Wealth Minerals, #Lithium Rich in Chile

Wealth Minerals Ltd[TSXV: WML / OTCQB: WMLLF / SSE: WMLCL / Frankfurt: EJZN] continues to build a formidable portfolio of lithium properties / projects in Chile.  It has by far the largest footprint of any publicly-listed junior, and has locked up more land in Chile [81,454 ha (~201,280 acres) net to the Company] than lithium Major Albemarle Corp. (NYSE: ALB) (in productionand concessions held by BHP (NYSE: BHP).

Wealth Minerals is making the bet that Chile will be open for business to more than just Corfo (the Chilean Economic Development Agency), Albemarle, SQM (NYSE: SQM) and state-owned Codelco.  This is a bet that dates back to late 2015 when management, (led CEO by Henk van Alphen), started kicking the tires of early-stage lithium prospects.  

In April 2016, Mr. Alphen enticed South American natural resources legend Marcelo Awad to join the Company as Executive Director of Wealth (Chile).  So, already by 1q/2q 2016, Wealth had shifted into high-gear with multiple Li assets under consideration. 

At that critical juncture in the Company’s decisive pivot towards lithium, Alphen brought in experienced and highly skilled executive, Tim McCucheon as President.  This key hire helped Alphen and Awad sign the deal of a lifetime; a 46,200 hectare (“ha“) (~114,160 acre) property in the heart of Chile’s Atacama salar.  The parcel is contiguous with concessions owned by BHP, SQM & Corfo.

How large is 46,200 ha?  Larger than many (entire) South American salars, (slightly larger than the city of Montreal).  The Atacama project alone is a Company-maker, but Wealth’s first mover advantage, strong ability to raise capital and tremendous management, Board & technical team, allowed Alphen to continue making attractive deals.  Fast forward 15 months, he’s still making deals.

On August 2nd, management announced that it had been granted an option to acquire 49% of San Antonio (a private Chilean group) and a 24.5% Interest in certain exploration & exploitation mining concessions that comprise the Seven Salars project {see org. chart below}.  The Property is owned 50% by Talison Lithium and 50% by San Antonio and is 39,404 ha (~97,370 acres) spread across 7 salars in Region II of northern Chile.  Wealth’s attributable portion of Seven Salars is 24.5%, equal to 9,654 ha.

Between 2010 and 2011, Talison completed TEM geophysical surveys, surface brine sampling & exploration drilling on the Property and TEM geophysical surveys were completed over 5 of the 7 salars.  The results of the TEM survey indicate that the depth of the salars may exceed 200 m.  

In 2011, 27 holes were drilled in Salar de La Isla.  The maximum drill depth was 43.5 m and the average depth was 16 m.  Lithium concentrations ranged from 220 mg/L Li to 1,080 mg/L Li; the average lithium concentration of 68 samples was 863 mg/L. 

Seven Salars is a big score, demonstrating once again that Wealth knows its way around Chile and has good connections.  But the crown jewel and main focus is the Atacama project.  It would be hard, if not impossible, to replicate a contiguous parcel that size in the single best salar on the planet.  Wealth’s land is located just 25 km north of Albemarle’s & SQM’s operating facilities.  Near-surface grades (< 50 m deep) are reportedly above 1,800 mg/L Li & 22,000 mg/L potassium (k).  

NOTE:   {Although in the same structure, the Company’s target zone is several hundred meters below surface.  There’s no direct evidence of viable (potentially economic) lithium values at that depth anywhere in the Atacama salar}  

Drilling is expected to begin within 60 days.  Hitting intervals with Li grades even 1/3 or 1/4 of 1,800 mg/L would be an important de-risking milestone.  Given the large scale of the property holdings, the Li grade would not have to be particularly high to be able to deliver a promising NI 43-101 compliant maiden mineral resource estimate.  

