Partners > Neo Lithium, Lithium Electronics Corporation's fast track to success

As the name suggests, the new lithium battery (CN: NLC) is relatively new to the primary lithium battery. The company was first launched on the Toronto Venture Exchange less than two years ago and did not begin an important preliminary economic assessment until the end of October.

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This is not to say that the new lithium- lithium battery has slowly completed its work in the third quarter of the province of Catamarca, Argentina - far from it.

The company was released from the discovery to the PEA within 22 months, if the predictions released by its feasibility study are correct - planned to be carried out next year --3Q will be reduced as one of the fastest discoveries found in the lithium brine space development story.

The valuation of Neo Lithium shows that the market is clearly not catching up.

The ratio of price to net asset value is about 0.1 times, which is seriously lagging behind the industry average of 0.7 times P/NAV.

Director and Chief Operating Officer Gabriel Pindar are well aware that this apparent value is out of touch and he and the management team are doing something.

“Now, Neo Lithium is a good buy for investors,” he told Mining Magazine. “3Q is the latest industry discovery, so we are behind other companies in marketing.”

Now, with the development of PEA and some additional drilling and processing, the team is looking for an education market.

Tick list

Those who were first introduced to this story may be surprised by what they found in the company presentation.

Resource calculations for May 2017 show that in the categories of measurements and indications, the average grade is 714 mg/l of lithium carbonate equivalent (LCE) of 714,242 tons, and the inferred resource is 1.3 million tons of LCE at a level of 713 mg/l. These larger tons contain lower industry leading levels of impurities such as magnesium and sulfate.

PEA outlines a 20-year operation of 35,000 tons of lithium carbonate per year. Good infrastructure and good chemical results result in an average cash cost per ton of carbonate of $2,791 and an upfront capital cost of $492 million.

Considering the average mineral carbonate price estimate of $11,760/ton - below the current level of $14,500/ton for Benchmark MineralIntel's offer, the project produces a net after-tax net present value (8% discount) of $1.13 billion.

However, these numbers are only part of the story.

JPMorgan Chase, Black Rock, M&G and other important institutional investors need more than just delicious numbers in their spreadsheets.

Binda placed the early involvement of these companies in the past experience of the management team.

Although Neo Lithium may become a new market participant, its team is far from being tested.

President and CEO Waldo Perez was the founder and former CEO of Lithium Americas (CN: LAC), and Chairman of Constantine Karayanpooulos previously served as a director. The company has a 50% stake in the Cauchari-Olaroz project in Argentina and is working with the industry leading SQM (US: SQM) to build the first phase of the 25,000 ton carbonate business.

A feasibility study was subsequently published, quickly seeing that Lia America received more than $200 million from Asian sellers to fund half of its capital expenditure bills.

In terms of process and chemical engineering, Neo Lithium is filled with industry talents from SQM and Orocobre (AU: ORE). The latter has been producing carbonate products for more than three years in Argentina's own Olaroz project.

At Binda, the new lithium company has an executive who has helped in several large projects in the mining area with the help of consulting firms and large miners. He quickly tracked the development of some iron ore during the recent boom in the steel industry led by China.

This outlines the fundraising, chemical and engineering columns in the investor wish list.

Strategic demand

“Prosperity” is where Neo Lithium and Pindar are located, so the company can quickly deliver project milestones.

“When he (Perez) found the third quarter, we decided it was really fast because the market was looking for more products,” Pindar said.

In the context of policy changes around the world, automakers are feeling the huge consumer demand for electric vehicles in the medium term, but lithium-ion batteries are more expensive, and upstream manufacturers are building electric vehicle battery capacity at an unprecedented rate.

According to Pindar, the lithium battery market is still lagging behind in the expansion mode.

“A few years ago, we only had six battery factories, including the ongoing ones, and now we have 24,” he said.

“You can argue how much lithium demand is growing each year, but the mineral capacity has not increased fourfold.”

This perceived deficit is becoming more and more obvious.

Although there is enough cash (about $61 million) to complete the feasibility study and even start the early stages of construction, Neo Lithium has recently entered Asia and Europe to find strategic investors.

They are all saying the same thing.

“Every strategic investor we meet is demanding products next year, which puts pressure on us,” Pindar said.

If the new lithium battery reaches its target, it may break ground in 2020 and start production. There is still a way to go, but the company has many near-term goals.

Change the rules of the game

According to Pindar, the latest resource estimates are unlikely to change the annual blueprint for PEA, but a “long life of 35,000 tons per year” should be planned.

This update will be completed by the end of September and is slightly delayed due to the discovery of a deep aquifer with a "game changer" in the area.

The first drilling activity of the new lithium mine (23 holes) can only enter the shallow depth, three holes reach the basement, and the deepest hole is 330 meters below the surface.

When the company returns to its second campaign this year, it will be equipped with 50 km diameter seismic reflection measurements - typically used in the oil and gas industry - and rigs up to 650 meters deep.

This led to the discovery of a second brine layer - a deep aquifer - with a depth between 400 and 650 meters.

In addition to showing good grades and low drilling impurities, the deep aquifer was confirmed to be an artesian well, which means that the lithium brine can flow out of the hole without pumping. This is a big advantage when it comes to brine extraction, but more importantly, it proves that the sediment is productive (brine will come out of these units).

It also has the potential to significantly increase the resource base and provide rare operational flexibility.

Pindar said: "If there is a big storm, some things will add fresh water to the top, dilute the surface aquifer, and we will be able to get salt water from the depths."

Not many companies have such a choice, which means that an unexpected short-lived storm can take production offline for days, even weeks.

“This is a huge advantage,” Pindar said.

When it comes to advantages, the company has recently achieved great success in processing after one of the company's nine test pools.

The high calcium content in the 3Q brine means that the PEA process must include a "conditioning" stage after the first set of pre-concentration tanks, where sodium sulfate is added to remove excess calcium before the brine is again concentrated to 6%, in line with SQM in Atac Horse operations (rarely salt water can be concentrated in this high-end, most concentrated around 1%).

The addition of this reagent accounts for US$2,791/ton of operating cost of approximately US$860/ton.

After evaluating the PEA flow chart, Neo Lithium's lab technicians designed an alternative in which calcium in brine can be crystallized and precipitated by solar evaporation in a certain concentration of lithium without the use of reagents as six Molecular water of calcium chloride.

Under the right conditions, the precipitated crystals contain only calcium and water, which means that the lithium in the brine remains the same. To date, the company has achieved a 3.8% lithium salt level in saline solutions without additives or "conditioners".

The Neo Lithium team, in collaboration with Hatch's consultants, is developing a mechanism under which companies can remove crystals to leave lithium. Pindar said that this development should lead to lower operating and capital costs.

In terms of processing, the company is still building a lithium carbonate pilot plant in hopes of this year. This will bring more product data to attract strategic investors to join the new lithium and lithium stocks.

Such a crowded project schedule and general industry urgency will suppress many companies, but not Neo Lithium.

The team has successfully completed the feasibility study project before this, and is confident that it will follow the blueprint again in the third quarter.

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