NetworkNewsWire
Editorial Coverage: The key component in making the
indispensable lithium-ion battery is in exceedingly short supply,
and competition to obtain the mineral has heated up. The race to
acquire reliable, long-term lithium feedstocks has sparked a
worldwide shift in procurement strategy. EV makers, battery
producers, and strategic investment companies are now joint
venturing, buying in or looking to acquire lithium miners. At least
12 lithium transactions have been closed between downstream
manufacturers and mining companies since 2016, and in the years to
come ever more supply agreements between manufacturers and miners
are expected (http://nnw.fm/3ZUgR). Lithium mining stocks,
especially junior miners, are liable to become outsized
beneficiaries of the investment and acquisition spree that’s
underway. Prospective junior miner, Lithium Chile (TSX-V:
LITH) (OTCQB: LTMCF) (LTMCF
Profile), which owns vast tracks of indicated lithium
assets, is positioned to potentially be one of the largest
beneficiaries in the space. Some look to the Global X
Lithium & Battery Tech ETF (NYSE: LIT), but direct
exposure junior miners is limited. Other lithium miners in the mix
include American Lithium (TSX-V: LI) (OTCQB:
LIACF), Nemaska Lithium, Inc. (TSX: NMX)
and Orocobre Ltd. (ASX: ORE) (TSX: ORL).
Epicenter Chile
Holding the world’s largest lithium reserves, Chile has become a
hotbed of acquisition activity (http://nnw.fm/oPB9K). High-quality proven reserves,
established infrastructure, a mining-friendly government, and the
lowest production costs on the planet have lured lithium seekers
from around the globe (http://nnw.fm/Ee1mV) and massive deals are
underway.
Chilean development agency Corfo recently increased lithium
production quotas to meet Tesla’s current needs and is discussing
further quota increases and potential investments in Chile by the
automaker (http://nnw.fm/LHg7t). China’s unprecedented push into
EVs has them bidding for a stake in the world's second-largest
lithium producer. Chile asked its antitrust regulators to block the
sale claiming it would give China an unfair advantage in the global
race to secure critical lithium resources. However, sources say a
deal is near for a $4.3 billion transaction, a 22 percent premium
to market (http://nnw.fm/y9ViY).
There’s such a significant wave of raw material supply
insecurity, mainly from Asia, that it should easily spur even more
lithium miner/manufacturer deals well into the next decade. The
lithium quest isn’t happening in the future – it is happening now -
and more money keeps pouring into lithium miners to lock in future
feedstocks.
Just the Beginning
On the cusp of unearthing what may become a bonanza of lithium
riches, Lithium Chile
(TSX-V: LITH) (OTC: LTMCF) just announced a Memorandum
of Understanding to enter a memorandum of understanding (http://nnw.fm/2iHK6) with Hong Kong-based investment
company, Prosper One International Holdings Company Limited. Over
the last few years, Lithium Chile has quietly and strategically
amassed 152,900 hectares (over 590 square miles) of lithium-rich
indicated properties, and suitors are starting to line up. The
proposed transaction with Prosper One requires them to spend C$3
million to earn a 55% interest in just one of Lithium Chile’s 15
properties, namely its Norte project. Prosper One will invest the
C$3 million in staged exploration expenditures on the Norte project
on or before December 31, 2021, and will make a C$1 million equity
investment in Lithium Chile at a minimum of $1 CAD per share.
The MOU designates Lithium Chile the operator on the Norte
exploration programs and it will receive a management fee from
Prosper One equal to 17.5% of the funds expended on the Norte
exploration programs. In testament to the seriousness of intent,
Prosper One must pay Lithium Chile a C$250,000 break fee if a
definitive agreement isn’t signed.
Steve Cochrane, president and CEO, of Lithium Chile, commented,
“We are pleased to have reached this agreement with Prosper One
which accelerates our ability to unlock the potential of our
dominant land package in Chile. Essentially, we are combining our
technical expertise and Chilean experience with Prosper One’s
financial acumen and support to explore our highly prospective
Pintadas Norte project in the coastal region of Chile. We look
forward to a mutually rewarding working relationship.”
This is likely just the beginning for Lithium Chile. Located
smack in the middle of the world’s foremost lithium reserves, the
company’s holdings represent the largest wholly owned lithium land
package of any private operating company in all of Chile. The
portfolio includes projects with high-grade lithium brines and
excellent chemistry, at shallow depths – all of which have good
access to infrastructure. Lithium Chile also owns (and plans to
spin out to shareholders) a significant copper, gold and silver
property portfolio consisting of 28,184 hectares over six different
properties (http://nnw.fm/j2kpG).
