Without a doubt, the markets are not in good shape right now. Pretty much every sector and commodity are down over the last several months, except for a few. One of the sectors that has actually performed quite well in recent months is Lithium and this is mainly due to a global push for new-energy sources to reduce carbon emissions.
Lithium batteries that allow for more efficient use of energy have become prominent in industries varied from smartphones to electric vehicles. As a result, the demand for lithium is expected to rise by unprecedented levels in the coming years; and this demand will only intensify as hybrid and electric vehicles, energy storage systems, and portable electronics become increasingly widespread.
In order to better understand the lithium market, it is important to know the difference between the two primary sources of Lithium supply: Lithium Brine and Lithium Hard Rock.
Lithium brine comes from arid salt flats, while Lithium hard rock comes from granitic pegmatites. The advantages of Lithium brine are lower capital costs and a higher quality lithium carbonate; however, the process for extracting lithium carbonate from brines takes much longer, as the lithium first needs to evaporate. Lithium hard rock can be processed into Lithium Carbonate at a much faster rate than brine; however, the quality is not as high.
Latin America is the region of the world with the largest amount of lithium. Its so-called Lithium Triangle will inevitably become the nexus for the coveted mineral, which is often referred to as “white gold.” The Lithium Triangle is a lithium-rich region in the Andean southwest corner of South America, spanning the borders of Argentina, Bolivia, and Chile and forming a geographic triangle of lithium resources underneath their salt flats. Approximately 58 percent of the world’s lithium resources are found in these three countries.
Now let’s talk about a company that is actively operating in the Lithium Triangle - Lithium Chile (TSXV:LITH)(OTC:LTMCF).
The reason why this particular company initially caught my eye was due to a large strategic investment ($34M) in the company from Chengxin Lithium, Chinas second largest lithium processor. More than 80% of this investment was done at a price of $0.95 per share, and the stock is currently sitting at around $0.55.
Lithium Chile operates an expansive portfolio of exploration and development assets in the Lithium Triangle.
Lithium Chile has 13 projects in total. 12 of these projects are exploration-stage assets in Chile, and one of these projects is located in Argentina — the Arizaro Project — which already has a resource estimate of over 1.4M tonnes of lithium carbonate.
So, Lithium Chile offers investors the best of both worlds by providing not just exploration upside, but also some partial security via its resource estimate.
In addition, Chile is actually the lowest cost producer of lithium carbonate in the world and Argentina is a close second. Both countries have developed infrastructures, mining experience, and are actively pro-mining.
The Arizaro Project
The main focus for Lithium Chile right now is the Arizaro Project in Argentina. The Project is located in the Arizaro Salar located in the Salta province of northwest Argentina - about 170 kilometers (km) from Salta. Salta is considered the best investment district in the Lithium Triangle according to the Fraser Institute.
Lithium Chile controls 23,300 ha of legal concessions located mainly in the central part of the salar which is strategically located close to the best water supply area.
Drilling activities for the first exploration well at the project started in September 2021, and were highly successful. On that single well, an initial resource estimate totalled 1,420,000 tonnes of lithium carbonate equivalent. In addition, the initial resource estimate is from only 29% of the main concession block, leaving an abundant area for resource expansion.
Given the initial success at the Arizaro project, Lithium Chile has decided to focus the majority of its efforts here. The company has already commenced a phase two program that includes 3 to 4 exploration holes as well as 3 production wells. The program is expected to take approximately 6 to 9 months and has a budget of $4,000,000.