Portofino Resources [TSX-V: POR] in the Right Place at the Right Time?

{amended to incorporate press release of February 28th}

Portofino Resources (TSX-V: POR) suffered through 2018 like most other lithium juniors that have all, or most of their assets in Argentina. Yet, post a share consolidation and capital raise, the Company has 24 M shares outstanding and about C$500k in cash to spend on its highest priority project. Although long-standing shareholders like myself are way underwater, Portofino has at least one good thing going for it. It has the right to acquire 100% of a brine project, of reasonable size, in one of the best salars in Argentina –the Salar del Hombre Muerto.

Portofino put out a press release on Feb. 26th outlining exploration and other activities in coming months. The plan is to do a geophysical survey in March to help define the extent of brines in the sub-surface at the Company’s Hombre Muerto West project, which will be used to define targets for exploration drilling later this year. Note: {With Argentina Li projects, there have been a number of drill hole execution problems & delays in getting assay results}. So, patience is required if one invests in this company.

If drill results are strong at Hombre Muerto West, or other promising properties can be locked down via option at low upfront cash cost, there could be upside from the current market cap of C$1.8 M. However, readers new to the story beware; this is a highly speculative investment opportunity, and some investors are very unhappy with the management team.

But, the same can be said of many lithium juniors. Others have seen their share prices fall as much or more than Portofino’s, and others still might do share consolidations. The lithium junior sector has been an unmitigated disaster over the past 12 months. I for one think that it could bounce back this year.

Portofino Resources controls, at low cost, 3 properties in Catamarca province, which is the top-rated province in Argentina according to the newest Fraser Institute mining survey released on Feb. 28th.

An Eye on the Prize, a Cheap Entry Price

Portofino Resources’ flagship project is the key to this story. The Company has the right to acquire a 100% interest in the Hombre Muerto West lithium brine project located on the west side of the Salar del Hombre Muerto in Catamarca province, Argentina. The project is comprised of 2 claim blocks, Del Condor & Pucara, totaling 1,804 hectares. Before Portofino got involved, there was no historical exploration on either claim. Hombre Muerto West is within the world-class, Salar del Hombre Muerto, where FMC Lithium is producing lithium carbonate and Galaxy Resources is developing the high-grade Sal de Vida project.

Portofino Resources negotiated a favorable deal (low upfront cash, 4-yr option term, no royalties) for a project in a sought after Salar. To maintain its option, Portofino has agreed to pay the vendor a total of US$400,000 and issue 1,000,000 shares over a four-year period as follows:

1. a)  An initial US$15,000 deposit (paid)
2. b)  Within 30 days of execution of a definitive agreement-pay US$7,000
3. c)  Upon TSX-V Exchange approval- issue 100,000 shares
4. d)  By the first anniversary of TSX-V Exchange approval- issue 200,000 shares and pay US$14,000,
5. e)  By the 2nd anniversary of approval- issue 200,000 shares and pay US$44,000,
6. f)  By the 3rd anniversary- issue 500,000 shares and pay US$100,000,
7. g)  By the 4th anniversary- pay US$220,000.

Salar del Hombre Muerto, 1 of the Best In Argentina

Galaxy Resources closed on the sale of 17,500 hectares in the Salar del Hombre Muerto to POSCO for US$280 M, POSCO paid US$16,000/ha. The 17,500 ha reportedly contain 2.54 million tonnes of Measured, Indicated & Inferred Lithium Carbonate Equiv. (“LCE“). So, POSCO paid nearly C$150/tonne, but further drilling could increase the resource.

Another company in close proximity to Portofino’s 1,804 hectares has defined a nearly 600k tonnne LCE (Measured & Indicated only) resource, with a very high grade of 756 mg/L Lithium, on a concession about 400 hectares in size. That company is now working on a Preliminary Economic Assessment (“PEA“)

Think about what’s been described so far, it shows 3 things, 1) Portofino’s main project is right in the mix of exploration, development & production activities, 2) 1,804 hectares is not a huge property, but large enough to potentially host a sizable resource 3) What POSCO paid per tonne & per hectare of LCE bodes well for Portofino and other juniors in and around the Salar del Hombre Muerto that can deliver favorable drill results, attractive maiden mineral resource estimates & PEAs.

Portofino recently raised about C$600k and is in the process of coordinating exploration work that should commence in March. Management is cautiously optimistic about exploration drilling later this year due to strong results elsewhere in the Salar, and their own 18 near-surface samples taken across both concessions at the Hombre Muerto West project.

