especially strong in the local Quebec environment. And having the right financing in place, and the confidence of our investors is crucial. On the first front, well, we talked about the supply/demand picture for lithium. Benchmark Minerals Intelligence estimates prices of lithium carbonate will average $13,000 a ton over the 2017-2020 period from around $9,000 a ton in 2015-2016.  

We have brought our cost structure in line with other lithium producers, putting us on sound competitive footing. And our investors have seen that we have a compelling value proposition in our aim to be North America’s only near-term, vertically integrated lithium producer, made all the more compelling as we have delivered against all of our milestones.

Disclaimer:

These materials may contain inaccuracies or typographical errors. NAL is not responsible for any errors or omissions contained in these materials and do not guarantee the accuracy, completeness or timeliness of the information contained herein. This article contains certain statistical, market and industry data that was based upon information taken from industry publications and reports or was based on estimates derived from the same and management’s knowledge of, and experience in, the markets in which NAL operates. Actual outcomes may vary materially from those forecast in such reports or publications. NAL has not independently verified any of the data from third party sources referred to  or ascertained the underlying assumptions relied upon by such sources.

Production estimates and timelines relating to the commissioning and start-up of the hydrometallurgical plant and hydromet plant are based on preliminary estimates provided by BBA Inc. and Hatch Engineering to NAL. There is no assurance that the estimated timelines and related milestones will be met as planned or at all.

MiningFeeds.com is being compensated by the subject of this article and the article is meant to serve informational purposes only, not investment advice and does not constitute a recommendation to buy or sell securities in North American Lithium. 

MiningFeeds.com does not own any shares or have any financial interest in the company.

The future is sealed; batteries will rule the automotive industry as more and more countries outlaw combustion engines. Lithium (Li) is the lightest metal with the highest energy density, allowing the metal to supply the maximum charge per kilogram, which, in turn, makes it excellent for battery use.  

Current global lithium production is not enough to meet future demand and with countries around the world increasingly shunning fossil fuels, demand for a secure supply of lithium will drive growth of lithium mining companies.

One company is already on its way to commercial production of lithium.      

North American Lithium (NAL) acquired and is re-starting one of the only near-term viable hard rock lithium operations globally. North American Lithium is the 100-per-cent owner of the Québec Lithium Mine in Val-d’Or, Quebec, a mine site located within reach of North America’s largest markets and export terminals.     

According to the 2016 Fraser Institute Annual Survey Mining Jurisdictions, Québec ranks as one of the top 10 mining jurisdictions in the world, with a low tax rate, low energy costs and a mining friendly government.   NAL’s mine is situated about 60 kilometres north of Val-D’Or, a city with a population of 35,000 residents that provides an abundance of skilled mining labor for the region.  The site also happens to be serviced by excellent regional and site-based infrastructure with access to natural gas, hydropower, highways, rail, and air. With security of supply a top priority for technology companies, businesses that require lithium will want to source their supply from safe and stable jurisdictions.

NAL’s lithium project is a past-producing mine with approximately $500 million already spent on the development of the property.  Previous companies completed the necessary work to advance the project to the brink of commissioning.  In addition, over $100 million has been invested by NAL shareholders over the last two years, shortening the timeline to production for a junior mining company.

Previous work at NAL’s mine site revealed significant mineral resource estimates for a long operating life.  As of May 2017, the company has measured resources of 13.5 Mt tonnes at 1.08 %Li2, indicated 25.8 Mt  at 1.02 %Li2 for a total of measured and indicated of 39.3 Mt tonnes at 1.04 %Li2.  Also as of May 2017, the site proved 11.9 Mt at 0.94 %Li2 and probable reserves of 8.9 Mt at 93 %Li2.   Infill-drilling confirmed previous drilling data and the 2016 drill campaign shows potential to extend reserve life from material within current mining lease. Currently, the project is fully permitted, in possession of all permits/licenses to restart the mine, processing facility and tailings.

The amount of previous work, in addition to the size of the resource and the improved market demand for lithium prompted NAL to acquire the asset in 2016.   NAL is a joint investment venture between Jien International Investments Ltd. and Investissement Québec. Jien has a successful track record in Québec, having invested $1.6 billion in Northern Québec nickel, copper and PGM producer Canadian Royalties Inc. (CRI). The company has strong relationships with China and other Asian markets with an experienced, Canadian-based operational, technical and finance team. Management has experience with turning around mines in Québec and a unique access to Chinese lithium converter markets.

NAL is led by Chief Executive Officer and Director, James Xiang.  James Xiang has had a successful track record as an entrepreneur, investor and savvy rescue artist since immigrating to Canada in 2001.  In 2005, Xiang began pursuing a career in the resource sector and successfully brought a China-based nickel-copper project, GobiMin Inc, to list on the TSX.  In less than one and a half years, GobiMin’s market cap grew by 10 times.  Under his management during the financial crisis of 2008, GobiMin was able to sell its main project to a Chinese firm in an all cash-deal which proved his ability to take advantage of both North American market and Chinese markets.   

James Xiang was also instrumental in the turnaround of Canadian Royalties Inc.  As the company’s CEO, Xiang re-built the company’s senior management and corporate strategy, which was work that ultimately led to a company turnabout that caught the attention of the market, especially Investissment Québec, which partnered with Xiang at NAL.

Future plans for the company include developing and completing the improvement of its existing lithium processing facilities, becoming a commercial producer of lithium carbonate, and looking for expansion and acquisition in Québec and globally.

This is my 4th interview of “Mr. Lithium,” Joe Lowry.  Do people still call him that? Following Joe’s advice by paying a pretty penny for his consulting services, or following him for free on Twitter and Linked-In, is one of the absolute best ways to stay on top of the lithium sector.  Although Joe does not give investment advice, he sometimes issues PSAs, “public service announcements,” warning followers to be careful not to believe everything they read or hear about lithium juniors!  (ask him what he thinks of the dozens of Li juniors heavily focused on projects in Nevada …. actually, don’t)

Still, reading between the lines, it’s been clear which names he has liked over the months and years.  Lithium Americas (TSX: LAC) and SQM (NYSE: SQM) are prime examples.  It’s truly worth one’s time to follow Joe.  Consider that LAC shares have more than doubled from an early July low of C$0.78 (it closed at C$1.70 on September 15th) when rumblings suggested that SQM might not move forward on the LAC/SQM Cauchari-Olaroz project.  Joe was among the first to squash those rumors, setting up what turned out to be a highly profitable buying opportunity.  SQM is up 120% in the past 12 months (by comparison, the Global X Lithium ETF is up 54%, and the S&P500 Index 16%

Another key takeaway from reading Joe’s real-time accounts of the lithium industry is that things happen, a lot of things, away from the U.S. & Canada.  And, it’s not all about south America’s, “Lithium Triangle” either.  China is incredibly important and Australia is a long-time and growing hotspot for hard rock Li mining.  Joe has mentioned Chinese and Australian-listed companies that have also had tremendous performance over the past year, Ganfeng Lithium (SHE:002460) + 208% and Tianqi Lithium (SHE:002466) + 97%.

