Edison in the Land of the Lithium Giants
December 7, 2021 -- InvestorsHub NewsWire -- By
Christopher Ecclestone – Mining Strategist
Deng Xiao Ping is most famous in mining circles for his
oft-repeated aside from the 1980s that whereas "Saudi Arabia has
oil, China has Rare Earths". It didn't grab much attention at the
time because Rare Earths were largely a mystery to most listeners
and moreover were not worth all that much and did not have many
day-to-day applications besides bringing red colours to one's
cathode ray tube television. The rest is history with the final
wake-up call in 2009-10 as to what Deng was actually referring to
in strategic terms.
Now we can add a third leg to the mantra because Argentina
has Lithium and oh, potentially, how much lithium it does have! In
theory, Chile was the place to source Lithium from brine lake
Lithium deposits (salares) but in a curious own-goal
situation Chile has squandered that advantage by trying to keep a
tight control on the number of players and advantaging the two
incumbents. Predictions are that Argentina will overhaul Chile in
terms of Lithium production by 2030. The result of the Chilean
torpor at welcoming new entrants is that the surprisingly
more laissez-faire
attitude in Argentina has made it the go-to place for
those wishing to stake positions in salares. Argentina has become
something like, to paraphrase Deng, the Saudi Arabia of
Lithium.
The Fluctuating Fortunes of Salares
One of the paradoxes of the middle of the decade was the
"talking down" of salares
as being in some way "too difficult" or too "long term".
Having said that though, several of the highest-flying stories in
the First Lithium Boom such as Orocobre, Galaxy and Lithium
Americas were salar-based. Back in that boom, and
its current revival, there was/is a staking boom in the Argentine
part of the Lithium Triangle that makes California in the 1850s
pale into insignificance. Explorers, quite literally, cannot get
enough of Argentine lithium territory.
The caution relating to salares exploitation was powered by
the mishaps that befell Orocobre and Rincon. However, in both these
cases the lessons learnt mean that others will have the benefit of
their difficult experiences. The argument that there is a longer
lead time for salar
development (due to the need to kickstart the evaporation
process) does not hold much water (pardon the bad pun) due to the
much longer (and more expensive) drilling and resource estimation
phase at a hard rock deposit and the much higher development costs
at underground mines.
The downfall firstly of Canada Lithium after the end of the
First Lithium Boom and the travails of Nemaska, at the beginning of
the latest recovery, have cast a pall in many investors' minds over
large-cap underground spodumene mines.
The Road Most Taken
Despite perennial concerns about the Argentina political
direction, the metaphorical road to the Argentine salares opportunity has become more
like a Los Angeles expressway in peak hour, of
late. Argentina has been in the
Lithium game for decades, so is no newbie, but was always perceived
as playing second fiddle to Chile.
Chile is merely expansion of existing facilities these days.
Chile's attachment to an ancient Pinochet regulatory system, that
required nuclear regulators (CCHEN) to clear Lithium projects, just
showed that Chile could not get out of its own way. This reinforces
the view that Chile is not the mining paradise that many would have
us believe. Its arcane regulations make it look like they are
trying to keep new kids out of the game, and that is just resulting
in Argentina making all the running.
With opportunities to enter and develop new projects in Chile
finding constant stones in the road, several of Argentina's Andean
provinces have become a veritable boomtown for the Great & Good
of the global EV revolution. The long established Livent (formerly
FMC) was joined by Orocobre and Galaxy Resources (which then
merged), and then a stampede of the elephants in the Lithium space
occurred with Posco, Ganfeng, Tianqi and most recently Zijin Mining
Group reset the bar higher with their stunning move on
NeoLithium.
Not to be forgotten is ASX-listed Argosy Minerals (with their
Rincon project – not to be confused with Sentient's fraught Rincon
project) are now developing their Phase 2 step-up with Mitsubishi
as the offtaker.
Then in November of 2021 TSX-listed miner Lithium Americas
offered $400m in shares and cash for Vancouver-listed Millennial
Lithium, the third offer for the company this year following one by
China's largest battery maker CATL and lithium producer Ganfeng
Lithium. A feeding frenzy has begun.
Beyond these majors, there is an array of junior players
hoping to replicate the NeoLithium success story. One of these
stocks that has come to attention lately is Edison
Lithium.
Into the Fray
In mid-June 2021, Edison Cobalt Corp (TSX-v: EDDY, OTCQX:
EDDYF, FSE: VV0) as the company was then known, announced that it
had entered into a Definitive Purchase& Sale Agreement to
acquire Resource Ventures S.A. (ReVe), an Argentine corporation
that owns or controls the rights to over 148,000 hectares (365,708
acres) of prospective Lithium brine claims (mapped below) in the
province of Catamarca, Argentina.
The claims are principally located in the two geologic basins
known as the Antofalla Salar (pictured below) and the Pipanaco
Salar in the famed Lithium Triangle.
The Transaction
To effect the purchase Edison inked an agreement to acquire
ReVe and a 100% interest in its properties for a purchase price of
$1.85mn paid by the issuance of ten million common shares of the
company at a deemed price of $0.185 per share. All securities
issued pursuant were subject to a hold period of four months from
the date of closing.
The Political Scene
For most of the last two decades Argentina has been ruled by
irregular iconoclastic governments, most recently by the dynasts of
the Kirchner family and before that the Duhalde regime the country
with a brief interlude of fiscal conservatism under Mauricio Macri,
elected President in the last quarter of 2016.
The major bugbears of foreign miners operating in the country
have been:
Currency controls – though the devalued Peso results (in
theory) in lower costs for project development
Export taxes on concentrates
Import restrictions on equipment
The Macri regime reverted these and this coincided with the
Second Battery Metal Boom of 2017. Though that boom proved to be
fleeting, it reenergised players in the Argentine space.
The Macri regime fizzled after three years and the
Kirchnerites were back in power, but mining (and particularly
Lithium) scarcely missed a beat with the surge of development
of salares (and
increasingly large copper projects) at the current time.
There is a good case to be made that the relative lack
of salares moving
to production pre-2019 was due to the double negatives of the low
lithium price between 2011 and 2016 and the death throes of the
first Kirchnerite period making Argentina an unattractive place to
advance projects. Pricing has resolved itself and the Argentine
government is welcoming Lithium players with open arms.
Edison Lithium's pivot from Cobalt to Lithium looks like a
prescient move. While Cobalt is much sought after it is seldom
found. Unicorn hunting can be a long and expensive sport. With
Argentina's rapid evolution as the "Saudi of Lithium" who could
fault the company moving into the territory and building up a
substantial position?
It's still early days of course with exploration, resource
definition (and presumably more territorial expansion) still lying
ahead. However, in elephant country one is more likely to find
elephants than gerbils. The hunt is on at Edison
Lithium.
Source:
Hallgarten & Company
London,United Kingdom
Telephone: (44) 795 08 53 621
Email: research@hallgartenco.com
Edison Lithium (QB) (USOTC:EDDYF)
Historical Stock Chart
From Mar 2024 to Apr 2024
Edison Lithium (QB) (USOTC:EDDYF)
Historical Stock Chart
From Apr 2023 to Apr 2024