Of the juniors with assets in Chile & Argentina, several have potentially viable projects, but none have really large-scale opportunities like Wealth’s Atacama (100% Interest in 46,200 ha) & Seven Salars (24.5% Interest in 39,404 ha).  I believe Wealth controls at least 2, maybe 3, prospective world-class assets.  How do Wealth’s projects compare to others around the world? 

Market derived values of select lithium projects

AVZ Minerals (ASX: AVZ) controls a giant early-stage deposit.  It is earning into 60% of the Manono project in the Democratic Republic of Congo (DRC).  The deposit could be the largest hard rock Li deposit in the world, but there’s relatively little infrastructure and it’s nearly 1,400 km to a port in Angola.  AVZ’s market cap is ~C$ 400 M.  Like Wealth’s flagship Atacama project, AVZ’s Manono is very early-stage.  But, AVZ’s market cap is ~150% larger than Wealth’s, despite both having huge blue-sky potential.

Bearing Lithium (TSX-V: BRZ / OTC: BRGRF) is acquiring a 17.7% Interest in the most advanced project in Chile’s Maricunga salar.  Australian-listed Lithium Power Intl. (ASX: LPI) owns 50% and a private Chilean group owns 32.3%.  It is 4,463 ha, about 30-35% the size of the entire salar.  A PFS is expected in 4q 2017 and a DFS in 2h 2018.  

Bearing’s entire market cap represents this single asset (the 17.7% stake).  The market cap is about C$42.5 M, which equates to ~C$ 240M for 100% of the Maricunga project.  NOTE:  [SQM & Codelco each control 2,000 + ha in the same Maricunga salar].  

Importantly, Codelco has been tasked with facilitating the consolidation of the entire salar into an integrated project that would, all else equal, represent pro forma C$ 720 M + (at least 3x what Bearing/Lithium Power Intl. has) for an area that would probably be 10,000-14,000 ha in size.  

Lithium Americas’ (TSX-V: LAC / OTC: LACDF) flagship asset is its 45.75% ownership in the Minera Exar SA – Cauchari-Olaroz project in Jujuy Province, Argentina.  SQM owns an equal 45.75% stake, and a local enterprise has a free carried 8.5% Interest.  Backing out an estimated C$ 40 M worth of other assets held by Lithium Americas, the market values 45.75% stake of Cauchari-Olaroz at about C$420 M and 100% of the project at nearly C$ 920 M (assumes LAC shares @ C$1.06).

This project is fully-funded and construction has begun.  It’s expected to reach initial production in 2h 2019 and ramp up to Stage 1 nameplate capacity of 25,000 Mt LC/yr. in 2h 2020 or 1h 2021.  The full project area covers 81,000 ha, Lithium Americas’ 45.75% Interest accounts for ~37,050 ha.

Orocobre (ASX: ORE) owns 66.5% of the Salar de Olaroz project in Jujuy Province, Argentina.  This operation was the first new brine production to come online in 20 years.  It’s ramping up slower than expected, but is forecast to reach Phase 1 nameplate capacity of 17,500 Mt/yr Lithium Carbonate (“LC“) in 2018.  

Plans are in place for a Phase II expansion to 35,000 Mt LC/yr. in 2019.  Based on 210 M Orocobre shares outstanding, the market values 66.5% of Olaroz at about C$ 660 M and, therefore, 100% at about C$ 1.045 billion (assumes ORE.ax shares @ A$3.31, C$/A$ parity).  As it stands, Orocobre’s attributable production is running at ~8,000 Mt LC/yr.  

On August 9th, Millennial Lithium (TSX-V: ML / OTCQB: MLNLF) announced that it will be acquiring additional property {2,492 ha} directly adjacent to its discovery holes at Pastos Grandes in Salta Province, Argentina.  One of the holes, “drilled to a total depth of 564 m and terminated in brine-bearing sand and assayed 535 mg/l Li over 381.5 m (93.5 m to 475 m).”  

The ground that Millennial is picking up is quite valuable (especially to them), but it does not come cheap.  The cost is US$ 3,000/ha to be paid out over the next 12-24 months.  In the long run, this cost, amounting to US$ 7.5 M, will not make or break a project potentially worth hundreds of millions of dollars.

