Yesterday morning, our top Lithium pick, Lithium Chile (TSXV:LITH)(OTC:LTMCF) announced the results of an updated 43-101 resource report at its flagship asset, the Salar de Arizaro. The Company added 671,000 tonnes of lithium carbonate equivalent (LCE) via diamond drill hole, ARDDH-05, for a current project total, indicated and inferred resource of 3,323,000 tonnes of LCE.
Not only was the company successful in adding more tonnage to an already large resource, but they were also able to boost the grade - Diamond drill hole ARDDH-05 recorded grades of 584 mg/l which are the highest lithium grades on the Arizaro property to date.
Steve Cochrane President and CEO comments “I am extremely pleased on how our Arizaro project is developing. The fact that we have nearly 700,000 metric tonnes of lithium carbonate equivalent from one hole up to 584 mg/l is outstanding and bodes well for the potential to double those resources when the results from hole ARGENTO-03 and ARDDH-06 are known. At over 3.3 million metric tonnes of lithium carbonate equivalent and growing, our Salar de Arizaro is quickly becoming a world class lithium brine deposit.”
The biggest takeaway from this news release for me is that the asset is now entering what I like to call the “big leagues”. Crossing the 3M tonne mark is a major milestone for the company and tremendously boosts the attractiveness of the Arizaro project in terms of potential takeover.
When looking at takeover potential, probably the most important aspect for acquirers is resource SIZE. Larger lithium companies are less interested in acquiring small assets with small resources… If they are going to put the leg work in to acquire a new asset they want it to come with substantial size to make the transaction worthwhile. Lithium Chile’s Arizaro project has now passed the 3M tonnes LCE mark, making it nearly impossible to ignore for larger companies looking to add tonnage. Arizaro has now reached a point in size where larger lithium companies will simply be unable to resist a takeover offer and I expect that we will see a bidding war start to ensue sooner rather than later.
Another factor to consider here is how quickly the price of Lithium Carbonate has rebounded since the end of April. Today, the price of Lithium Carbonate touched CNY 312,500 per tonne, the highest point in three months, extending the rebound from the 19-month low of CNY 165,500 at the end of April amid robust demand for battery inputs.
Prices are rising very quickly and development assets are getting more expensive. At this rate, acquirers are not going to want to hold off much longer before pulling the trigger on new assets.
In my last article on Lithium Chile, I discussed potential takeover value and derived a $100/tonne LCE takeover multiple for Arizaro. If we take that value and multiply it by the newly updated resource of 3,230,000 tonnes — we are left with a takeover value of $323,000,000 for Arizaro alone ($1.57 per share).
Currently, the market cap of Lithium Chile is just $175M… so we are looking at almost a double if/when the asset gets taken over. Not to mention, these calculations do not factor in any of Lithium Chile’s exploration properties in Chile which also carry some value.
The bottom line is that the near-term upside here is HUGE.
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