IM Lithium News in Brief 2 – 8 March

By Myles McCormick
Published: Tuesday, 08 March 2016

Galaxy signs 60,000 tonne offtake deal for Mt Cattlin; Nemaska and Western confident on fundraising; Bacanora publishes PFS results; Orocobre ramp up continues.

ASX-listed Galaxy Resources Ltd and General Mining Ltd have signed an offtake agreement with a Chinese buyer for 60,000 tonnes lithium concentrate at a price of $600/tonne (FOB, min 5.5% Li2O) from the soon to be reopened Mt Cattlin spodumene mine near Ravensthorpe, Western Australia (WA).

Half of the $36m revenue from the deal will be paid as a prepayment by the customer by the end of this month. Delivery of the product is due this year.

The companies have agreed to deliver a further 120,000 tonnes lithium concentrate in 2017 to the same customer at a sale price to be agreed in Q4 2016.

Anthony Tse, Galaxy’s managing director, said that the company expects "to continue to see strong growth in end user demand from a diverse range of end user applications".

"Coupled with an ongoing limited response on the supply side for the near term, lithium feedstock will remain in very high demand, and as such pricing will continue to be very robust going into 2017," he added.

Galaxy cited growth in the Chinese electric vehicle (EV) sector as a driver of this demand. 600,000 EVs are expected to be sold in China this year, up from 379,000 in 2015, said Galaxy, citing Chinese government targets.

Mt Cattlin is owned by Galaxy Resources, but will be operated by General Mining. Galaxy has indicated that the first shipment of concentrate from the project will be made in July or August this year, before the plant achieves full optimisation in December. A total of 65,000 tonnes lithium concentrate is expected to be produced in 2016.

TSX-V listed lithium juniors, Nemaska Lithium Inc. and Western Lithium USA Corp. are confident that they will soon secure the funding needed to develop their respective projects, despite difficulties encountered by junior miners generally, Reuters has reported.

"Given the fundamental shift in energy demand, nothing's easy, but [raising capital is] very doable," Tom Hodgson, Western’s CEO, said at the Prospectors and Developers Association of Canada (PDAC) convention in Toronto, which is taking place this week.

Western hopes to bring its Caurchari-Olaroz project in Argentina online in 2018 at a cost of $314m.

Guy Bourassa, CEO of Nemaska, meanwhile, said he expects to have completed fundraising of Canadian dollar (C$) 521m ($390.72m*) within a year, to finance the Whabouchi project in Quebec, Canada.

TSX-V and UK AIM-listed Bacanora Minerals Ltd has published results from an NI 43-101 pre-feasibility study (PFS) on its Sonora lithium project in northern Mexico.

The PFS anticipates production of 17,500 tpa lithium carbonate for the first two years of operation, to be ramped up to 35,000 tpa thereafter. The site also has the potential to produce up to 50,000 tpa potassium sulphate.

Sonora has an estimated pre-tax internal rate of return (IRR) of 29% for a net present value (NPV) of $776m, at an 8% discount rate.

The project has an indicated resource of 5m tonnes lithium carbonate equivalent (LCE) and an inferred resource of 3.9m tonnes LCE.

Sonora, which attracted international attention last year after Bacanora signed a provisional offtake deal with US EV maker, Tesla Motors Inc., will now move immediately to feasibility study stage.

Separately, Rare Earth Minerals Plc (REM), also listed on the UK AIM, which owns a 17% stake in Bacanora, has increased its ownership of ASX-listed European Metals Holdings Ltd (EMH), owner of the Cinovec lithium deposit in the Czech Republic, to 19.8%.

REM purchased a further 7.9% stake in EMH at a cost of £670,000 ($951,541), as part of an overall Australian dollar (A$) 1.755m ($1.303m) raised by the latter to fund a drilling campaign targeted at upgrading Cinovec’s current inferred mineral resource of 514.8m tonnes ore at 0.43% Li2O. 

ASX-listed Orocobre Ltd increased production at its Olaroz lithium carbonate facility in Argentina to 725 tonnes in February, up from 699 tonnes in January and 427 tonnes in December.

Orocobre is currently ramping up production at Olaroz, following the clearing of various bottlenecks in 2015 which prevented the project from reaching break even capacity, which it finally achieved last month.

The company said it retains a production guidance of 2,400 tonnes lithium carbonate for the current quarter.

Fellow ASX-listed Hannans Reward Ltd has entered into a "lithium knowledge and technical assistance agreement" with Neometals Ltd "to identify and advance European lithium opportunities".

Following shareholder approval, Hannans intends to demerge its subsidiary, Scandinavian Resources, in which Neometals will take a 13.5% stake through the purchase of 62.5m shares, priced at A$0.004/share.

Lithium Australia NL has defined two areas for initial drill work on the southern part of its Ravensthorpe tenements in WA.

It has specified an exploration target of minimum 1% Li2O, with a size range from 525,000-1.281m tonnes and a grade range of 0.8%-1.2% Li2O.

