Rodinia Minerals
Rodinia Minerals Inc. is a Canadian mineral exploration company with a primary focus on Lithium exploration and development in North and South America. The Company is positioned to capitalize on the explosive demand for lithium carbonate expected from the paradigm shift to mass adoption and use of key lithium applications (lithium-ion batteries, glass ceramics, greases, pharmaceuticals, etc.).
Rodinia Minerals is seeking to ride the wave of strong long term demand for lithium
While Rodinia Minerals’ name is based on the earth’s supercontinent of a billion years ago the company itself has a new face and focus in recent weeks following a tie up with private investment bank Forbes & Manhattan. Rodinia is now switching its emphasis from uranium to lithium, with an initial focus on developing the Clayton Valley lithium brine project in Nevada which it acquired earlier this year. Specifically it is looking to become a low cost producer of lithium carbonate from brine and to ride the wave of the strong long term demand prospects for lithium by developing a mine in an established producing district in a geopolitically stable jurisdiction. It will also be looking to develop its recently acquired Strider lithium project in Manitoba and to make other lithium acquisitions, probably in South America.
In the last month or so there have been major changes to Rodinia’s board and management team with the appointment of a new CEO, Chairman, two further board members, a CFO, and VPs of exploration and corporate development. All but one have come from the Forbes and Manhattan stable and will be seeking to bring the Forbes and Manhattan philosophy to Rodinia. This, in essence, is to create shareholder value by combining a strong asset in a sector with significant growth potential with an effective management team, adequate financing and concerted marketing efforts in order to give a company an appropriate amount of leverage to achieve success. So perhaps the obvious questions are: Why the lithium sector? Why the Clayton Valley asset? And what might the new management team and the Forbes and Manhattan connection bring to the table? Taking each question in turn:
Why the Lithium Sector?
The metal, which is the third element on the periodic table, is light, (about half the density of water), and soft, with a low melting point, high electropositivity and a high charge- and power-to-weight ratio. Its characteristics make it suitable for a number of applications; for many years lithium was a minority metal whose principal uses were in the production of ceramics, glass and a light strong aluminium alloy and in applications such as pharmaceuticals, air conditioning systems and lubricants.
However lithium demand has been galvanised by the rechargeable lithium ion battery, a technology initially investigated by Exxon in the 1970s then developed and improved by others over the last quarter century. Lithium ion batteries offer users the benefits of a high energy density to weight ratio, long life, a slow rate of discharge when not in use, and they can be manufactured to any shape or size. So they are now the favoured battery technology for a huge range of consumer electronics such as watches, cell phones, laptops, Blackberries and Ipods as well as in power tools and scientific and military equipment. Demand for lithium has therefore been growing strongly in recent years; batteries are now the principal end-use accounting for more than 25% of demand.
But the bonanza may be only just beginning if demand for hybrid and electric cars takes off as anticipated and if lithium ion batteries can replace nickel hydride as the battery of choice. Two “ifs” but, arguably, there are valid reasons for anticipating both:
· Hybrid vehicles (which have two engines, one gasoline, one electric and which currently account for around 2.5% of the automotive market in the US) are gaining market share on the back of growing concerns about emissions, climate change, fuel economy and energy security. Market share may accelerate further in a few years as technology improves and emissions legislation tightens. Although significant demand for electric cars (as distinct from hybrids) is further down the road pending the resolution of a number of technical issues and the establishment of a network of recharging stations, it too could eventually drive the demand for auto batteries.
· Lithium ion batteries offer a number of significant advantages over the current nickel hydride technology, particularly as they offer more energy per unit of weight. General Motors, Mitsubishi, Nissan, Ford, and BMW, amongst others, are therefore developing hybrids based on lithium. The US Government has recently committed to allocating $1bn through its Economic Stimulus Package to further develop the lithium ion battery.
Since the amount of lithium in a car battery is several thousand times higher than in a mobile phone this potential green car revolution could transform lithium demand and convert it into a strategic commodity.
On the supply side although lithium is present in many igneous rocks and some brines it is generally not found in high concentrations. There are therefore only a few mineral and brine deposits which are of sufficient size and grade to be of commercial interest. Lithium can be produced from either hard rock or from brine but the economics are now stacked very much in favour of brine as it is time, energy and cost intensive to extract it from rock. The economics of recovering lithium carbonate from brine are particularly favourable when solar evaporation can be used as this further reduces energy consumption. Recovery from brines is also environmentally friendly as nearly all the chemicals produced and used can be either recycled or sold.
In 1997 Chile took over the mantle from the US as the world’s leading producer of lithium chemicals, now accounting for 44% of world supply. Three companies are now particularly dominant in the world market; the Chilean company SQM, Chemetall Foote Corporation (a subsidiary of NYSE-listed Rockwood), which owns the neighbouring property to Rodinia and is the only producer in the US, and FMC which has an operation in Argentina. Bolivia has the potential to be bigger even than Chile as it has significant reserves but despite considerable interest by foreign companies there is no production and the government is seeking to keep foreigners at bay (see the NY Times article of 2nd February 2009, In Bolivia Untapped Bounty meets Nationalism). There is a strong incentive for the US, which currently imports some 3,000 tonnes of lithium annually, to seek a move towards self-sufficiency in lithium.
Why the Clayton Valley asset?
Rodinia acquired what it now sees as its principal asset, the Clayton Valley lithium project in Esmerelda County, Nevada, in early 2009 when it acquired 250 unpatented mining claims in the valley from North American explorer GeoXplor and staked a further 284 claims, taking the total under its control to 50,400 acres (204 square kilometres) which represents about 90% of the valley.
