Advantage Lithium Corp. (TSX-Venture: AAL; OTCQX: AVLIF) is drilling 4,800 metres at its Cauchari joint-venture lithium project in northern Argentina’s Jujuy province to further expand and upgrade its already increased resource of 3.02 million tonnes of LCE.
This third phase of drilling comes on the heels of a positive preliminary economic assessment (PEA) that Advantage Lithium tabled in mid-August, just over a year after drilling its first hole on the property in late April 2018.
The Vancouver-based company began by drilling the northwest portion of the 92.6 sq. km property, and is working its way to the southeast with as many as four drills turning at any given time.
“The focus this year is to take the inferred resource into measured and indicated and to show that the hydrology in the pump tests and the dynamic modelling of this basin works,” says Advantage Lithium president, CEO and founder David Sidoo.
As of a May 2018 estimate, the project contains 5.5 million inferred tonnes grading 450 mg lithium per litre and 4,028 mg potassium per litre for 3.02 million tonnes of lithium carbonate equivalent and 9.5 million tonnes of potash.
The company’s PEA assigned the project an excellent US$830 million after-tax net present value at an 8% discount rate and a 24% after-tax internal rate of return. The project would require US$401 million in pre-production capital expenditure with sustaining capital of US$2.75 million per year over the mine’s 25 year life. Payback would be in three years and four months from the start of production.
The company is poised to move quickly into a feasibility study thanks to good planning and a strong relationship with its partner Orocobre (TSX: ORL; ASX: ORE), which owns 25% of the Cauchari project.
“Before we put out the PEA, we had engaged the permits, had the drill rigs ready, and were already initiating this drill program,” explains Sidoo.
Orocobre has been active in the Cauchari salar for more than a decade and producing lithium since 2015 at facility that lies just 10 km from the Cauchari. Orocobre produced 3,596 tonnes of lithium carbonate in 2018’s second quarter, or 28% higher than in the previous quarter.
Orocobre allowed Advantage Lithium use its drill data to better understand the basin’s geology and map drill targets. Sidoo says that using the same consultants as Orocobre is allowing his company to fast track the project from the PEA right into a definitive feasibility study (DSF). The company’s own drill results compare well to Orocobre’s, as well as those of the nearby Lithium Americas (TSX: LAC; NYSE: LAC) and Ganfeng Lithium (SHE: 002460), which have their joint-ventured Cauchari-Olaroz lithium project in the same basin.
“The main reason we partnered with Orocobre is because they understood the basin,” says Sidoo. “They’re the only new independent producer in the last twenty years that’s come to the marketplace. They understand the Cauchari basin, they understand the government relations and they understand how to get permits. They’ve got strong environmental protocols put in place and they have retention of very good staff and experienced people — who in this basin are very difficult to retain.”
In addition to owning part of Cauchari, Orocobre also has a 29% stake in Advantage Lithium, making it the company’s largest single shareholder.
When Advantage Lithium completed a $12-million financing in late July 2018, Orocobre elected to maintain its position.
“This shows they feel this is a world class project,” comments Sidoo.
In tandem with its PEA, Advantage Lithium has engaged Goldman Sachs Group (NYSE: GS) as its sole financial adviser. Goldman Sachs will help Advantage Lithium find funding for future aspects of the project.
Shares of Advantage Lithium are currently trading at 70¢ with a 52-week range of 48¢ to $1.42. The company has a $110 million market capitalization and $17 million in cash. It’s fully funded up to its DFS, which it aims to table by the second quarter of 2019.
“We really feel like at the end of the day Cauchari is going to rival Atacama in terms of production numbers,” says Sidoo.
— The preceding Joint Venture Article is promoted content sponsored by Advantage Lithium Corp. and written in conjunction with The Northern Miner. Visit www.advantagelithium.com to learn more.