A key takeaway is the rising cost to play Li-brine ball in South America.  A trend that will make it harder and more time consuming for juniors to move forward.  Those already well into exploration activities like Argentina’s Millennial, Advantage Lithium (TSX-V: AAL / OTC: AVLIF) LSC Lithium (TSX-V: LSC) and Neo Lithium, (TSX-V: NLC / OTC: NTTHF) or in advanced exploration/early-stage development like Lithium X Corp., (TSX-V: LIX) / OTC: LIXXF) have coveted seats at the global Li table.  

Besides Wealth, in Chile there’s just Bearing Lithium, Lithium Power Intl., Kairos Capital (TSX-V: KRS) and LiCo Energy Metals (TSX-V: LIC / OTC: WCTXF). 

Most of Wealth’s projects are early-stage projects or green field properties, but it has reached critical mass.  Management has amassed option interests in a total of 110,604 ha [81,454 ha (~201,280 acres) net to the Company]

Wealth’s first mover advantage has been a winning strategy.  However, it was far from a no-brainer 18 months ago.  There was (and still is) risk and confusion regarding Chile’s stance on new Li entrants.  There’s the presumption by some that SQM or Albemarle would never allow a junior to slip through the cracks.  Or, that Corfo / Codelco / ENAMI (the Chilean National Mining Corporation) would tightly control the process by which newcomers enter the market.  

But the facts on the ground tell the story…. Wealth has arrived, not by slipping through the cracks, it came in through the front door.  

Surprising?  Not to Henk and Marcelo.  Chile’s rule of law is strong and enduring.  By all accounts, management has followed both the Letter and the Spirit of the law at each and every turn.  Wealth has not side-stepped governmental bodies, mining agencies or State-controlled companies.  Management continues to work proactively with interested parties from inside the country and abroad.  They’ve spared no expense on lawyers / consultants / advisors.  Management has had boots on the ground since day 1. 

Chile, both risk and reward….

Earlier I mentioned the concerns some have about lithium juniors investing in Chile.  There are also rewards for choosing Chile over other brine producing countries.  Chile has the lowest cost and highest grade production facilities in the world.  Notice the elevation in the Atacama at 2,300 meters is 40% lower than the Argentinean brine projects.  

Low elevation means faster evaporation rates.  This is one of the reasons why operating costs are so low in the Atacama.  Access to infrastructure, workers, equipment, lodging, mining services, consultants, etc. is better in Chile than in many other countries (less remote sites).

Once there’s better clarity on the way forward for private Li companies in Chile, there could be a tsunami of investment capital flowing into the country.  Wealth Minerals [TSXV: WML / OTCQB: WMLLF / SSE: WMLCL / Frankfurt: EJZNis sure to get its share, or more, of the loot.  Why?  I can list only 5 juniors with Li properties in Chile, but I can name 25 with assets in Argentina, and 50+ trying to make it in Nevada / Utah!  

CONCLUSION

Wealth’s first mover advantage has placed it in the right place at the right time to attract serious attention from significant funding / strategic partners.  Talks are no doubt already taking place.  Once M&A activity picks up in South America, Wealth’s tier 1 assets will be near the top of the list.  Who are some possible suitors?  

How about Asian battery makers, like CATL, LG Chem & Samsung?  Chinese & European EV manufacturers like BYD, BAICVolkswagen?  Global miners like Glencore, Rio Tinto & BHP?  Battery materials companies like Umicore & BASF?  And of course, the usual industry suspects– Albemarle and China’s Tianqi & Ganfeng.  

The list goes on and on, but many of the juniors mentioned above are too small for these larger interested parties, industry leaders, to consider.  Readers may want to take a closer look at Wealth Minerals before prospective suitors make a move. 

 

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At the time this interview was posted, Peter Epstein owned shares and/or stock options in Wealth Minerals and the Company was an advertiser on [ER]. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector or investment topic.