A maiden drilling programme of up to 35 drill holes on the site’s Horseshoe pegmatites is scheduled to begin once approvals have been confirmed.

Peninsula Mines Ltd has been granted a trading halt pending details of a capital raising.

The company last week filed for 53 tenement applications over an area prospective for lithium-bearing pegmatites in South Korea.

The halt will remain in place either until 9 March or until an announcement is made to the market, whichever is earlier.

Argonaut Resources NL, has secured an exclusive option to acquire the Crescent Lake lithium pegmatite project in Ontario, Canada from Canadian Orebodies Inc.

The project comprises two adjacent deposits, Zigzag and Falcon Lake, defined by two phases of drilling – historic diamond core drilling carried out in the 1950s and limited modern diamond drilling in 2011, plus trench sampling.

TSX-V-listed Lithium X Energy Corp., has entered into a binding letter of agreement with TSX-listed Aberdeen International Inc. to acquire up to 80% of the latter’s subsidiary, Potasio y Litio de Argentina SA, owner of the Sal de los Angeles lithium-potash brine project in Argentina.

The project, previously known as the Diablillos project, comprises 32 mining claims over 8,156 ha (81.56km2), near to FMC Corp.’s Salar de Hombre Muerto operation.

Houston Lake Mining Inc., also TSX-V-listed, announced a NI 43-101 mineral resource estimate for its PAK lithium project in northwest Ontario.

The estimate gave the sited a measured and indicated resource of 7.89m tonnes at 1.73% Li2O, including 6.87m tonnes at 1.96% Li2O.

The study also estimated the site to have an inferred mineral resource of 295,600 tonnes at 1.35% Li2O, including 228,700 tonnes at 1.69% Li2O.

Ultra Lithium Inc. has received the results of a controlled source audio-frequency magneto-telluric (CSAMT) ground geophysical survey at its South Big Smokey Valley lithium brine project in Nevada, US.

The company said that the study identified several targets representing potential lithium bearing brines and structural traps favourable for brine accumulation in two distinct areas

Resolve Ventures Inc. has entered into an interim agreement with Nevada Sunrise Gold Corp. to earn up to a 50% working interest in the Neptune lithium property in Clayton Valley, Esmeralda County, Nevada.

Neptune comprises 316 unpatented placer claims covering around 6,320 acres (25.6km2).

Resolve also said it intended to complete an equity financing to raise proceeds of up to C$500,000.

Separately, Nevada Sunrise has begun a drilling programme at Neptune, following approval by the US Bureau of Land Management for 10 exploration drill holes.

The company said it plans to drill up to three vertical holes to depths of 380-480 metres as an initial test of the interpreted sub-basin.

Zadar Ventures Ltd has entered into an option agreement with Arizona, US-based GeoXplor Corp. to acquire two prospective lithium projects in Clayton Valley.

To exercise the option, Zadar will have to issue 5m common shares and pay $450,000 in cash. It will also be required to make a number of specified exploration expenditures and pay annual royalty payments to GeoXplor.

Also in Clayton Valley, CSE-listed Matica Enterprises Inc. said it had completed sampling work at its McGee claims, which cover around 1,140 acres (4.6km2) in the valley’s southeast region.

The company said that this was the second round of sampling of outcropping claystones at McGee.

It noted that "while Matica is still at a very early stage of exploration and [is] only beginning to understand the stratigraphy of the basin fill evaporate and volcanic ash units, it seems reasonable to expect that the outcropping stratigraphy at the McGee claims will persist to depths below the water table".

Iconic Minerals Ltd has filed an application with the state of Nevada, US, to appropriate groundwater for its Bonnie Claire lithium project in Nye County.

The company intends to use the water obtained to explore for lithium brines and, if successful at this stage, later for lithium extraction and production

In financing news, ASX-listed Altura Mining Ltd has settled a share placement with Lionergy Ltd for A$3m.

The income from the issue of just over 37m fully paid ordinary shares will be primarily directed towards the development of the Pilangoora lithium project, including completion of a feasibility study (FS) expected later this month.

In downstream news, Toyota Australia has told automotive magazine, Car Advice, that it has opted to retain use of a nickel-metal hydride (Ni-MH) battery for the fourth generation Toyota Prius, rather than switching to the lithium-ion (Li-ion) system used in other markets.

Tony Cramb, executive director of sales and marketing of Toyota Australia cited the reliability and cost of the Ni-MH battery as the reason for the decision.

"We have had no issues with it and for this model we’ve decided to stay with it," he said at the new model’s launch.

"One day, lithium will be the future but for the time being, nickel hydride is the most appropriate for here in Australia," he added, noting that Li-ion battery technology will continue to fall in price.

Daimler AG will invest €500m ($549.13m) into a second Li-ion battery plant, adjacent to its current facility in Kamenz, Germany.

The new plant will triple the production capacity of its battery producing subsidiary Deutsche ACCUMOTIVE and produce batteries for use in Mercedes-Benz and smart hybrid and electric vehicles.

*Conversions made March 2016