Shortly after filing a preliminary economic assessment (PEA) on its 100% owned Tres Quebradas (3Q) lithium project in northwestern Argentina’s Catamarca province, Neo Lithium Corp. (TSXV: NLC; US-OTC: NTTHF) has optimized the project’s economics even further.
The company has reduced the anticipated capital expenditure by 17% to US$490 million by relocating evaporation ponds to its salar. In the prior plan, half the evaporation ponds were in the salar and half were in the alluvial cone.
“The way this works is the following,” explains Waldo Perez, Neo Lithium’s President and CEO. “If you build the ponds in the alluvial cone you have excess material that you need to put somewhere.
“When you’re building ponds in the salar, it’s the opposite. The hole that you create to make the bed for the ponds is the hole that you need to put the tailings in. It works very favourably to the economics of the project.”
The 35 sq. km project lies on the southern end of Argentina’s “Lithium Triangle”. It contains 714,242 measured and indicated tonnes lithium carbonate equivalent averaging 716 mg lithium per litre and 2.3 million measured and indicated tonnes potassium chloride equivalent averaging 6,506 mg potassium per litre. It also contains a substantial inferred resource of 1.3 million tonnes lithium carbonate equivalent averaging 713 mg lithium and 4.4 million tonnes potassium chloride equivalent averaging 6,554 mg potassium.
The change also resulted in an updated after-tax net present value of US$1.2 billion with an 8% discount rate and a 27.9% internal rate of return. With an expected life of 20 years, Neo Lithium believes the project will produce an average 35,000 tonnes of lithium carbonate annually.
“This is a full, pristine discovery,” says Perez. “There are no technical or scientific reports on this area containing lithium, and the fact that it contains a lithium lake, literally, is very interesting because it was hiding in plain sight.”
The lake, discovered in December 2015, was thought to contain water. When Perez and his team examined it more closely they discovered it contained brine. He says the only other place in the world with a known lithium brine lake is China.
Neo Lithium’s lake, however, contains only 2% of the lithium resource. The rest is in the salar.
“You consider it an overflow from the salar that contains excess brine,” says Perez. “If you were doing an analogy in terms of oil and gas, it’s like finding a lake of oil.”
Neo Lithium advanced the project from discovery to PEA in just two years. During that time it acquired the land, defined the resource and completed US$85 million in financing across multiple tranches.
Perez says part of the reason Neo Lithium was able to move so quickly is it has strong support from the Catamarca government as well as major institutions like JP Morgan Chase & Co., BlackRock Inc. and M&G Investments.
“It’s very difficult for a junior company to have such a premium set of institutional investors, and the reason we do is actually very obvious: massive resource, high grade with very low impurities,” says Perez. “This is one of the lowest impurities’ projects worldwide.”
The project has a 1.99 magnesium to lithium ratio and a 0.5 sulfate to lithium ratio.
The other reason it has been able to move so fast is Perez and his team have experience developing a high quality lithium project. Before forming Neo Lithium, Perez was the founder and CEO of Lithium Americas Corp. (TSX: LAC; US-OTC: LACDF), which has a current market cap of $822 million and advanced lithium projects in Argentina and Nevada.
Neo Lithium plans to continue drilling. It currently has the eighth largest lithium brine project globally, even though its resource is only based on one season of drilling.
“All the holes ended in lithium bearing brines,” says Perez. “So there’s a lot more that needs to be done.”
The total thickness of the basin is unknown, but seismic reflection results indicate that the 3Q salar is approximately 600 metres deep.
Neo Lithium is also approaching 4% lithium concentration in its evaporation ponds, working toward a 6% target. At the same time it’s building a pilot plant, which Perez expects will be operational by the fourth quarter of 2018.
“It’s going to be a very busy year as we move toward final feasibility,” he says.
Neo Lithium has a market cap of $216 million and a healthy cash position of US$60 million. Its shares are valued at $1.81 with a 52-week range of 85¢ to $2.75.
— The preceding Joint Venture Article is promoted content sponsored by Neo Lithium Corp. and written in conjunction with The Northern Miner. Visit www.neolithium.ca to learn more.