I’ve heard a hundred lithium explorers pitch themselves over the last few years and there’s been only a few stories I liked within that batch, each of them mostly because they were non-traditional.
I liked Beyond Lithium’s (BY.C) ‘lets gather up every lithium project in Ontario’ strategy as a differentiator when the market was strong and lithium deals were falling from the sky, though they’ve since been beaten down by the greater lithium market malaise.
I liked little Lancaster Resources (LCR.C) and their ‘lets see if we can go carbon neutral on project development’ play in the US, again as something a bit different that could appeal to ‘green investors’, though they too have been beaten down by the macro side. Fortune doesn’t always favour the brave, especially the little and brave.
I really like Saga Metals’ (public soon) Maritimes lithium play, which the gigantic Rio Tinto (RIO.NYSE) just zeroed in on and will explore for them while they work their local uranium project, with a titanium/vanadium project not far away. Saga’s ability to attract big partners has set them a level above many and they bear watching closely.
All of these are interesting to me because they’re not your basic ‘we have an old oil well and it has some lithium in it’ exploration plays, which were a dime a dozen when times were good, never really had much commercial viability in scope, and now mostly sit in bottom drawers waiting for better times.
But let’s be clear – they are all ‘exploration plays’, which means they’re going to require financing along the way, they’re going to need work done and permits and PEAs and NI 43-101’s, and their fortunes will live and die based on what the drill finds over the next few years. They’re longer holds, with inherent risk offsetting rewards along the way if they can keep rolling 6’s.
What the greater lithium investment market has been missing. to my way of thinking, are the ‘we’re basically done exploring‘ plays, where companies are transitioning from look-sees to near-producers, and the high risk/high reward is replaced by low risk/high reward and a growing sense of inevitability.
WELL APPARENTLY I FOUND ONE:
Lithium Ionic (LTH.V) isn’t out there asking investors to help them finance a drill hole in the hope they’ll find something.
They found something.
They’ve got something, and it ticks a lot of boxes.
- High grade
- Large scale
- Low cost
- Hard rocks, not brines
- PEA and feasibility study completed
- Multiple NI 43-101s completed
- $20 million royalty deal just banked
- Raising money at a premium to market
- Still expanding the resource
- Acquiring new ground
- Mining friendly jurisdiction in a region with big wins already producing
- Right on the border of a company that just got bought up by a giant
How’s that feasibility study look? I’m glad you asked.
Based on just 1% of the company’s 14,000 hectare land holding:
- 14-year mine life producing an average of 178,000tpa of high quality spodumene concentrate (5.5% Li2O)
- After-tax NPV8% of US$1.3B; IRR of 40% (using a long-term price of US$2,277/t SC5.5)
- Industry-leading LOM operating costs of $444/t SC5.5
- Low CAPEX of US$266 million (with 15% contingency), after tax pay-back of 3.4 years
The company does a good job of explaining the nuts of their deal:
The Itinga properties are located in one of the largest lithium-bearing pegmatite populations in the world.
Lithium Ionic’s Itinga properties are located in the mining-friendly state of Minas Gerais, in the southeast region of Brazil, within the Araçuaí Pegmatite District (APD), in the municipalities of Araçuaí and Itinga.
The APD, located within the Eastern Brazilian Pegmatite Province (EBPP), represents one of the largest lithium-bearing pegmatite populations in the world. This region has emerged as a globally significant producer of high-purity lithium with increasing spodumene concentrate production at CBL’s Cachoeira Mine and Sigma Lithium Corp.’s Grota do Cirilo mine. These lithium mines are located in proximity to Lithium Ionic’s two main NI 43-101 compliant lithium deposits: the feasibility-level Bandeira project and the Outro Lado deposit.
THE RESOURCE ESTIMATES:
The Bandeira Project:
- Measured & Indicated: 23.68Mt grading 1.34% Li2O (787kt LCE)
- Inferred: 18.25Mt grading 1.37% Li2O (617kt LCE)
Near-term Catalysts: Construction permit (Environmental and Installation License, “LAC”, or Licença Ambiental Concomitante) expected in H2 2024.
The Salinas Project:
- Measured & Indicated: 5.86Mt grading 1.09% Li2O (159kt LCE)
- Inferred: 8.9Mt grading 0.97% Li2O
The Gutro Lado Project:
- Measured & Indicated: 2.97Mt grading 1.46% Li2O
- Inferred: 0.4Mt grading 1.48% Li2O
The Region:
- Minas Grenais is the #3 economy in Brazil by size, with over 300 mines in the state
- Grid power is hydroelectric with ports under 300km away, paved roads, and local sustainable water that LTH already has permits for
- State government has a “Lithium Valley Brazil” program in place to facilitate mine development and unrestricted lithium trade, seeking to become a key global lithium player
- Less than 500m away sits the CBL Cachoeira Lithium mine which has been producing since 1991, and under 4km away is the Sigma Lithium Grotta do Cirilo mine, which is one of the world’s largest lithium mines
Those producing mines sitting nearby? Here’s where they sit in relation to LTH.
The red circles are Sigma. The yellow is CBL.
LTH is the blue squeezed between them.
When I say they’re neighbours, I’m being literal.
I mean, you could get a noise complaint from CBL if you played your music too loud at Bandeira.
It took Sigma (SGML.Q), which is sitting on the largest hard rock lithium project in the Americas, just 18 months to get from its maiden resource to permitting, and 5 years to get to production. That’s QUICK and tells you the local regulators aren’t messing around. Thgat company sits on a market cap of $1 billion, giving you some semblance of what a comparable operation may look like.
You want other comps?
Okay – Leo, Atlantic, Piedmont, and Critical have hard rock projects in development, just like Lithium Ionic does. Only Leo has a (slightly) higher grade, and their markets caps are each at least 2x, and as much as 8x larger than LTH.
SIGNED, SEALED, MOSTLY DELIVERED:
If LTH had just acquired their land and it had never been explored, you’d be comfortable saying there’s a REALLY good chance the massive pegmatite showings all around that property it would continue into the Lithium Ionic project.
But guesswork isn’t necessary – they’ve gone and done the drilling, and got the 43-101s, and KNOW they’re on a good thing.
SO NOW ITS ALL ABOUT CONSTRUCTION:
Will LTH keep drilling? Sure, why not.
Will they keep acquiring land? Sure, why not.
But the real deal here is the move to construct, permit, and finance a mine proper. Permits are expected to be n hand in weeks, not months. Hiring of local team leaders has already commenced.
THE BOTTOM LINE:
These projects are feasible, regardless of whether lithium commodity prices stay low or rise to where they’re expected to return to.
It’s just a good set-up with most of the risk removed, doing all the things you could ho[pe for an explorer to do in order to graduate to a producer. I love it.
And the best part? Nobody has figured it out yet, based on the share price.
Watchlist?
Nah. Take a nibble.
— Chris Parry
