By Keith Schaefer, editor, Oil and Gas Investments Bulletin
Lithium is the hottest commodity in global energy, and there’s a race on to develop the next greenfield lithium mine (greenfield=from scratch).
Lithium X Energy Corp (LIX-TSXv; LIXXF-OTCBB) took a big step to being The Next Big Lithium Producer with a deal last week to get a pilot plant operating at their Sal de Los Angeles property in Argentina.
The plant is expected to cost only US$9.3 million to build. The new partner, a technical consortium known as SESA, will earn its 50% stake by contributing US$6 million.
Lithium X will contribute the other $3.3 million to earn 30%; it will earn its other 20% by contributing brine to the facility from Sal de los Angeles.
Initially the plant will be built to produce 2,500 tonnes of lithium carbonate equivalent (LCE) annually. Once it is operating smoothly the partners will expand it to 5,000 tonnes LCE annual capacity.
It will provide the company with cash flow, and prepare the Market—and Lithium X--for full scale production, says Lithium X Vice President Will Randall.
“The cash flow from (the pilot plant) operations will go back to build this out to 5000 tons per year,” he said in an interview late last week.
“In conjunction with the pilot plant build, we’re also going to update the resource bring into a Measured and Indicated category. That will help LIX as we do a feasibility study for a full 15,000 ton per year operation.”
Randall says the real time data and costs from the pilot build and operation will give a bankable feasibility study much higher quality numbers than normal.
“If, at the end of a year of processing, we have a facility that’s working well, and a robust feasibility, then raising the capital to build the full plant should be much easier.” He added that pilot plant production also makes offtake (sales) agreements much easier to conclude.
The pilot plant itself will also be easier to build: the Sal de los Angeles partners will not actually produce lithium carbonate. Instead, they plan to extract lithium from the brine and produce a concentrate grading 5-30% lithium – and then sell the concentrate.
Randall said the plan makes economic sense, as there is both a local market in Argentina for lithium concentrate and demand overseas in China.
“That’s what led me to the idea; I saw all these tankers going out with brine. They basically line a container inside and fill it with concentrate.”
Randall says you still get most of the value for lithium—which has been quoted as high as US$20,000/tonne in China--without incurring the big costs to make lithium carbonate.
Eliminating those final steps lowers the technical and execution risk, he says. Carbonate plants are tough to build, especially at 4000 metres elevation, where there is a scarcity of energy and workers.
The world has lots of lithium, but like any metal, getting it into production can be difficult for political, economic or environmental reasons.
That’s why the first few new mines should enjoy the best margins. Even forecasts that use conservative assumptions around electric cars and exclude power storage completely still see lithium demand tripling within a decade.
Sal de los Angeles is one of few lithium assets in the world where conventional methods work to recover the lithium from the brine. The project is in the mining friendly Salta province, which is also lithium brine central: there are operating and feasibility-level lithium projects all around.
In fact, the team that built the most recent such mine finished up about a year ago…and just signed on to build the pilot plant for LIX.
As background, Lithium X is earning an 80% stake in Sal de los Angeles from Aberdeen International, which bought the property from Rodinia Minerals in 2015. Rodinia discovered the deposit and produced a Preliminary Economic Assessment, under the leadership of Will Randall … who is now VP Exploration for LIX.
So he knows it is one of few lithium brines in the world that can be brought into production quickly and easily, because the resource responds to conventional processing methods and because the project is located near infrastructure.
With this agreement not only has Lithium X found a partner to fund most of the build, it has found a partner with deep expertise to design, build, and operate the plant. And SESA is responsible for any cost overruns.
SESA principals have been involved in the design, construction or operation of Orocobre, Sentient and FMC’s lithium production facilities in Argentina.
Randall says SESA wanted to use their knowledge and expertise to get involved with a lithium project on the ground floor.
The deal only covers 1% of the land mass and 3% of the resource, which means Lithium X remains free to develop the rest of Sal de los Angeles however it wants. And develop it LIX will – the real goal is to build a 15,000-tonne-year-year LCE operation in addition to the 2,500-5,000 tpa LCE pilot plant.
There are few assets in the world that people really need; but new lithium mines are one of them. That's why these junior lithium stocks are running so hard.
In almost every other case it takes years to move from idea to production, often decades. To do it in half a year is perhaps unprecedented.
The race is on, and Lithium X is ahead.
EDITORS NOTE--I profiled Lithium X at 46 cents in January 2016--and it's on the way to pilot production. Another junior energy-related company I profiled last year has also made it to production. Select Sands (SNS-TSXV) was able to secure and develop a greenfield frac sand deposit in Oklahoma. I can't tell you how hard it is to get a mining asset into production--even if it's for energy! But CEO Rasool Mohammad has done a commendable job in doing so--without raising hardly any money! Interesting that the initial contract for the sand was for industrial minerals--with one of the largest industrial glass makers in the world--and not for fracking. Well done Select Sands and CEO Mohammad!
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