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Li3 Energy’s strong management team suggests ambitions to develop lithium and potash projects is achievable

Li3 Energy (OTCBB: LIEG), is an early stage, U.S. public company, with a highly competent, Peruvian based management team, that is acquiring and developing a portfolio of brine deposits located in Peru, Argentina, and Chile for development and production of Lithium, Potash and associated by products.

The company recently raised $1.5 million, and plans to list on the TSX in the first quarter of 2011. The equity offering will place 80 million shares at US$0.25 cents, raising US$20 million, which is required to acquire the Maricunga Lithium Project for $6 million, fund work commitments on the project for $5 million, acquire the Alfredo Iodine-Nitrate Project for $5 million, and provide additional cash of $4 million to cover working capital, placement and listing fees.

CIBC is advisor and sponsor to the company. On completion of the offering and listing Li3 will have issued 392.1 million shares on a fully diluted basis, after payment of vendor consideration. In addition, vendors will have the right to appoint 3 out of 7 Li3 Directors and will also have management participation in the Executive Committee.

The Alfredo and Maricunga Projects are projected to have a total capital cost of $290 million and exceed a 20 year mine life. Their consolidated Net Present Value is estimated at $465 million, creating annualized net revenues exceeding $100 million, and providing a healthy Internal Rate of Return of 31%, discounted at 10%. These estimates assume that Maricunga will secure a sale price of $5,500 per tonne of Lithium Carbonate and $300 per tonne of Potash, and Alfredo will secure $900 per tonne of Potassium Nitrate and $27,000 per tonne of Iodine.

Alfredo covers 6 concessions over an area of 2,700 hectares, and is located southeast of Iquique, near Ponzo Almonte, in an area that hosts the biggest caliche deposits in the world and the only known source of commercially exploited natural nitrates on the planet. These resources are believed to be the result of sediment depositions from an ancient sea or accumulation of minerals from the Los Andes. SQM (SSE: SQM.A) annually extracts 30 million tons of caliche and Minera ACF is also a major producer, operate caliche mines recovering both Iodine and Nitrates.

The Alfredo Potassium Nitrate-Iodine Mine has been drilled, sampled and technically evaluated for a pending NI 43-101 statement, containing an Inferred Resource of 63.5 million tonnes of caliche ore, containing 4 million tonnes of Nitrate, at a grade of 6.3% using a 4% cut-off and 12,000 tonnes of Iodine.  This estimate is based on 4,660 samples, and 438 drill holes for a total of 2,330 meters, over a grid measuring 400 meters by 400 meters to a depth of 5 meters, covering 67% of the property.

Geophysics also confirms that Alfredo contains continuous caliche beds that are capable of producing commercial quantities of both Iodine and Nitrates. The extraction technology required for this project is well established, and EPCM Engineering firms with technical expertise are readily available to complete a feasibility study and project pre-construction engineering within 18 months. On a stand alone basis Alfredo is projected to cost $117 million, have a Net Present Value of $75-100 million, and a mine life of 21 years.

The Maricunga Lithium Project covers an area of 1,438 hectares and is located in the northeast section of the Salar de Maricunga, in Atacama in northern Chile. Historical work on the Salar over an area of 8,000 hectares, calculated a Non Compliant Mineral Resource of 224,300 tonnes of Lithium and 3,274,000 tonnes of potash, and is known as the 7th largest Lithium brine resource in the world. In the 1980’s the Chilean Government calculated a Non Compliant Resource of 224,300 tonnes of Lithium, for a recovery of 600,000 tonnes of Lithium Carbonate utilizing a 50% recovery factor. On an annualized basis they estimated that the resource could produce 30,000 tonnes of Lithium Carbonate for 20 years. Utilizing a recovery factor of 70%, 2,300,000 tonnes of Potash could be recovered at a rate of 115,000 tonnes per year for 20 years, or 96% of the requirements at Alfredo, where the feedstock will be upgraded to a higher value product.

The Maricunga Lithium Project will produce a Potassium Chloride/Potash co-product that will be shipped approximately 300 miles to the Alfredo Project, where it will be upgraded to Potassium Nitrate Fertilizer. The value added process will upgrade the Lithium Carbonate Potash to 120,000 tonnes per year of Potassium Nitrate, which is currently priced at US$1,000 per tonne. This credit from the transfer of the Potash will reduce the production cost of Lithium Carbonate at Maricunga by $22 million per year, or $ 1,500 per tonne of Lithium Carbonate. The Alfredo Project will also produce 700 tonnes per year of Iodine.

Recent brine samples analyzed by the vendors from 58 wells and 226 brine samples, indicate that the Maricunga Project will have production costs lower that the nearby Salar de Hombre Muerto, and slightly higher than the Salar de Atacama. The Project is situated at an elevation of 3,760 meters above sea level, and has a net evaporation rate of 1,000 mm per year, which is lower than Atacama but similar to Rincon. The capital cost of a 30,000 tonne per year plant is estimated to be under $170 million, with cash costs of US$1.50 per kg, including the Potash by-product credit.

Li3 has signed a non-binding Letter of Intent, and paid a non-refundable deposit of $250,000, providing a 90 day exclusivity to purchase a 60% interest in Maricunga from a group of private companies that hold a 100% interest in the project. The agreement is subject to full due diligence, which is now in full swing. On closing of the acquisition Li3 will make a payment of US$6 million, and issue 78.8 million shares to the vendors. Following the Closing of the acquisition, Li3 will commit to invest US$5 million in development and technical studies, in full compliance with NI 43-101 standards, advancing Maricunga to completion of a bankable Feasibility Study.

Li3 is led by a highly motivated team with a proven track record of successful resource development experience, including Kjeld Thysen, who is currently a Director of Ivanhoe Mines (NYSE: IVN), David G. Wahl, who is a Senior Geologist and Consultant to a large array of international clients, and Anthony Hawkshaw, who is CFO of Rio Alto Mining (TSX-V: RIO).

CEO Luis Saenz, who runs operations from the Peruvian office, and has over 18 years of senior mine finance and metals trading experience with a number of well known international entities.

The immediate future of Li3 will focus on completion of the proposed funding and closing of the purchase of both Alfredo and Maricunga. The value of the business is expected to rapidly unfold as the company fast tracks development, through to funding, plant construction and commencement of mining operations, projected to commence in about eighteen months.