As Founder, President and CEO I wanted to take this opportunity to provide our shareholders with some comments on where we are, how we got here and, more importantly, where we are going.
We completed our listing as a lithium explorer in July 2016 with the acquisition of an option to earn up to a 70% interest in three, and a 50% interest in two, Nevada lithium brine properties. Our exploration programs moved forward aggressively and to date we have drilled six holes at Clayton Northeast. The work programs in Nevada have gone well and we have built a strong portfolio of properties.
While these Nevada assets were a good starting point for our entry into the lithium exploration market our longer term objective was to seek out world class opportunities in the lithium space.
This search took us to Latin America and, in particular to Argentina and the assets of Orocobre in the lithium triangle. On March 27th, we closed on the acquisition of up to a 75% interest in the Cauchari advanced lithium exploration project and a 100% interest in five other lithium properties totaling 85,543 Hectares. Orocobre will hold the remaining 25% of Cauchari and will be our joint venture partner, as well as our largest shareholder. Orocobre, is the first new independent lithium brine producer in 20 years, having constructed the 17,500 tpa Olaroz Lithium facility and has built up extensive technical and in-country experience while operating in Argentina since 2007.
Our technical team is led by Callum Grant and Orocobre’s former VP of exploration, Miguel Peral. Callum is an engineer with broad experience from exploration to production focusing on South America and in particular, Argentina. Miguel’s focus on lithium brine deposits led him to the development of Salar de Olaroz, the first new production in the lithium space in 20 years which is now in production and ramping up towards 17 500 tons of lithium carbonate per year with plans to double this production within the next three years. Miguel has been involved in the discovery of approximately 8.5 million tonnes of LCE and has been part of the team that is credited with discovering Salar Oloraz, Salar Cauchari, Salar del Rincón and Salar Cangrejillos.
As for myself, over the years I have taken a number of companies from exploration to production and my most recent success was American Oil and Gas sold to Hess Corporation for US$630 million.
The Argentine basin is well advanced and has seen tremendous exploration success with up to 18 million tonnes of lithium resources in place already, most of this surrounding and directly beside our Cauchari project. This is not simply a near-ology play but an extension of salars that continue through our properties. Orocobre is one of two producers in Argentina with the Olaroz production facility located just over 10 kilometers north from our Cauchari property. The operation at Olaroz is currently going through an expansion program and Orocobre estimates 2H FY17 guidance at 5,500 – 6,000 tonnes with gross margins of US$6,646/tonne, up 21% quarter over quarter. We recognized an opportunity to acquire the cornerstone exploration assets of Orocobre and advance these to production stage while Orocobre is focused on operations at Olaroz.
The portfolio of properties we have acquired from Orocobre includes our flagship Cauchari Property with an existing inferred resource of 470,000 tonnes of Lithium Carbonate Equivalent and a large exploration target to be tested with a 17 hole drill program. Almost immediately on closing of the acquisition the drill rig got to work and we most recently announced the successful casing of Hole CAU07, the first of the five-hole Phase One program located in the North-West block of our Cauchari property. We provided an update to the market on June 7th and I am pleased to say that the drill program is going very well and on budget. We expect initial sampling results to be available in July along with geophysical profiling which will provide key information on target zones through the salt lake sedimentary sequence.
The objective of our work programs at Cauchari is to rapidly advance the property through exploration and towards development by 2018/2019. A diamond drill program to complement the rotary program will start as soon as a contractor is confirmed in the next few weeks. The overall objective for 2017 remains an updated resource estimate combining both NW and SE blocks of our core area moving into a Scoping Study in early 2018. More advanced technical and engineering studies will continue through 2018 and into 2019 by which time we aim to have a bankable Feasibility Study in place along with the required environmental permits for the development phase.
We can see a shortened timeline to production for the Cauchari project given our location adjacent to Orocobre’ s production facility and our contractual relationship with Orocobre regarding processing rights. This is particularly the case for the NW sector of the property which sits only a few kilometres to the south of our partner’s processing facility at Olaroz. The SE block could also provide incremental feed to Olaroz although over a longer, but still economic distance.
Supplying brine to Olaroz for processing is an alternative that could provide a lower-capex, quick-start to production and cash flow from our wells versus building a standalone plant which would require higher capex and would depend largely on the level of resources and reserves to be defined.
We will not require any further funding to advance our projects to the development stage unless we embark on a large scale processing facility such as that built by our partner Orocobre.
In addition to Cauchari the Company holds a 100% interest in the following earlier stage lithium brine properties; Incahuasi, Guayatayoc and Antofalla. We recently just acquired another 3,000 Ha in Antofalla in the province of Catamarca in close proximity to the southern part of the salar which Albemarle owns. This brings the company to the total of 13,000 Ha in the province of Salta and Catamarca. Albemarle late last year entered into an agreement with Bolland Minera S.A., for the exclusive exploration and acquisition rights to a lithium resource in Antofalla, within the Catamarca Province of Argentina. At this time we are currently reviewing additional opportunities to bring value to the company from these assets and I am pleased to say that Advantage Lithium is receiving proposals for possible joint ventures or sales agreements and has signed several confidentiality agreements with companies who are currently doing due diligence to support further exploration and development of these assets.
The acquisition of these Argentine lithium brine assets has moved us to the forefront of lithium exploration companies. We have the cash, approximately $20 million, to fund our exploration and development of these properties and we have the assets which merit such expenditures.
Advantage has been mentioned in several publications; most recently in the highly acclaimed publication “The Economist”
The lithium market is not a fad but is here to stay and will continue to grow at rapid pace mainly through Electric Vehicle production and sales with an estimated 120 models of electric vehicles available by 2020. This will drive an increase in demand for lithium carbonate which is unlikely to be met by current producers which will create opportunities for company’s such as Advantage Lithium.
The Company has progressed tremendously over the past ten months, growing from an initial asset base of less than $2 million to more than $60 million. We have the technical team, a seasoned joint venture partner in Orocobre, the cash; approximately $ 20 million, to fund our exploration and development of these properties and we have the assets which merit such expenditures. Our objective remains to continue to grow the company as quickly as possible.
We wish to thank all our shareholders for their ongoing support.
ADVANTAGE LITHIUM CORP.
Per: “David Sidoo”
David Sidoo, CEO, President, Director
Tel: 604.343.3760 | Fax: 604.683.1585
Email: [email protected]
The technical information in this letter has been reviewed and approved on behalf of the Company by Murray Brooker, MAIG, RPGEO, a “Qualified Person” as defined in NI-43-101.
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