Lithium Companies In Dog Fight for Talent
Mining dream team assembled in Argentina by Lithium X Energy Corp
By Peter Cole
In 1991 when a cell phone was the size of a domestic cat, Sony Corporation developed a rechargeable lithium ion (Li-ion) battery to power consumer video cameras. This invention catalysed the mobile device revolution.
Since then, lithium demand has increased 600% but the supply of lithium mining experts has not kept pace. Why? Because engineers, geologists and metallurgists gravitate to sectors like gold and copper where it is easier to identify and develop economic deposits.
The ‘lithium triangle’ of salt flats in Bolivia, Chile and Argentina account for more than 70% of the world’s known reserves. Prime addresses are rare. You won’t stumble on an isolated vein of lithium in the Spanish Alps. There are currently only 12 lithium companies listed on the TSX.V – compared to 210 gold companies.
Without a pipeline of funded lithium juniors to incubate talent, lithium developers are in fierce competition to land high level executives. Team always matters. With lithium, even more so.
Lithium X Energy Corp. (TSX.V: LIX) (OTCQB: LIXXF) has assembled an unparalleled mining team as the company develops its 8,156 hectare Sal de los Angeles project, situated in the prolific ‘lithium Triangle’ in Salta Province, Argentina.
The COO, Eduardo Morales, is a chemical engineer with 36 years of experience. As President of Rockwood Lithium Latin America, he led the development and operation of Rockwood’s Salar de Atacama project — the world’s largest lithium producer — which culminated with the company’s sale to Albemarle Corporation for US $6.2 billion in 2014.
Executive Chairman Paul Matysek is a corporate entrepreneur, professional geochemist and geologist who has built four companies in the past decade and sold all four for aggregate proceeds of over $2.3 billion, including Lithium One in 2012. LIX has a market capitalization of $145 million.
“Lithium fundamentals are driven by the battery revolution and the emergence of electric vehicles,” stated millennial LIX Founder & CEO Brian Paes-Braga, “but although these macro fundamentals create a tail wind, I knew the success of the company would depend on the strength of the executive team.”
The Sal de los Angeles Project is located in Salta about 4,000 metres above sea level. The project includes 32 mining claims and is located near FMC Corp’s Salar de Hombre Muerto lithium deposit, one of the world’s largest lithium operations.
Sometimes called the Saudi Arabia of the lithium business, The Puna Triangle – comprising of Chile, Argentina and Bolivia – is host to roughly 40% of the world’s lithium supply. The LIX asset has already had about $20 million spent on it.
1,037,000 tonnes of lithium carbonate equivalent) (“LCE”) at an average grade of 501 milligrams per litre (“mg/l”) and 4,088,000 tonnes of potash (“KCl”) equivalent at an average grade of 5,512 mg/l. The resource estimate also established an inferred resource of 1,007,000 tonnes of LCE at 410 mg/l and 3,948,000 tonnes KCl equivalent at 4,489 mg/l.
“This resource estimate confirms the significance of the Sal de los Angeles deposit and will form the basis of a Feasibility Study,” stated Paes-Braga, “Our experienced operating team, led by Eduardo Morales, continues with ongoing processing and engineering work.”
The establishment of a large high grade NI 43-101 resource is considered a major step towards bringing Sal de los Angeles into commercial production. Other lithium companies operating in the same triangle, with similar resources, have market caps between $250 million and $1 billion.
“We expect to continue advancing the project at a fast pace and converting the indicated resource into reserves,” stated Matysek.
“The overall quality of the brine continues to impress with its low level of impurities,” stated Morales. “Lithium X is assembling a team of in-house and external consultants, led by Andres Barrientos and myself, to advance Sal de los Angeles through feasibility and on to construction as efficiently as possible.”
In the next 12 months LIX plans to obtain permits to begin construction on a 2,500 tonne ponding facility.
“This ponding JV Agreement represents an important step towards full scale lithium production,” stated Matysek. “The agreement secures the financial contribution and know-how of a group that has designed, built and/or operated three construction and development-stage lithium brine projects in Argentina over the last five years.”
Given surging lithium demand – and limited supply – there is a race to production. The ponding facility functions as a proof-of-business model and will advance off-take negotiations. LIX joint venture partners have put up $6 million of their own money, while only participating in only 100 of the 8156 hectares that LIX controls.
“The ponding facility is a small downside risk, creating significant potential upside,” confirms Paes-Braga. “We have an opportunity to accumulate real-time empirical data which can be fed into the feasibility study, for a larger 15,000-25,000 tonne-per-year operation.”
LIX also controls the largest land package in Clayton Valley, Nevada, contiguous to the only producing lithium operation in North America – Silver Peak. Clayton Valley is the only producing lithium area in North America, and it’s three hours away from Tesla’s Gigafactory.
Lithium comprises only 2.5% of the price of the battery. So if the lithium price triples, it has a relatively small effect on the profit margin of a battery manufacturer. This gives upside potential in the lithium price – and dissuades commercial competitors.
According to Deutache Bank, demand for lithium will rise from 209,000 tonnes in 2016 to 534,000 tonnes in 2025.
The electric car company, Tesla Motors Inc. (NASDAQ: TSLA), has already received 400,000 pre-orders for the $35,000 Model 3. By 2020, Tesla’s $5 billion lithium-ion battery Gigafactory in Nevada will produce more lithium-ion batteries than the entire world did three years ago.
The LIX team is completed by Fiore Advisory, led by Gord Keep and Frank Giustra, who are responsible for equity financings and corporate structuring. Through Fiore, LIX has access to large pools of capital and deep geological expertise.