Joe is a fan of Australian-listed Galaxy Resources (ASX: GXY), a company a hard-rock operation in production in Australia, a world-class brine development project (Sal de Vida) in Argentina that has a Bank Feasibility Study on it, and a promising exploration project in Quebec, Canada near Nemaska’s (TSX: NMX) Whabouchi project.  GXY is up 60% in just the past 3 months.

Reading my prior 3 interviews of Joe in preparation for this one was quite interesting. Consider what he said in June 2015

“There’s already significant tightness in the upstream market (both carbonate & hydroxide) that will build over the next 24 months resulting in a significant price rise.”

Now, look at this price chart from Simon Moores’ group, Benchmark Mineral Intelligence


Notice what happened around June, 2015?  I always learn a lot from interviewing Mr. Lithium, this time was no different.  Please enjoy this latest masterpiece, my fourth, and view links to previous interviews at the bottom of the page.  NOTE:  (I have no prior or existing financial relationship with Joe Lowry or any of his business interests)

What has been the biggest change in your view of either demand or supply for the next 5 or 10 years? 

Since mid-year when I have been asked to speak on lithium supply & demand, I say the following, ‘all the positive surprises have been on the demand side and the negative surprises on the supply side.’  I do a lot of expert consultant calls on the subject of lithium.  These calls no longer dwell on the topic of demand — investors seem to recognize that electric transportation demand is real and significant.  

The question now is more about speed of EV implementation.  On supply, it has been great to see LAC, Pilbara Minerals (ASX: PLS)Altura Mining (ASX: AJM) get funding, but the continued issues with Albemarle’s (NYSE: ALB) LaNegra II expansion, and Orocobre (ASX: ORE) ramping up to phase 1 capacity of 17,500 tonnes/yr. of lithium carbonate, are further evidence that lithium projects take time and have considerable execution risk.

While most agree with you & Simon Moores that Li prices will remain at or above $10-12k/tonne for years to come, what event(s) could cause prices to fall below $10k/tonne?

Oversupply, which isn’t likely to happen.  Also, the global average cost of production is creeping up each year.  Even Albemarle in the Atacama salar in Chile has significantly higher cash costs after agreeing to a new royalty regime this year.  

What is the most important lithium industry topic that investors are not talking about?

The biggest issue with the retail investor is falling love with a company because its stock price is up, even if the company’s project is poor or marginal. 

On the institutional side, many are asking the wrong questions and accepting what some major banks say, that is, in many cases, simply poor quality analysis.  I have done calls with hedge funds and institutions that were only willing to look at ALB for a lithium investment.  Juniors were not on the table for them because of their size or the exchange they are traded on.  I always said to buy SQM, but would get some response about the CORFO issue.  Look at the missed opportunity (up 120% in the past year).

Are you receiving more calls from investment fund managers lately?  At what point on the investment spectrum are we on in terms of boom-bust / fear-greed, bubble / pop? 

Since 2015, the rate I charge for expert consulting calls has tripled, while at the same time, the volume of calls coming in has also tripled.  I say we are in, ‘lithium’s 15 minutes of fame‘ which may turn into a 15-year ‘super cycle.’ 

Companies you’ve spoken favorably on, companies like Tianqi, Ganfeng, SQM, and Lithium Americas are up between 87% & 208% in the past year.  Can large lithium companies continue to vastly outperform market indices?  

First, let me clarify, Tianqi should be at the end, not the beginning of that list.  They have great assets but are not great operators like SQM & Ganfeng.  In this cycle I bought SQM at $15/shr. and bought more shares up to $20.  It’s at $58 as we speak.  I started buying shares of LAC the week of the SQM JV deal in March of 2016.  I was public about this only to prove that I, ‘eat my own cooking.‘  At this point in the cycle, SQM may be approaching full valuation, but in my opinion LAC is still significantly undervalued and has a lot of room to run.

NOTE:  Howard Klein of RK Equity has excellent commentary on the perceived under-valuation of LAC, and a few other names.  He publishes the Lithium-ion Bull newsletter.  Twitter: @HowardKlein10

China’s announcement to ban gas & diesel cars is hardly a surprise, yet the market seems to have been blown away by this news.  In what year do you think China will start phasing out ICE-powered vehicles?  

Much of my business is directly tied to what happens in China.  My opinion is that this announcement is both aspirational and significant.  I take it as more of an indication that near-term policy decisions will support e-transportation & ESS growth.  But, we could easily be talking five years from now about when China is going to turn that pronouncement into reality.

There are > 20 juniors with at least 1 owned or optioned Li brine property in Argentina.  Lacking large sums of capital, some are planning to pump brine into evaporation ponds, then ship a 1%-2% Li concentrate to a larger player for processing.  Is that a business model that could work?    

This idea sounds good, but would be difficult to implement.  Most brine assets have significant variations.  Salars are dynamic – it’s not just about, ‘pumping brine into ponds‘; expertise is required to manage the mix of brines.  This is true on the world’s best brine resource in Chile and wouldn’t be any easier with combined mediocre assets.  Blending brines from several salars will increase processing complexity significantly.  It may look good on a, ‘white board‘ and make for a good story for investors who don’t understand how lithium processing works, but I’m skeptical to say the least. 

You comment periodically about FMC Corp., Albemarle & SQM.  Please summarize your views on each.  

SQM only fairly recently decided to go ‘all-in’ on lithium, as evidenced by the LAC and Kidman Resources (ASX: KDR) deals and their expansion in Chile.  SQM is now the, ‘lithium superpower.’  Yes, they still have to work out issues with CORFO, but the Chilean government does not want to kill the golden goose. 

Albemarle has great assets, but are, at best, mediocre operators.  They have a very poor record of executing on capital projects.  Their announcement on September 15th about new technology was a typical PR move, but likely lacks substance – they highlighted a technology that even they say is not ready for commercial use.  ALB has issues with their brine operation that are starting to be recognized based on their limited output vs. SQM.  In one sentence; ALB is a company run by a lawyer trying to compete in a world where operations are key.