The valley, which les some 350km from Las Vegas in Western Nevada has been producing lithium carbonate from brine in the Silver Peak production facility since 1967 which has a capacity of 1.2M kg of lithium per year and has produced a total of 50M kg to date. Estimated lithium reserves total 700M kgs in the valley, according to the US Geological Survey, with lithium concentrations in the brine of between 300-700 parts per million. Moreover the lithium is replenished from the surrounding rhyolite, which is the one of the most lithium-rich in the world. The brines are found in layers of volcanic ash and gravels down to an estimated depth of 2800 feet (850 metres). The infrastructure is good with power, water, rail and road links all close by.
The agreement with GeoXplor essentially gave Rodinia a 100% interest in the property in exchange for $322,000 and 2.5M shares in Rodinia (both over 4 years) and subject to a 3% royalty on lithium carbonate production and on all other ores or minerals produced (see Rodinia’s website for full details).
Clayton Valley offers the opportunity for low cost production as it is a brine mine, with low manganese content and it can be processed initially by evaporation. Moreover it has large reserves, good grades, proximity to infrastructure and a production plant, and relative proximity to key US markets.
What can the New Management Team and Forbes & Manhattan bring to the table?
The new management team, who largely come from the Forbes and Manhattan group offer a wide range of the technical and financial experience that will be required to develop Rodinia into a lithium producer. David Stein, the new CEO and President and a former mining equities analyst, has 9 years experience with asset evaluation, research and corporate finance experience. Stan Bharti, the new Chairman has 25 years experience in business, management and finance and is currently the President and CEO of Forbes and Manhattan through which he has helped to raise several billion dollars for many public and private resource companies over the past decade.
William Randall, the new VP of exploration is a geologist, born in Argentina who now specializes in lithium deposits, particularly brines in both South and North America. With the Forbes and Manhattan group now behind Rodinia it is in a much better position to develop and finance the Clayton Valley project, as well as pursue growth through acquisitions. David Stein believes that the team sets Rodinia apart from other lithium-focused junior explorers. He told Proactive Investors that “Our intention is to build a robust lithium business based on the reality of today’s price environment, rather than simply existing as an option on higher lithium prices in the future. That way, as lithium prices do increase lover the longer term, out shareholders will be in the best position to benefit”.
Rodinia’s Next Steps
Rodinia commenced work on its lithium claims in April this year firstly conducting a 2D reflective seismic study and then a drilling programme of 3 holes. Results will be reported to the market in the near future. The company will then embark on a geophysical programme in November, with results probably in late November which in turn will provide input into the next round of drilling. This should lead to a resource calculation in early 2010, followed, if all goes well, by a feasibility study and then construction. Of course the construction time will depend on the scale of the operation but it is possible that Rodinia will be in production within two to three years. No exceptional work will be required as the infrastructure is all close to hand. Rodinia will also be looking for marketing arrangements during this time as lithium is generally sold directly to end-users.
Rodinia will also be looking to explore and possibly develop its Strider lithium project in Manitoba, which it optioned in May this year whereby Rodinia has the right to earn a 100% interest subject to a 2% net smelter return royalty in exchange for in the 14 claims with a total area of 2849 acres (11.5 square kilometres).
The company also holds a number of uranium properties in Arizona and Utah. Workman Creek has a 43-101 compliant inferred resource of 5.6M pounds of uranium while the other projects have historical though non 43-101 compliant reserves. It is possible that Rodinia will seek to divest these now that uranium is considered non-core in order to focus fully on lithium.
The company currently holds $3.5m in cash which should last until mid-2010, based on the current exploration programme.
Summary
The maxim that past performance is no guide to future performance is perhaps particularly true in the case of Rodinia Minerals with its new focus, projects and team. Rodinia has been busy lining up all its ducks in a row. It now has an asset in a commodity with strong growth prospects. The asset has the potential to be at the lower end of the cost curve, it is in a mining friendly jurisdiction and is near a production facility in an area of known production. It has the backing of an experienced and well connected management team and a private bank.
The greatest risks and uncertainties therefore are probably the size of the resource, technical uncertainties during the period of development and future trends in lithium prices which will be driven on the demand-side by the extent of the hybrid/electric car revolution and degree of substitution away from nickel hydride and on the supply-side by developments or otherwise in Bolivia. For the moment lithium prices are steady at a ballpark price of around $3/lb (depending on specification and quality). David Stein, the new CEO of Rodinia, says that he is not a “raging bull” on lithium in the short term. He anticipates that the “Big 3” companies will keep prices low for the next few years so that lithium technology gains acceptance and to deter competition from marginal players. Prices may well grow explosively from about 2015 as the green car revolution takes hold. Rodinia’s strategy however will be to focus on low cost production with robust projects which will be able to ride the wave of growing lithium demand even if lithium prices remain low.
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Other Rodinia Minerals articles
Other Rodinia Minerals news
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22/07/10 Rodinia to raise at least C$5 mln for Argentine lithium brine projects
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17/06/10 Rodinia Minerals starts next exploration phase at Salar de Diablillos lithium project
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16/06/10 Rodinia Minerals name change to Rodinia Lithium approved by shareholders
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01/06/10 Rodinia Minerals promote William Randall to President and CEO
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26/05/10 Rodinia Minerals says drilling results from Diablillos lithium project confirm potential
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18/05/10 Rodinia Minerals completes secondary placing, total proceeds raised CDN$2 million
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28/04/10 Rodinia Minerals hires Farhad Abasov as new chairman
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20/04/10 Rodinia Minerals encouraged by Phase II results at Salar de Diablillos which exceed initial samples
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20/04/10 Rodinia Minerals completes 1st tranche of fundraising for lithium projects development
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04/03/10 Rodinia Minerals 'encouraged' by sample results from Clayton Valley lithium-brine project