In addition to the Norte project, Lithium Chile’s assets include
66 square kilometers directly on the Salar de Atacama, Chile’s
largest mineral salt flat and home to over 30 percent of the
world’s lithium production. The Salar de Atacama offers multiple
competitive advantages in lithium production including good
infrastructure, high concentrations of salar brines, low processing
costs, superior evaporation rates, and favorable year-round
weather.
Results of field tests announced
in April identified multiple high-priority target areas at both
Lithium Chile’s Salar De Atacama and Salar Ollague properties.
Large, multiple lithium brine targets of 20 to 25 square kilometers
were discovered at both properties. The Atacama property contains
near-surface lithium brine values up to 1330 mg/L of lithium and
the Ollague Property contains near-surface Li brine values up to
1140 mg/L of lithium.
Lithium Chile has also identified a 58+ square kilometer high
priority lithium brine target area at its Coipasa project. Results
of field tests in May (http://nnw.fm/UPX8j) returned lithium values in
near-surface brines ranging from 310 mg/L to 1410 mg/L. Strikingly,
this zone displays the same geophysical characteristics as the
lithium-rich aquifers at Salar de Atacama, home to the world’s
largest and highest-grade lithium brine producers. By comparison,
typical lithium concentration needed for production in the United
States is between 190 to 200 milligrams of lithium per liter.
Commenting on the recent filed tests Steve Cochrane stated,
“These strong survey results at our Coipasa project follow
similarly impressive results at our Atacama, Ollague and Helados
projects. It’s also important to note that we are the only major
landholder in the Salar de Coipasa and we control the bulk of its
footprint in Chile. This property will be included in our upcoming,
multi-project drill program and we look forward to sharing the
results.”
Inexpensive Invaluable Assets
Astonishingly, Lithium Chile acquired all its potentially
invaluable assets for only around $3 per hectare. Land prices in
lithium-rich Chile are currently pegged around $1,500 per hectare.
Over the last three years, Lithium Chile accumulated large tracts
of prime lithium bearing properties utilizing the vast in-country
experience and skills of Terry Walker, VP of Exploration and chief
geologist. Using a 1970’s French technical report overlaid on a
national database of water well hydrology and water chemistry,
Walker meticulously matched that information with an extensive
lands claim database. Lithium Chile subsequently acquired the best
salars in proximity to the highest lithium concentrations and
closest to needed infrastructure such as roads and power. The
result may turn out to be the most promising lithium rich land
package in all of Chile.
The Take Away
As drill dates draw nearer, and especially if reserves are
proved, Lithium Chile is likely to receive more offers to purchase,
option or joint venture key projects at prices far exceeding
earlier costs. Once the company shows the surface lithium brine
already encountered is contained in subsurface aquifers, deal
values will skyrocket, and a bidding war could easily ensue.
Major deals at significant market premiums are underway around
the world as downstream global manufacturers scramble to secure
reliable, long term sources of lithium feedstocks. Demand isn’t
about to dry up anytime soon and it seems to reason that junior
miners with significant lithium bearing assets are in position to
potentially reap immense rewards.
In the Mix
Other lithium companies having differing degrees of skin in the
game. Focused on the Americas, American Lithium (TSX-V: LI)
(OTCQB: LIACF) currently holds more than 18,000 acres at
its FLV Project in Nevada, located less than four hours from the
Tesla Gigafactory and roughly 20 miles from Albemarle Corporation’s
Silver Peak project, currently the oldest and largest lithium
producer in America.
Based in Quebec, Canada, Nemaska Lithium (TSX:
NMX) is an exploration-stage miner looking to supply
lithium through exploration and development of hard rock lithium
mining and processing lithium compounds using its proprietary
process to produce lithium hydroxide and lithium carbonate.
Orocobre (ASX: ORE) (TSX: ORL) is a global lithium
carbonate supplier and an established producer of boron. Orocobre
plans to expand production at its Olaroz Lithium Facility in
Northern Argentina. The company also owns Borax Argentina, an
established Argentine boron minerals and refined chemicals producer
and a 29% interest in Advantage Lithium.
Pure play lithium miners have historically been and should
continue to be the best way to profit from burgeoning lithium
demand, market imbalances and the new acquisition/investment
flurry. However, to cover the full spectrum of the sector from raw
resource to battery production, look at Global X Lithium
& Battery Tech ETF (NYSE: LIT) which invests in the
full lithium cycle.
A tsunami of transactions between lithium miners and
manufacturers is underway to lock in long-term supply agreements.
The real winners in this global bidding war will more than likely
be the lithium miners and their shareholders.
For more information on Lithium Chile visit Lithium Chile
(TSX.V: LITH) (OTC: LTMCF)
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