FMC Corp. (NYSE: FMC) has allowed their franchise to atrophy by not investing in resource capacity.  They have a very good, but small upstream operation in Argentina.  They have a very old processing plant in North Carolina, and an old downstream plant in the UK.  Their newly announced tolling operation is what I have called a ‘House of Cards‘ – your readers can find my posts on Linked-In.  From a top 3 producer in years past, FMC will be #6 globally in LCE production in 2018. 

Joe, I notice that you mention a company named Nano One, ticker NNO.v from time to time.  What can you tell us about that company?

Nano One Materials (TSX-V: NNOhas an extremely interesting technology. The primary focus is to lower the cost of producing cathode by eliminating process steps.  In addition, Nano’s process may enable the use of non ‘battery-grade‘ lithium materials in cathode production.  Another benefit of the process is the ability to use lithium carbonate to produce high nickel compounds such as NCA that currently require lithium hydroxide.

SQM has operations or projects in Chile, Argentina & Australia.  It’s been reported that they’re looking for a fourth jurisdiction to operate in.  Any thoughts on where they are looking?

I have very clear thoughts on this, but I will keep them to myself.  Clearly SQM is now “all-in” on lithium and part of what I call the, ‘Lithium Star Alliance‘ along with LAC, Ganfeng, Kidman & PLS (via Ganfeng’s interest)

You & Simon Moores say that the lithium supply chain is in need of funding from additional sources, presumably battery makers & EV manufacturers.  Has there been any evidence of this yet?

Absolutely, there is evidence, but valuation is a major issue.  I am speaking with interested parties across the supply chain (from cathode to car makers).  The problem is that car and battery companies want to negotiate from strength and tend to be bullies when dealing with their suppliers.  They are trying to price shop in a seller’s market.  It will take time for them to realize the reality of the lithium market – lithium suppliers are in the driver’s seat.

Thanks Joe, very good stuff, as always.  Great catching up with you! 

First Interview

Second Interview

Third Interview

The Salar de Atacama salt flats in Chile. Is most of the easily recoverable lithium here already gone?
The Salar de Atacama salt flats in Chile. Is most of the easily recoverable lithium here already gone?

Read the word lithium and it’s likely not too long before you are reading the word battery. Jon Hykawy, lithium analyst for Byron Capital Markets echoed the sentiments of many recently when he described lithium as “hot and getting hotter.”

Lithium demand is experiencing a “sea change” according to James Calaway, chairman of Australian lithium miner Orocobre (Stock Profile – TSX:ORL & ASX:ORE) in an article by the New York Times. He further enounced, “We are at the front end potentially of a very significant increase in the demand for lithium for the emerging electric transportation sector.” Calaway’s company recently entered into a $100 million joint-ventured lithium project in Argentina with Toyota Tsusho, the material supplier for Toyota.

Investors picturing a massive new demand for lithium unfolding in order to power our lives might be surprised to hear that, in 2008, just 25% of the world production of lithium carbonate was used by battery manufacturers. The majority of the demand for lithium comes from its use to manufacture high performance alloys, ceramics and glass. But it’s the anticipated demand from the automobile and electronics industries, which are increasingly adopting lithium batteries, that has the spotlight on the element. This is because a lithium-ion battery stores two to three times as much energy per pound as a nickel-metal hydride battery.

According to French technology consultancy firm Meridian International Research, the current supply of lithium is so tight and the potential sources are so limited that by 2015 there may only be enough lithium carbonate to power 1.3 million GM volt class vehicles. And, the report goes on to suggest, politics may play a major role in the supply/demand equation. Meridian says that 70% of the world’s lithium may ultimately come under state control. The lithium frenzy was not eased by recent actions in Argentina. The government in the that country’s Jujuy province recently declared it a “strategic” metal, effectively notifying all current and future lithium projects that they must be evaluated by a special commission.

In talking to The Energy Report analyst Merrill McHenry described the structure of lithium pricing as one that lends itself to confusion and speculation. “You take a mineral with no spot market and very obtuse pricing and combine that with a significant distance from here to high future volumes, significant market penetration of hybrids and higher pricing estimates and you have a scenario ripe for volatility.”

But not everyone agrees that there might not be enough lithium to satisfy demand. Lithium consultants Tru Group, who presented at the Lithium Supply & Markets Conference in Toronto in January, pointed out that the world’s current major lithium chemical producers, SQM, FMC Corporation and Chemetall/Rockwood Holdings, have the in-ground resources and ability to meet nearly all market requirements by simply expanding capacity through 2020. Their report further stated, “Only a select few new projects could make it into profitable production and then only as marginal suppliers. Bottom line is if you do have a good resource make sure you also have the strongest possible lithium technical capability to develop it.”

Today, the debate over “peak lithium” rages between those, such as Meridian’s William Tahil, who say that most of the easily recoverable lithium from world-class properties like SQM’s Salar de Atacama project in Chile has already been recovered. While groups like Argonne National Laboratory, a research branch of the US Department of Energy, says that on the other hand “long-term supply should not be a major concern.”

Whichever side is ultimately proven correct issues around the supply, demand for lithium appears to be on the front burner for some time to come. That means volatility in the lithium market and, perhaps, opportunity in the sector. For investors looking to sort the lithium contenders from the pretenders, MiningFeeds.com offers, in no particular order, five lithium stocks with varied stories to keep an eye on in 2011.

1. Lithium One (TSXV: LI)

Other people’s money. Not only does Lithium One (Stock Profile – TSXV:LI) have what might be one of the purest sources of lithium in the world; the company recently reported what it described as favorably low magnesium and sulphate content at their Sal de Vida brine project in Argentina, but some well timed agreements have minimized the company’s requirements for additional fund raising to capitalize on the project.

In early June of last year Lithium One entered into a joint venture earn in agreement with Korea Resources Corporation (KORES) to develop their Argentinian Project. The arrangement required KORES to fund up to US$15 million to complete a Definitive Feasibility Study and to provide a completion guarantee for Lithium One’s share of the debt portion of project development. KORES then brought more to the table when it entered into a consortium with GS Caltex and LG International, two leading battery and energy companies in Korea, to share equally in the 30% ownership stake.

Lithium One's Sal de Vida brine project located in Argentina within the famed "Lithium Triangle".

