JP Morgan, M&G, Blackrock, Sprott and RBC: quite a register for a junior miner to boast, but then the company that’s supported by all these institutions is no ordinary company.
From the very beginning, indeed, Neo Lithium (CVE:NLC) has stood out.
The discovery of the Tres Quebradas lithium ore body in Argentina might itself be a unique story in exploration.
“We were actually looking for gold and copper on the Maricunga Belt,” says Neo Lithium chief executive Waldo Perez.
“We went to visit one target and drove past a lake, thinking it was fresh water. But we tasted the water. It was black.”
And it was in fact not really water at all, but a lithium brine and an orebody in and of itself. To be sure, following a quick-fire drill campaign, it’s now been established that the major orebody at Tres Quebradas actually lies underneath the lake, but the discovery of an orebody simply on visuals and taste alone is quite a thing.
Waldo Perez smiles at the recollection.
New orebody discovery no mean feat
It was an amazing discovery moment, but it was also serendipitous in terms of market timing. Lithium has been on a tear in recent years as investor appetite has been stoked by the development of the electric vehicle industry and its likely large consumption of lithium in battery products.
To find a new orebody in the location that Perez and his team found it is actually no mean feat, and it speaks of their experience that they immediately knew what they were on to.
Tres Quebradas is situated in the most prolific lithium producing district in the world, a triangle of territory that spans Argentina, Chile, and Bolivia. The Bolivians are not so well advanced, but the Argentinians keen to keep up with the Chileans. It’s likely they will facilitate development in any way they can.
Already progress has been astonishingly rapid.
Following discovery in December 2015 and after only one season’s drilling, Neolithium managed to establish a measured and indicated resource of 134,000 tonnes of lithium or 714,000 tonnes of Li2O3 equivalent, with almost double that again in the inferred category. Following completion of a second season of drilling, that resource has now been boosted to just over 4mln tonnes of lithium carbonate equivalent grading an average of 614 mg/L lithium in the measured and indicated categories, with a further 2mln tonnes inferred.
Neolithium itself has gone from a standing start to being a company with a C$138mln market capitalisation.
Neo Lithium master of its own destiny
To be sure Tres Quebradas will take a few hundred million dollars to develop, but the likes of JP Morgan are already standing behind that, so there’s lots and lots to play for.
The key reason is that because Neolithium controls the entire salar structure on which the lithium brine is contained, it can control development and production at every stage. For other metals and minerals this might sound like a given, but for a brine, which has no compunction about flowing across artificially designated boundaries and borders whether underground or at surface, it’s significant.
“This is no minor feature,” says Perez. “Most other salt flats have at least two mines on them. We are the only company that controls 100% of a salar. This allows you to manage your extraction rate at will.”
PEA completed at the end of last year put the capital costs at upwards of US$1bn, although that will likely come down in time. The internal rate of return was a healthy enough 28%, with payback in less than two years.
100-year mine life
With permits for construction already in place, Neolithium is thus very much the master of its own destiny.
“The project is fully de-risked,” says Perez. “It’s in a mining province, and it’s the largest mining province. They know permits for lithium.”
The porosity also looks good, and the company is already evaporating brine to generate product specifications to send to potential buyers.
The plan is to produce initially at a rate of 35,000 tonnes lithium carbonate per year. Mining like that would take the highest grade material first, but still allow for a 100-year mine life, so clearly Tres Quebradas has plenty to give.