It is no secret that lithium is back. The battery metal in the form of lithium carbonate has gone to the moon in the last 12 months, reviving a commodity that’s central to the EV thesis.
Let’s look at a junior exploration company with very promising projects and even a little legislation tail wind going for it. If you believe in Chris Berry’s forecast of 20% compounded growth rate, making bets on lithium should be on your radar.
Lithium Ionic Corp (OTCQB: LTHCF | TSXV: LTH) is a sub 200m company listed in the TSX.V. At around 117m shares out, the price this week is hovering around 1.60-1.70 CAD.
Their Itinga project is located in Minas Gerais, a state in Brazil whose name literally means “General Mines”. It’s also where all the lithium reserves in Brazil are located. Five hundred meters from them is the CBL Mine, a private producing mine since the 90s. Another neighbor is Sigma Lithium’s Grota do Cirilo project, the largest hard rock lithium deposit in the Americas with an expected eventual production of 531,000 tons per year. Sigma is a 4.7b+ company that is hard to ignore, so Itinga does benefit from “nearology”. Their project being nearby means infrastructure won’t be a problem.
The Galvani project is to the northwest with a small drill program underway for due diligence.
One unexpected benefit of having projects located in Brazil is the fact that Brazilian lithium imports and exports won’t require preliminary authorization any longer, according to a decree published during the summer of 2022.
Previously, such operations required the green light from government agencies such as the nuclear energy commission. Minas Gerais in known to be a mining-friendly jurisdiction and the business-inclined Governor Romeu Zema was re-elected in early October.
But let’s go back to Lithium Ionic – the management team has a ton of experience, not just in Lithium but in well-known names to mining investors such as Troilus Gold, Glencore and Sun Belo Mining. There are complaints about how the company got its Itinga project, with the project formerly being owned by Emerita Resources Corp. and then being let go for a short period of time, only to be repurchased by a company with a decent overlap of the management team in both companies, but no benefit to $EMO shareholders. Despite the scandal, the company has so far had geological success and is moving forward.
A 30,000m drill program was initiated which has been able to find potentially economic hits such as 1.93% Li2O over 5.7m from 33.1m, 1.55% Li2O over 5.2m from 8.5m and 1.55% Li2O over 5.2m from 8.5m. The company is aiming for a resource 20,000+ tons, and this should come out between the end of this year to early next year.
The company is trying to capitalize in the current lithium cycle, so these are the questions I’d love to see them answer in the next few months.
- Can they delineate a resource that is in line with expectations put forth by management?
- Is the strategy to move forward to building the project in the long-run or selling the assets?
- What sort of guarantees can shareholders have should the company sell its assets, given recent history?
Shareholders have seen strength, let’s see if they can hold it.