With things in full swing, Lithium One, early last month, reported its first independent lithium and potassium resource statement for its flagship Argentinian project. The inferred resource estimate, prepared by E.L. Montgomery and Associates, includes 5.44 million tonnes of lithium carbonate equivalent and 21.3 million tonnes of potash equivalent. Lithium One’s property is adjacent to FMC Corp.’s lithium brine operation, the source of more than 15% of the world’s production of lithium, in the eastern part of the same Salar.

Lithium One’s second project, a spodumene hard rock project in James Bay, Quebec exhibits a spread-the-risk methodology similar to the one used on their Argentinian property. In February, the company announced a joint venture agreement with Galaxy Resources (ASX: GXY), an Australian listed mining company, whereby Galaxy can acquire up to a 70% interest in project in Quebec through earn-in conditions including $6 million in payments and the completion of a feasibility report. Galaxy owns and operates the Mount Cattlin mine in Western Australia which is currently producing spodumene concentrate. The MiningFeeds.com connected with Lithium One’s President and CEO Patrick Highsmith recently to discuss the company’s future – CLICK HERE – for the interview.

2. Canada Lithium (TSX:CLQ)

On the last day of February of this year, Canada Lithium (Stock Profile – TSX:CLQ) had a surprise for investors. And, in this case, investors didn’t like what was inside the box. At 12:23 p.m. Pacific, shares of Canada Lithium were halted at the company’s request, pending news. A few hours later Canada Lithium announced it had hired Roscoe Postle and Associates Inc. to explore the possibility that its flagship project in northwestern Quebec might not be as large as they first suspected. Canada Lithium management said it was “unable to reconcile the results of the internal review, which incorporated various resource estimation methodologies, with the reported 43-101 resources announced in October, 2010.”

When the stock resumed trading the next morning, the verdict was swift and harsh. Shares of Canada Lithium ended the day at $.89 cents, down 34% from $1.35. The stock lost another $0.17 cents to close at $.72 cents on March 2nd.

Just months before, things were looking much brighter for Canada Lithium. In an interview with BNN on December 20th, 2010 CEO Peter Secker said the company would “be producing by the end of 2012, we’ll produce about 20,000 tonnes of lithium carbonate per year which would make us about 12% of the world market.” Mr. Secker also said that the mine’s life would be “in excess of 50 years” and felt there was “there’s a lot of potential there” for additional reserves being identified having only drilled 50% of the property.

Secker now believes there will be a material reduction in the measured, indicated and inferred resources reported in October. The question for investors now is: just how material? Speculation will no doubt run rampant over the months it takes to produce a new National Instrument 43-101-compliant report.

Canada Lithium believes an historical reserve estimate done by a firm called Nenninger et Chenevert Inc. in 1974 is is “relevant” but should “should not be relied upon” because “they do not meet the current CIM definition standards on mineral resources and mineral reserves adopted in 2005”.

Canada Lithium’s Quebec Lithium Project is located in the Lacorne Township near Val d’Or. Between 1955 and 1965 the mine was a former producer of lithium carbonate, lithium hydroxide and spodumene. Before the internal review, Canada Lithium said the project could be one of the two-or three-largest hard-rock lithium deposits in the world. With all the recent uncertainty surrounding the project, however, some investors might be inclined to take this information with a grain of spodumene.

For Part 2 of 5 Lithium Stocks to Watch in 2011CLICK HERE.

3. Talison Lithium (TSX:TLH)

With a market capitalization near half a billion dollars, Talison Lithium (Stock Profile – TSX:TLH & OTC:TLTHF) is the biggest lithium mining company listed in Canada, and the largest pure lithium play in the world.

But in a move that speaks to how far the TSX Exchange has matured on the world mining stage, Talison is actually an Australian company with no connection to Canada other than its takeover of Salares Lithium, a TSXV listed junior with properties in Chile. The merger, which was completed last summer, gave Talison exposure to Salares’ lithium brine projects located in Chile, and creates as close to a diversified portfolio as exists in the suddenly burgeoning world of lithium mining. Salares resource in Chile has not be verified through NI-43-101, but the company says there is 394 square km of exploration potential within a number of salares brine lakes.

Meanwhile, at Greenbushes, a mine near Perth in Western Australia Talison mines tantalum concentrates and lithium minerals. The company purchased Greenbushes in 2007, and is already distributing to a well-established global customer base, including China. Production from the Greenbush mine fills 75% of the Chinese demand and a full third of total worldwide demand for lithium.

Spodumene at Greenbushes is mined from the pegmatite that's exposed in open pits.

According to Ahead of the Heard’s Rick Mills, Talisun Lithium offers “potential investors many attributes” including “exposure to both mineral and brine sources of lithium… a well established and diversified global customer network… and a low-cost, rapid plant expansion (that is) currently in progress.”

In 2010 Talison sold all the lithium concentrate it produced and did so with high margins receiving an average price of over $300 per tonne (or $2,000 lithium carbonate equivalent). It must be noted that the $2,000 LCE price does not account for any associated end-user lithium carbonate conversion costs estimated to be in the range of $2,000 to $3,000 per tonne.

Talison, straight out of the gate looks like an early leader in the lithium race. The company reports that in a few years expanded operations should reach annual production of approximately 110,000 tonnes of lithium carbonate equivalent. The company is drilling at Greenbush and expects to provide an update on mineral reserves and resources by June, 2011. Talison also plans continued exploration work on their Chilean salars brine properties this year.

Mineral Resources from the company’s NI-43-101 report define a technical grade ore type at a 4% Li2O block cut-off and chemical grade ore type at a 3.2% Li2O block cut-off. Over the 12 year mine life the company expects to produce 4.6 million tonnes of lithium concentrate, or an estimated 700,000 tonnes of lithium carbonate equivalent.

4. Rodinia Lithium (TSXV:RM)

A tale of two projects. Toronto’s Rodinia Lithium (Stock Profile – TSXV:RM), like Talison and Lithium One, is developing lithium projects in two radically diverse geographical areas; Nevada and Argentina. But unlike its counterparts, Rodinia is focused exclusively on lithium brine production. A comparison of Rodinia’s properties reminds investors that geopolitical concerns are never far from the mining world.

Earlier this month, Rodinia announced results from an independent brine resource estimate of its Diablillios Project in the province of Salta in Argentina. As conducted by AMEC Internacional Ingenieria y Construccion, the report is consistent with the standards set out in Canadian Securities Administrators’ National Instrument 43-101 but does not constitute a NI-43-101 report. Nonetheless, the report identifies 4,959,000 tonnes of lithium carbonate equivalent, 19,837,000 tonnes of potassium chloride and 6,194,000 tonnes of B203.

