FOLLOW THE MONEY: The Big Guns Are Taking Note of Chilean Lithium Projects

Lithium Chile (TSX.V:LITH) (OTC:LTMCF): High-Grade Lithium, Premier Locations, Potential to Fast Track 

Lithium – More Precious than Oil?

Lithium prices have run up 45% year-on-year since the start of 2005 to $16,500/tonne earning the metal the nickname, “white oil.”

One could aptly describe 2017 as the year of Lithium Investment Mania. In 2018 this sector definitely still has legs and is far from done. The fact that right now literally billions of dollars is being poured into expanding lithium battery Gigafactories, (Figure 1), begs the question, can an investor really afford to sit on the sidelines?

Chile the Next Frontier: Untapped Limitless Potential

In January, Tesla put Chilean lithium assets back on the map when they sat down and negotiated additional lithium quota from top global producer, SQM.

Any serious lithium explorer would do well not to overlook Chile as an exploration target. Firmly entrenched in the lithium triangle and containing the largest reserves in the world. In terms of reserves, Chile accounts for 47% of the global base.

However, in a look at the country’s production contribution, Chile is behind Australia and contributes only 33% – and most of this is coming from one firm, SQM! This means there is room for further in-country exploration and investors should look closely at Chile’s potential.

This is exactly why Lithium Chile (TSX.V:LITH) (OTC:LTMCF) presents an exciting investment opportunity and why their market cap has grown from $30 million to $85 million in 18 months on increasing land values. 

The upcoming exploration phase is where companies like this could see the biggest upside- “it’s all in the drilling”. 

Lithium Chile (TSX.V:LITH)(OTC:LTMCF) has one of the largest exploration portfolios in Chile, spanning over 152,900 hectares across fifteen properties.

Recently, the company announced that it had identified multiple near surface target areas, one of which is in the famous Salar de Atacama- home to SQM, the largest lithium brine producer in the world. As further exploration gets underway, Lithium Chile (TSX.V:LITH) (OTC:LTMCF) looks well-placed to benefit from the fortunes of the lithium market.

When asked about Lithium Chile, Company president and CEO, Steven Cochrane, said simply;

“We’ve got the goods.”

And given that the company has amassed an impressive exploration portfolio in the lowest cost lithium production jurisdictions in the world, one can only nod in agreement.  

Benefitting From a Pure Play

Lithium Chile is completely focused in one country and one commodity, offering investors a pure play within one of the hottest commodity spaces today.

Second, junior mining stocks, leveraged to a particular commodity generally outperforms large diversified mining stocks in the same sector. So, if an investor is after a ten-bagger or even a hundred bagger, a junior miner with exposure to a single commodity is likely their best bet.

So How to Tell If Lithium Chile (TSX.V:LITH) (OTC:LTMCF) Really Has the Goods?

Lithium carbonate is the necessary ingredient for lithium-ion batteries. In general, it is far more cost effective to produce lithium carbonate from a brine source compared to a hard rock deposit. But this is only half the story, in reality, not all brine deposits are created equal.

In fact, the costs of lithium extraction vary greatly according to the specific chemical and physical properties of a particular brine.

The basic approach for producing lithium carbonate is to concentrate the lithium by pumping the brine into evaporation ponds. Essentially in evaluating the costs of this evaporation process, one looks at four main factors in the brine deposits;

• Higher lithium concentration: The higher the initial lithium concentrations present in the brine, the easier and more cost effective it is to concentrate. “Lithium Chile’s surface brines are some of the highest in the world”. 
• High evaporation rates: The less time that is needed for the brine to evaporate in order to recover the concentrate, the better. “Chilean evaporation rates are the higest in the world”. 
• Large surface area: The larger the surface area, the easier it is to evaporate the brine. “Lithium Chile properties are some of the largest private land holdings in Chile.” 
• Magnesium-lithium ratio, the higher the Mg:Li ratio, the costlier the process of lithium carbonate production. For this reason, the ratio of Magnesium (Mg) to Lithium (Li) is the foremost critical metric one should measure in assessing the quality of the brine. “Lithium Chile has some of the lowest magnesium-lithium ratios in the world”. 