Strong Near-Surface Samples at Hombre Muerto West Project

Last year, management sampled 18 sites within Del Condor & Pucara. The program included geological mapping & near-surface auger & pit sampling of saline brines to depths of 1.0 to 1.5 meters. The work delivered Portofino’s highest-grade brine assay to date of 1,031 mg/L Lithium (“Li”). The range of Li values, however, was quite wide — stretching from 10 mg/L Li to 1,031 mg/L Li. Two samples were over 1,000 mg/L Li, averaging 1,026 mg/L, 4 samples were over 800 mg/L Li, averaging 935 mg/L and 6 samples were over 700 mg/L Li, averaging 871 mg/L.

Two of the 18 near-surface samples returned high Magnesium (“Mg“)/Li ratios (9.3:1 & 10.1:1), the other 16 Mg/Li ratios ranged from 1.7:1 to 3.1:1, and averaged 2.0:1. Including the 2 high results, the average of all 18 samples was 2.8:1, which is stil a good outcome. Magnesium is a deleterious element that needs to be removed in lithium brine processing.

February 26th Press Release Provides Brief Company Update

In addition to upcoming surveys & drilling, other activities are planned or underway at Hombre Muerto West. From the Feb. 26th press release, quote,

“The Company also reports that it has engaged an experienced Argentine group (comprised of geologists, biologists, archeologist & naturalists) to commence an Environmental Impact Study (“EIS”) for the Hombre Muerto West project. The study is required by the provincial government and will include discussions of the geological & hydrogeological characteristics of the Project area, the flora & fauna of the region, sites of historical value, climate, proposed work plans and proposed impact mitigation measures. The results of the 2018 near-surface brine sampling program will also be submitted to provincial mining authorities as part of the EIS and to support other permit applications which are now underway.”

2nd Lithium Brine Project in Argentina

Portofino can acquire up to an 85% interest in a project called, Project II, located ~10 km from the Chile border, ~27 km east of Wealth Minerals’ Laguna Verde project and ~65 km northeast of Neo Lithium Corp’s 3Q project. Project II encompasses a 3,950 ha claim block, of which Portofino can acquire 85%.

Historical exploration work commissioned in 2012 by the vendor included geological mapping, sampling of surface waters, auger sampling of brines, and compilation of the distribution of Lithium & Potassium grades within the basin. Surface water & auger brine samples were analyzed and results averaged 274 mg/L Li.

In June 2017 APEX Geoscience undertook a comparative surface sampling program that validated the results received in 2012. Although not the flagship asset, management kept this project and let a few others go. They like this opportunity, and it covers most of the salar it’s in.

Portofino Resources’ 3rd Project, Yergo….

On February 28th, Portofino executed an amended agreement to acquire a 100% interest in the Yergo Lithium Brine project in Catamarca, Argentina. This 2,932 Ha project encompasses the entire salar and is ~20 km southeast of Neo Lithium Corp’s high-grade 3Q project. Portofino’s 3 project locations can be viewed at Portofino Resources – Catamarca Lithium Projects.

CEO David Tafel stated, quote,

“We are very pleased to have been able to renegotiate a (previously announced) agreement that decreases our acquisition costs and enables us access to a historically unexplored lithium brine salar…. we intend to commence a surface sampling program during the current Argentine summer period” stated David Tafel, Portofino’s CEO.

To acquire a 100% interest, Portofino has agreed to make annual payments to the vendor over a 48-month period totaling US$370,000 as follows:

1. US$10,000 on signing agreement-(paid)
2. By the 12 month anniversary of TSX-V approval- US$20,000,
3. By the 24 month anniversary of approval- US$70,000,
4. By the 36 month anniversary of approval- US$120,000
5. By the 48 month anniversary of approval- US$150,000

Conclusion

Readers should be reminded that Portofino Resources (TSX-V: POR) is a highly speculative investment opportunity. However, there are many highly speculative lithium juniors around the world who don’t control a meaningful project in a top salar in Argentina, plus 2 other prospective properties. To reiterate, strong near-surface sample results performed by the Company last year demonstrated the potential for high-grade lithium on Portofino’s Hombre Muerto West claims.

Drilling on this high priority project is expected later this year. The project is in a great neighborhood, nearby much larger companies including FMC, Galaxy Resources & POSCO. In addition, the Company has 2 other projects in Catamarca province that cover entire salars. Patience is a virtue, but Portofino Resources could be in the right place at the right time if they can deliver exciting drill results.

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Portofino Resources, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing co-ntained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market making activities. [ER] is not directly employed by any company, group, organization, party or person. The shares of Portofino Resources are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making any investment decisions.

At the time this article was posted, Peter Epstein owned shares of Portofino Resources and Portofino 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.