Talking about the results William Randall, Rodinia’s President and CEO said, “This resource represents one of the largest estimated brine resources in the world. In addition to its size, the brine geochemistry is favourable with low magnesium-to-lithium and sulphate-to-lithium ratios.”

Lithium brine refers to lithium that is not mined, but rather, produced from brine, or salt water. To recover lithium this way salt rich brines are pumped from just beneath the surface of the desert and diverted into a series of large, shallow ponds. Areas of Nevada, Chile and Argentina are particularly rich in lithium brine.

At first blush the timing of Rodinia’s resource estimate was not ideal. A few days after the report
the government of neighbouring Jujuy province in Argentina announced a decree making lithium of strategic importance to their region making investors nervous that legislation around lithium in places like Argentina might become more widespread and protectionist. Then on March 11th the Japanese earthquake and subsequent tsunami hit resulting in general and widespread market instability. Shares of Rodinia feel from $0.57 to $.385 in a matter of days.

Demand for lithium batteries for "green cars" like the Chevy Volt is expected to drive future demand for lithium.

Rodinia was quick to point out that its two main projects were unaffected by the decree. President and CEO William Randall calmed fears by pointing out, “Mining legislation and government activity within the mining sector varies dramatically from province to province in Argentina, and the evolution of legislation in one province does not directly impact neighbouring provinces.”

Clearly, the position of the Jujuy province in Argentina has no bearing on the company’s Clayton Valley Project in Nevada which the company believes can offer some strategic benefits down the road.

The MiningFeeds.com sat down with William Randall to find out more about Rodinia Lithium, its strategic partnership with China’s Ningbo Shanshan and the company’s future plans. CLICK HERE for the exclusive interview.

5. Lithium Americas (TSX:LAC)

The Lithium Triangle, the high altitude, semi-arid salt flats at the intersection of Bolivia, Argentina and Chile is where nearly three quarters of the world’s salt lake lithium deposits are found.

It’s also where Lithium Americas’ (Stock Profile – TSX:LAC) Cauchari‐Olaroz property is located. A more specific description of the location of their property – smack dab in the middle of Jujuy province in Argentina – will provide much of the reason why the company’s stock was under pressure for most of March. Shares of Lithium Americas fell from $2.19 on February 28th to a low of $1.33 on March 16th, before recovering ground in sessions that followed.

In early March, Walter Barrionuevo, the Governor of Jujuy Province in Argentina, issued Decreto 7592/11, which changed existing laws for all existing and pending lithium projects. From now on in Jujuy, a ‘special expert commission” will review all projects. Lithium Americas, however, believes the market overreacted to the possibility of troubles at Cauchari‐Olaroz, pointing out that exploration and development permit applications were approved in late 2009 and is fully permitted through final feasibility. The Company is currently working on the environmental baseline and has confirmed that new legislation should not effect the current development program at Cauchari‐Olaroz, but is expected to increase the requirements for the final exploitation permit that will be requested once the final feasibility study is completed and presented to the Government as it is mandatory under the Argentinean law”.

Hernán Zaballa, a partner at Buenos Aires law firm Brons & Salas believes that mining in Argentina, a country in which each province owns its natural resources, gets a bad rap. “I do not think having different approaches to mining is a killer for Argentina and it is probably unfair the country is ranked so low in surveys like the one of the Fraser Institute” he recently told The Engineering and Mining Journal. “If you look at Canada or the U.S., you have big differences between states. Nevada is not California; Alberta is not British Columbia.”

And things aren’t all gloomy for Lithium Americas. Current disruptions aside, the company’s brine based project in Argentina was able to attract Magna International and Mitsubishi Corporation as equity investors. Both have off-take arrangements with the Company.

A worker at Salar de Uyuni lithium brine deposit in neighbouring Bolivia - part of the Lithium Triangle.

As Lithium Americas President and CEO Dr. Waldo said in an interview with BNN, “Lithium carbonate is not like gold where that you put an ad and you sell it… it has to be sold to a market that needs it. In our case our partners are Magna and Mitsubishi and this is something that gives you the comfort that there is a buy out there on the other side of the deal.”

Lithium Americas is clearly a little further ahead than some of the other junior miners in the Lithium Triangle. In mid-2010 the company engaged ARA Worley Parsons to perform engineering services on the Cauchari project. And on March 7th, 2011, the company entered into an agreement with SGS Canada for the completion of bench studies required for the design and construction of a lithium carbonate pilot plant and hopes, despite the new decree, to produce its first lithium carbonate before the end of 2011.

In late 2010, Lithium Americas released the results from an independent NI-43-101-compliant resource estimate completed under the supervision of Groundwater Insight. The company’s President and CEO Dr. Waldo Perez stated, “With measured and indicated lithium carbonate and potash (KCl) resource equivalents of 5.3 million tonnes and 17.3 million tonnes respectively, we have validated the potential of our resource.”

For a list of publicly traded lithium companies with market caps over $10 million – CLICK HERE.

President & CEO William Randall, "We are developing the potash potential of our current properties".

A tale of two projects. Toronto’s Rodinia Lithium (TSXV:RM), like its peers Talison and Lithium One, is developing lithium projects in two radically diverse geographical areas; Nevada and Argentina. But unlike its counterparts, Rodinia is focused exclusively on lithium brine production. A comparison of Rodinia’s properties reminds investors that geopolitical concerns are never far from the mining world.

Earlier this month, Rodinia announced results from an independent brine resource estimate of its Diablillios Project in the province of Salta in Argentina. As conducted by AMEC Internacional Ingenieria y Construccion, the report is consistent with the standards set out in Canadian Securities Administrators’ National Instrument 43-101 but does not constitute a NI-43-101 report. Nonetheless, the report identifies 4,959,000 tonnes of lithium carbonate equivalent, 19,837,000 tonnes of potassium chloride and 6,194,000 tonnes of B203.

Talking about the results William Randall, Rodinia’s President and CEO said, “This resource represents one of the largest estimated brine resources in the world. In addition to its size, the brine geochemistry is favourable with low magnesium-to-lithium and sulphate-to-lithium ratios.”

Lithium brine refers to lithium that is not mined, but rather, produced from brine, or salt water. To recover lithium this way salt rich brines are pumped from just beneath the surface of the desert and diverted into a series of large, shallow ponds. Areas of Nevada, Chile and Argentina are particularly rich in lithium brine.

