VANCOUVER (miningweekly.com) – Junior project developer Advantage Lithium plans to “aggressively” chase its exploration target of finding between 250 000 t and 5.6-million tonnes of lithium carbonate equivalent (LCE) as soon as its acquisition of 75% of ASX- and TSX-listed Orocobre’s Cauchari project and a 100% interest in five other lithium brine projects spread across the northern Jujuy, Salta and Catamarca states, in Argentina, closes before the end of March.
“The asset monetisation and shareholder value is going to come from the development of the Argentina assets,” president and CEO David Sidoo tells Mining Weekly Online in an interview, stressing that Advantage is one of only a handful of juniors in the lithium space that has a clear path to production within three years, as it has the management team, the assets and partnerships required to get there, in place.
Under the option agreement with Orocobre, Advantage will acquire the 85 543 ha Argentina land package subject to raising $20-million (which it has successfully done), and the issuing of 40.62-million common shares to Orocobre, which will represent no less than 31.1% of the outstanding common shares of Advantage following the financing.
Sidoo explains that the prospective Couchari project is in the same basin that Lithium Americas and SQM successfully uncovered a 12-million-tonne LCE resource in. Orocobre has defined a six-million-tonne LCE resource and is producing just under 15 000 t/y of LCE at its own facility at Olaros, about 15 km from Couchari.
Advantage’s focus this year is on building on the existing 470 000 t inferred LCE resource and improving confidence in the measured and indicated resource categories.
The plan entails five rotary drill holes of about 400 m to 450 m in depth in the exploration and inferred target areas, developed after Orocobre drilled seven holes between 2007/8.
“We are going to drill deeper than anyone has ever drilled in the area and we are also permitted to drill 12 diamond holes on the five additional assets we acquired in the Orocobre deal, each to a drill depth of about 250 m. The shallow depths will give us strong resource potential over the next six months and the deeper zones are expected to expand this entire play,” Sidoo states.
“When we speak to our partners at Orocobre and other participants who have been active in the area for years now, they think this might become the next Atacama in Argentina, similar to the basin SQM and Albemarle have been developing over many years in Chile.
Advantage plans to spend $4.5-million to $5-million on the Couchari exploration drilling alone this year.
Meanwhile, the company has already completed three drill holes on its prospective Nevada assets, in the Clayton Valley, where it and joint venture (JV) partner Nevada Sunrise Gold have possibly discovered an untapped lithium-brine aquifer at depth, immediately next to Albemarle’s producing Silver Peak lithium operation. They just completed the fourth hole, with results due out imminently.
Sidoo explains that the strategy is to complete the entire six-hole programme, and then sit down with Albemarle to work on potential options for Advantage’s Nevada assets. This means either striking a potential JV deal with Albemarle, or selling the assets to raise some cash to focus on the Argentina assets, where the most potential is.
Sidoo points to the battery megafactory boom that is currently unfolding worldwide, with China in the lead to manufacture lithium-ion (Li-ion) batteries for new technological applications such as increasingly popular electric vehicles.
South Africa-born entrepreneur Elon Musk’s Nevada-based Tesla Gigafactory is leading the "capacity revolution", with a planned total installed production capacity of 35 GWh by 2020. Other significant expansions include LG Chem Korea, which is more than doubling Li-ion battery output to 20 GWh, and the Chinese Lishen and CATL plants, which are upgrading from below 5 GWh, to 20 GWh and 25 GWh, respectively.
Sidoo says battery makers are already knocking on Advantage's door with a view to secure lithium supply over the next three years. “We are being asked: ‘now that you are fully funded and building out your resources, how soon can you get to production and get product to us?’,” Sidoo says.
He characterises the recent private deals that have been done with Australia-based Galaxy and Chinese battery makers, among others, as pointing to the equities markets having become "somewhat tired of seeing a bunch of players only promoting area plays". The investors are looking a lot closer at things such as location, if companies have a clear path to production and if companies have management teams that are able to drive projects through to production over a given timeframe. “They are starting to sharpen their pencils a bit more,” he notes.
“A year ago, there was a lot more euphoria in the market, where any [lithium] deal got funded, but now institutions are taking the magnifying glass to verify companies and their assets a lot closer before committing to anything,” he says.
“This rocket ship is loaded and ready to take off and Advantage Lithium is sitting in a perfect situation because we feel that, over the next three years, we are going to develop our resource enough to get into production, and we’ll have options at that stage to either build a standalone facility, if we get a big enough resource (but that will take another three years to build), or we could build a pipeline that would cost us about $4-million to $5-million to pipe our brines directly to our partner Orocobre’s Olaroz facility, for processing at a toll fee.
“I think that’s probably what we’ll do immediately to get some cash flow once we’ve built out the resource. So we’ve got some optionality and won’t have the large capital expenditures some of the other companies have had like Lithium Americas, which had to raise about $250-million to finish its facility. The chemistry is essentially the same, so it’s a big advantage we have,” Sidoo advises.