Lithium Chile (TSX.V:LITH)  (OTC:LTMCF) Confirms Targets with High Lithium Concentrations and Low Mg:Li ratios

On the 3rd of April, Lithium Chile confirmed that it had identified various high priority target areas at its properties in the Salar de Atacama and the Salar Ollague.

The announcement confirmed that the target areas have near surface brine values with lithium concentrations of 1330mg/l and 1440mg/l respectively. For comparison purposes, a chart is provided below detailing the lithium concentrations of the major brine deposits in the world, and it is clearly evident that these targets represent extremely high levels of lithium concentrations.

To this end, Lithium Chile ticks all of these boxes.

In terms of location, one couldn’t hope for a better address. The targets are located within the Salar de Atacama and the Andean Lithium Belt and both these properties are accessible all year round via a paved highway from the towns of San Pedro de Atacama and Calama.

In 2016, a new policy framework was announced with the aim of developing the lithium industry that would allow private investors in these exploration projects to obtain exploitation and export rights.  As such, Lithium Chile (TSX.V:LITH)  (OTC:LTMCF) is the fortuitous position of being in the right place at the right time and is set to benefit from these developments. It goes without saying that Markets tend to reward management foresight.

In March 2018, Lithium Chile (TSX.V:LITH) (OTC:LTMCF) closed its last round of financing, with now over $10 million for drilling.  

Lithium Chile’s (TSX.V:LITH) (OTC:LTMCF) management team is highly experienced with strong Chilean connections. The Chief Geologist and VP of Exploration has spent over 25 years in Chile’s mining industry, having worked as an independent consult for major names in the Chilean mining space such as Polar Star Mining and Minera Tech.

Lithium Chile Poised for Potential Re-rating

Potential Comparables

If we consider Lithium Chile (TSX.V:LITH) (OTC:LTMCF) against its Argentinian based counterpart, Millennial Lithium Corp, we note that  Millennial returned a whopping 94% to investors over the last year.

However, the market may have missed a trick. Indeed one could argue that as Millennial is in PEA phase, it is somewhat more derisked as a project, however, if one compares these company’s explorations projects, based on brine quality alone, one notes that all the Chile-based projects are superior to Millennial with respect to lithium concentration and Mg:Li ratio.  

One can only surmise that the market has not yet caught wind of the fact that Chilean based projects are now getting the rights to exploit their targets- a right previously denied to these private explorers. A classic case of a market inefficiency which is not expected to last too long!

A consideration of other lithium companies and their relative market success, reveals very positive signs for the sector for Lithium Chile (TSX.V:LITH) (OTC:LTMCF) by extension.

Another Argentinian lithium miner is Advantage Lithium (TSX.V. AAL) which is currently mining the Cauchari lithium project.  The company caught the attention of an advanced lithium player, Orocobre, which entered into a 75% JV with Advantage. National Bank of Canada issued a  BUY on the company at the end of March 2018.

Another positive from the lithium sector is from Lithium Chile’s neighbour and largest global producer, Sociedad Quimica y Minera De Chile (SQM: NYSE). The company’s share price is up 13% over the last month since the start of April. Three separate companies including Rio Tinto, Canada’s Wealth Minerals and Chinese private equity firm, GSR Capital have all tried making a bid for a stake in the company, pointing to the fact that the sector is hot and buyers are scrambling to ensure they are able to keep pace with demand.

Apart from SQM, another lithium major is FMC Corp (NYSE. FMC). While lithium is not FMC’s main focus- more than 80% of its revenue comes from selling pesticides, if one considers FMC’s third quarter results in 2017, the company’s lithium revenue rose over 20% and FMC is currently expanding its lithium hydroxide capacity in response to increasing  lithium demand.

These companies simply serve to demonstrate the potential for the lithium industry as a whole.

This window of opportunity could close quickly. If you’re looking for what could potentially be the next big Lithium mover, you should strongly consider Lithium Chile (TSX.V:LITH) (OTC:LTMCF).

Check Out Lithium Chile‘s Corporate Presentation Below 

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