At first blush the timing of Rodinia’s resource estimate was not ideal. A few days after the report the government of neighbouring Jujuy province in Argentina announced a decree making lithium of strategic importance to their region making investors nervous that legislation around lithium in places like Argentina might become more widespread and protectionist. Then on March 11th the Japanese earthquake and subsequent tsunami hit resulting in general and widespread market instability. Shares of Rodinia feel from $0.57 to $.385 in a matter of days.

Rodinia was quick to point out that its two main projects were unaffected by the decree. President and CEO William Randall calmed fears by pointing out, “Mining legislation and government activity within the mining sector varies dramatically from province to province in Argentina, and the evolution of legislation in one province does not directly impact neighbouring provinces”.

Clearly, the position of the Jujuy province in Argentina has no bearing on the company’s Clayton Valley Project in Nevada which the company believes can offer some strategic benefits down the road. The MiningFeeds.com sat down with William Randall to find out more about Rodinia Lithium, its strategic partnership with China’s Ningbo Shanshan and the company’s future plans.

Rodinia Lithium has properties in both the United States and Argentina – could you tell us about the projects and why the company is focused on two geographically diverse areas?

Rodinia has a project in Salta Province, Argentina, covering the entire Salar de Diablillos.  This property hosts a recently announce resource of almost 5 million tonnes of lithium carbonate and 20 million tonnes of potash.  Coupled with this very large resource are high grades of both lithium and potassium as well as a brine geochemistry that is amenable to low cost, conventional processing.  This project has lots of upside and is well positioned to become the newest lithium carbonate and potash producer.  Our second project is in Nevada, United States, and covers 70,000 acres of the only lithium brine producing salt flat in North  America.  The brines have been harvested since the 1960’s, so it is an asset with proven potential.  These two flagship projects have many common elements that we consider important: stable, friendly mining jurisdictions; brine-based lithium and potash source (lower cost than hard rock lithium or conventional underground potash), excellent geochemistry, and very significant land holdings that allow us to control the salt lake. Argentina gives us a significant potential producer in the heart of the South American lithium triangle.  To that, the Nevada asset provides geographical diversity and access to a very large domestic market that is supported by investments from the Obama government as well as auto and battery OEMs.

Argentina is a notable mining country but it is also notorious for its archaic bureaucracy – has Rodinia faced any of these issues in Argentina?

Argentine mining law is determined provincially.  It is therefore very important to make sure you choose projects that are in mining friendly provinces such as San Juan and Salta.  Salta, where our Diablillos asset is located, has a very long and stable mining history, evidenced by the presence of numerous international mining companies including Rio Tinto Minerals.  As such, Rodinia has not faced any issues so far and does not expect to in the future.

There has been a lot of talk lately from the Obama administration about energy independence – as supplier of lithium that is based in the U.S. is anything materializing on the front lines or should we chalk this up as more government rhetoric?

This is an avenue that the Obama administration is actively pursuing.  In fact, last year the government issued a $30M grant to expand the Silver Peak lithium carbonate production facility, located in Clayton Valley, in a push to secure a domestic supply of lithium.  I think we will find the US to be increasing its activity in the sector in a push to gain independence from the oil producing countries.

You recently closed an $11.5 million financing, where do you plan on spending that money and what major milestones are you hoping to accomplish?

We are now well financed to reach major milestones on both properties.  In Diablillos we are moving towards a feasibility study.  Our work program will incorporate further exploration drilling, an updated and upgraded resource, metallurgical report to demonstrate the brine’s amenability to conventional processing, pump tests to determine the production potential of the salar and seismic profiles.  A feasibility study will allow us to prove the excellent production potential of the deposit.  In Clayton Valley we will move towards the resource stage by completing an exploration program on the southern claims.  We hope to release a resource estimate in the second half of 2011.  This area hosts the only brine resource in North America.

I noticed on your website you have an “Other Projects” section that says “Coming Soon”. Is the company looking at other non-lithium projects or will your focus remain Lithium?

We are not looking at non-lithium projects.  We are developing the potash potential of our current properties and will devote this section of the website to this.  We have 20 million tonnes of potash contained in Diablillos brine.  As a co-product during lithium carbonate production, this could be introduced to the market at the very low end of the cost curve.  We think the potash company offers upside for the company over other lithium deposits that do not have this advantage, primarily the hard rock facilities.

Can you please discuss the significance of you recent announcement with strategic investor Shanshan?

Shanshan is the largest lithium battery components manufacturer in China.  What that means is that they produce the anode and cathode material for the Li batteries.  They are a major consumer of lithium carbonate and are trying to secure a steady supply of the stuff for future growth.  They estimate huge growth in the sector and have a very aggressive agenda to increase their market participation.  The private placement we completed with Shanshan late last year was an indication of their interest in our properties.  We are now working on developing a more involved partenership with them and the Institute of Salt Lakes (ISL) whom they sponsor.  ISL is a university with over 40 years experience in the brine processing field and will be an integral part of our project going forward.

What sets Rodinia apart from its competition?

Rodinia is well positioned to take advantage of the growth in lithium carbonate and potash demand.  With our brine assets, containing what we believe are world class resources, we can project operating costs in the lowest percentile distributed in two mining friendly jurisdictions.  We are fully funded to meet our next milestones and have the backing of China’s largest lithium carbonate consumer.  We think the company has a bright future!

This interview appeared in 5 Lithium Stocks to Watch in 2011 – Part 2 – CLICK HERE for the article.

Lithium One President & CEO Patrick Highsmith with lithium carbonate from the Sal de Vida brine project in Argentina.

Other people’s money. Not only does Lithium One (TSXV:LI) have what might be one of the purest sources of lithium in the world; the company recently reported what it described as favorably low magnesium and sulphate content at their Sal de Vida brine project in Argentina, but some well timed agreements have minimized the company’s requirements for additional fund raising to capitalize on the project.

In early June of last year Lithium One entered into a joint venture earn in agreement with Korea Resources Corporation (KORES) to develop their Argentinian Project. The arrangement required KORES to fund up to US$15 million to complete a Definitive Feasibility Study and to provide a completion guarantee for Lithium One’s share of the debt portion of project development. KORES then brought more to the table when it entered into a consortium with GS Caltex and LG International, two leading battery and energy companies in Korea, to share equally in the 30% ownership stake.

With things in full swing, Lithium One, early last month, reported its first independent lithium and potassium resource statement for its flagship Argentinian project. The inferred resource estimate, prepared by E.L. Montgomery and Associates, includes 5.44 million tonnes of lithium carbonate equivalent and 21.3 million tonnes of potash equivalent. Lithium One’s property is adjacent to FMC Corp.’s lithium brine operation, the source of more than 15% of the world’s production of lithium, in the eastern part of the same Salar.

Lithium One’s second project, a spodumene hard rock project in James Bay, Quebec exhibits a spread-the-risk methodology similar to the one used on their Argentinian property. In February, the company announced a joint venture agreement with Galaxy Resources (ASX: GXY), an Australian listed mining company, whereby Galaxy can acquire up to a 70% interest in project in Quebec through earn-in conditions including $6 million in payments and the completion of a feasibility report. Galaxy owns and operates the Mount Cattlin mine in Western Australia which is currently producing spodumene concentrate. The MiningFeeds.com connected with Lithium One’s President and CEO Patrick Highsmith recently to discuss the company’s future.

You have two projects, your flagship brine project in Argentina and a “hardrock” project in Canada, can you share with us some of the key points about each project and what makes them attractive from a development perspective?

Our flagship Sal de Vida brine project is located at Salar del Hombre Muerto in north-western Argentina. This area of South America produces about 60% of the world’s lithium annually, from two commercially productive lithium salars: Salar de Atacama in Chile and Salar del Hombre Muerto where our neighbour, FMC Corporation, produces about 15% of the world’s lithium.  So we are developing the eastern half of this dry lake bed, while FMC expands their producing operation the western half.

From our work to date, the Sal de Vida brine is emerging with all the positive characteristics of the world-class commercial brine deposits in the region, including a large volume of near-surface brine containing high concentrations of lithium and potassium, with low concentrations of impurities such as magnesium and sulphate.  This was quantified in our recently announced NI 43-101 compliant inferred resource estimate, totaling 5,440,000 tonnes of lithium carbonate equivalent and 21,300,000 tonnes of potash equivalent, placing the project as one of the largest and highest grade undeveloped lithium and potash projects in the world.  Furthermore, the resource covers only about two-thirds of the project area known to contain high-grade brines at surface, so we have significant expansion potential to the north and south, as well as at depth. The project is road-accessible with a gas pipeline, rail, and power line nearby.  Importantly, we also have joint venture partners who are funding up to US$15M to complete the bankable feasibility study in the next year, plus securing the project debt facility for mine construction including Lithium One’s share, and who have committed to purchasing at least 30% and up to 50% of lithium production.

Our James Bay project is a spodumene pegmatite lithium deposit in north-western Quebec.  Last fall we announced our first open pittable resource estimate including indicated resources of 11.75 million tonnes at 1.30% lithium oxide and inferred resources of 10.47 million tonnes at 1.20% lithium oxide.  While the project has significant growth potential, the indicated resource is already similar in size and grade to Galaxy Resources’ Mt. Cattlin lithium pegmatite deposit in Australia, which recently began producing lithium concentrates and selling them into the rapidly growing Chinese market.   In fact, the similarities between the deposits and the success Galaxy has had in developing Mt. Cattlin led us to form a joint venture that sees Galaxy earning a 70% interest in James Bay in exchange for both cash and funding the project through bankable feasibility within two years.  Galaxy are aggressively expanding their operations to include lithium carbonate production in China and potentially even lithium battery production, so we believe they will make for strong partners in the development of James Bay, which will allow us to focus even more attention on our Sal de Vida project.

Your Sal de Vida brine project in Argentina is adjacent to FMC Corporation’s Fenix operation – how does your project compare?

FMC’s Fenix operation is a fully permitted lithium operation. The western half of the Salar del Hombre Muerto basin has been host to the Fénix lithium brine operation for about fifteen years. Our Sal de Vida project occupies the eastern half of the salar basin, in a 100% controlled land package of about 385 square kilometers.  And while our side of the basin differs somewhat geologically from the FMC side, we are seeing the chemistry and scale of the brine emerge as very similar.  The average grade of 695 mg/l lithium reported in our recent resource estimate is very close to the average reported by FMC, and while they have estimated reserves of approximately 4 million tonnes of lithium carbonate equivalent, we currently have an inferred resource of just over 5.4 million tonnes contained lithium carbonate equivalent.  We have confidence that as we further define the key economic parameters this year they will continue to be similar to this neighboring project.

It’s obviously a little premature to try and determine the exact cost of production for each project but could you comment on the economics?

All indications to date are that the Sal de Vida Project will have very positive economics due to its favourable chemistry, large scale, and strong jurisdiction. Our plans for Sal de Vida are to recover lithium carbonate and potash from the brine using a solar evaporation circuit, which is typically the lowest cost method of commercial lithium production and allows for the recovery of by-product potash.  The adjacent Fénix operation historically recovered only lithium and therefore used an ion-exchange method; however it is now adding evaporation ponds that will allow the recovery of potash.

We recently announced the start-up of the year-long on-site evaporation testing to produce lithium carbonate at a pilot scale and validate the process as designed by our consulting engineers.  We have already recovered several batches of lithium carbonate and potash from the pilot plant. Results show that we are well on the way to matching the bench-scale tests that indicated our evaporation circuit could result in concentrations of 2% lithium and more than 4% potassium in the evaporation ponds, well beyond that necessary to recover lithium carbonate and potash from conventional commercial processing plants.  The pilot plant is also achieving good separation of the waste products, including magnesium, sending a good signal that the evaporation upgrading will exceed expectations and result in a low-cost process design.  It’s important to note that some the world’s largest lithium deposits are uneconomic mainly due to very high concentrations of magnesium relative to those of lithium, but at Sal de Vida we are fortunate to have much lower concentrations of magnesium. In fact, Salar del Hombre Muerto is known for having one of the lowest magnesium to lithium ratios of any salar in South America.  And finally, our high concentration of potassium in the brine translates to the recovery of potash (as potassium chloride) which we will look to market locally to achieve a significant by-product credit.  Given the considerable size and quality of the potash resource, we are even examining the potential economics of larger-scale potash production.

For hard rock projects like James Bay the processing, and therefore the economics, are completely different.  These deposits use fairly conventional mining and milling to produce a concentrate, which then requires several steps including roasting and leaching to produce lithium carbonate.  The results are that total costs to market as lithium carbonate can be as much as twice those from brine operations.  However, with a good combination of low-cost attributes, the right hard rock project can certainly be economic; and at James Bay we believe we have many of these attributes.  To start with, the project lies in one of the most favourable mining jurisdictions in the world.  Quebec is a world leader in incentivizing mineral exploration and development and it boasts some of the lowest cost power and best infrastructure in the mining world.  James Bay is located on a paved highway and cross-cut by a major power line.  The deposit is at surface and amenable to open-pit mining, and the large grain size of the lithium minerals and lack of penalty elements contribute to lower-cost processing.  The deposit is also higher grade than others recently going through feasibility.  In addition, our new partners, Galaxy Resources, have demonstrated that the James Bay deposit may be amenable to lower cost dense media separation instead of flotation. We have already produced battery grade lithium carbonate from James Bay samples at the lab scale, and we are taking advantage of a wide array of expertise and Galaxy’s recent lithium mine commissioning experience to aggressively focus this project on commercial success.

All the stakeholders in the project, including the First Nations communities, are taking a keen interest in nurturing us to success.  Given such broad support and favourable technical characteristics, we are confident the James Bay Project can be commercially successful.

What are the estimated capital costs associated with building a lithium brine processing facility in the area?

Well, FMC built the neighboring Fénix Project in the mid 1990’s with somewhat different technology, and with less infrastructure in the area, for approximately US $150 million. An evaporation based processing plant for recovering lithium and potash, similar to Salar de Atamaca in Chile or Silver Peak in Nevada, would function differently than FMC’s lithium-selective ion exchange process, but we believe the capital costs would be similar. We have seen capital cost estimates for other lithium and potash brine projects ranging from US $140 million to US $250 million.  We haven’t published a PEA or Scoping Study yet but we expect to issue guidance on capital cost estimates for Sal de Vida towards the middle of the year and we believe the numbers will be consistent with that range.

You have already assembled some impressive partners for the Sal de Vida project – could you talk a little bit about these relationships and what they mean to Lithium 1?

A key component of the economics of any new lithium production is securing a buyer. Lithium is not traded on an open market; like many industrial minerals it is sold by contract.   Therefore, without having customers arranged a project is unlikely to move forward.  Historically there has been a very small group of large companies controlling the production and sale of lithium products.  However, there is a forecast increase in demand for lithium in 2020 of between 2 and 5 times that of today, driven mainly by the growing lithium battery market. There appears to be a lack of confidence in the current supply chain with respect to its ability to adapt to a world with large scale lithium powered electric vehicles and still provide lithium when and how it is needed.  As a result, several major end-users of lithium sought us out to explore a relationship that could give them stability of supply while at the same time deferring risk for our shareholders.   These types of relationships open the door to this complex closed market for potential new producers by entering into off-take agreements in exchange for funding at the resource and feasibility stages.

In June we announced just that kind of strategic partnership for the Sal de Vida project with three Korean companies: LG International, Korea Resources Corporation (KORES), and GS Caltex.  Korea has committed to the aggressive development of its lithium battery industry, so we are thrilled to be partnering directly with the government and leading international battery and energy players.  LG International is the trading arm of the giant LG Group, which includes one of the largest batter makers in the world, LG Chem.  GS Caltex is a 50% Chevron owned joint venture company with the Goldstar group; they are one of Korea’s leading energy companies and have recently announced direct entry into the lithium battery sector themselves.

The earn-in agreement includes an estimated US $15 million to advance Sal de Vida to feasibility, which means we don’t have to go to the market for those dollars.  More importantly, we have structured an off-take agreement for a minimum of 30% and up to 50% of our lithium products, which as I mentioned is a key component of moving the project forward.   Furthermore, our agreement includes a provision for securing the debt financing when we get to the mine construction phase.  Being able to secure these high-caliber partners under these terms for only a 30% stake in the project, at a time when we hadn’t yet completed a resource estimate, spoke volumes about the quality of the Sal de Vida project.  With this agreement in place we are able focus on advancing the project with the confidence that given a positive feasibility study, we will be able to develop the project and market our product.

Are you standing pat in 2011 or are you looking at any additional partnerships in 2011 for either of your projects?

We aren’t a big enough company to “stand pat” on anything.  We are moving faster and faster every day it seems.  But, in regards to the project partnerships, we believe the stakeholders in the Company and the projects are well served by the existing relationships.  Both projects are funded all the way through feasibility.  We have secured off-take of up to 50% of the lithium production from Sal de Vida, and we have excellent market access for the James Bay lithium through Galaxy Resources.  Our focus is now on delivering the results at Sal de Vida, where we are the operator and will maintain 70% project ownership, and lending support to Galaxy as they get their feet on the ground in Quebec.

It is true, though, that we always have our eyes on the market.  It is not many junior companies that are on the cusp of mine building decisions on two of their projects almost simultaneously.  I would say that some of the most exciting opportunities for us may be with regard to the potash production from Sal de Vida.  We have already been approached by some groups with interest in our potential low-cost potash production.  We retain all the marketing rights for the potash component of production, so we will certainly be looking at the best way to extract value from the world’s need for fertilizer. We are also continuously looking at new opportunities in the so-called energy metals, but so far, we have elected to stay focused on these two sector-leading projects.

How is the feasibility study progressing at Sal de Vida?

When you ask yourself, what constitutes a successful feasibility study; you have to say we are faring very well. We’ve made exceptional progress over the last 18 months.  We have defined high-grade lithium and potash in near-surface brines over an area of more than 260 square kilometres.  We subsequently delineated one of the largest and highest grade lithium and potash resources in the world – potentially economic in grade and scale – over just two thirds of that area.   We have demonstrated the amenability of that resource to conventional processing technology.  We have even completed a small scale “test mine” by pumping a continuous bulk sample from one of our wells into our pilot plant, which is producing both lithium carbonate and potash at a small scale.  That will continue through the third quarter, providing information on lithium and potash recoveries and product quality. Over the next quarter, the pump tests will provide critical information on the behavior of the aquifer and constitute our large-scale test of extractability of this brine, which will be used to model the long-term production scenario.  Given success there, we will have all the major technical components required to accurately assess the engineering and costs of a major mine development.  The preliminary economic assessment and/or scoping study due in the next three to four months will be a good progress report for us, and we expect to see very “good marks” when that progress report comes out.

This article appeared in 5 Lithium Stocks to Watch in 2011 – Part 1 – CLICK HERE for the article.

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 Golden Queen Mining Co. Ltd. GQM.TO +20.00%
 Standard Lithium SLL.V +16.42%
 Abcourt Mines Inc. ABI.V +15.79%
 Patagonia Gold plc PGD.L +14.29%
 Finlay Minerals Ltd. FYL.V +14.29%
 Rubicon Minerals Corp. RMX.TO +14.10%
 Lodestar Minerals Limited LSR.AX +11.11%
 Southern Silver Exploration Corp. SSV.V +10.34%