By Marc Davis
It’s the kind of back-slapping news that most mining industry executives dream of.
Canadian start-up Millennial Lithium (TSX.V: ML) is discovering that its Pastos Grandes lithium deposit is bigger and richer in grades than was originally believed.
And that’s a big deal.
By commercializing Pastos Grandes, the company expects to generate large-volume lithium supplies from brine. And best of all, it can be done at a very low cost at the heart of Argentina’s economically-deprived hinterland
Brine solution mining involves pumping lithium-bearing brines (saline water) to the surface of salt lakes, where it is distilled and concentrated over time by natural evaporation. Brine deposits are by far the least expensive to mine and by far the most profitable, too.
A recent $3.5 million exploratory drill program at Pastos Grandes deposit revealed that prospectively economic lithium grades can be found to a depth of at least 400 metres.
In other words, Pastos Grandes structural controls suggest it is emerging to be a much larger deposit than the project’s past operator ever envisioned.
This is according to Iain Scarr, the company’s newly-appointed Chief Operating Officer and the Vice-President of Development and Exploration since mid 2016.
As one of the world’s leading lithium mining experts, Scarr knows exactly what he’s talking about. An accomplished lithium mine developer, he benefits from over three decades of experience as a geologist -- mostly with the world’s second largest mining company, Rio Tinto.
At Pastos Grandes, Scarr likes what he sees in Millennial’s first two drill holes, which only tested the northern portion of the salar-hosted deposit.
Average grades for these two drill holes proved to be significantly higher than those encountered by the project’s past operator. More specifically, nine brine samples collected from one exploration hole to a depth of 355 metres averaged a lithium grade of 395 milligrams per litre.
A further ten brine samples collected from a second exploration hole returned an average lithium grade of 389 mg per litre to a depth of 400 metres.
Such favourable drill results have given the project a big boost, Scarr suggests: “These are economic grades, which is very encouraging. There are mines that are being developed with lower grades.”
Of further encouragement, all but one zone in the two exploration holes/wells resulted in brine flows exceeding 0.5 litres per second over one-metre intervals.
“There is good flow rate. In fact, the better the flow rate, the less operating costs will be, as well as Capex costs, such as a need for fewer wells,” Scarr says.
Additionally, these initial drill results reveal that the chemical composition of Pastos Grandes’ lithium brine is well-suited to a prospectively uncomplicated, economically-viable mining operation.
“There’s good chemistry in the brine in that the chemicals -- namely calcium, sulphate and magnesium -- are all in a good balance,” Scarr says.
“This kind of chemistry is the kind that is well-suited to traditional, low-cost lithium extraction methods.”
The Best is Yet to Come
In the coming months, Millennial Lithium intends to drill at the southern end of the salar, where lithium grades are expected to be even higher.
Why does the company have this level of optimism? Truth be told, there’s good reason to have high hopes in that two historic holes drilled by the previous operator averaged lithium grades of 558 mg per litre and 566 mg per litre, respectively.
“These grades that are almost on par with the kind of grades being mined at some of the world’s most profitable lithium mines,” Scarr says.
Notably, the previous operator, which spent over $4 million on exploring the property, only drilled to a depth of 160 metres. Now Millennial’s management is hoping to encounter even richer grades at depth.
There are good odds in Millennial’s favour. For instance, there exist several proximal lithium mines and deposits with plenty of high-grade lithium at depths below 200 metres. And so it’s reasonable to presume this to also be the case with Pastos Grandes.
Scarr explains: “Lithium-dense brine tends to sink to greater depths.”
The Right Place. The Right Time
Millennial has lately been consolidating its grip on much of the lithium riches in this region. It recently more than doubled its land position.
The company now controls approximately 26,000 hectares of lithium-rich land holdings in north-eastern Argentina in Salta Province and the adjacent Jujuy Province.
Being an early-stage entrant in the race to bring more lithium mines on-stream in this part of the world should become increasingly important in the coming years. It promises to make the company a serious player among a new generation of lean, mean lithium miners.
Most importantly, Millennial’s projects are located at the heart of the fabled “Lithium triangle” -- where Bolivia, Chile and Argentina all intersect.
This remote, high-altitude region hosts salt flats that boast the highest concentrations of lithium in the world.
So too is it the hotspot that is expected to supply most of the world’s lithium needs in the coming decades. This is due to the consistently high grades among this cluster of deposits, as well as their amenability to low-cost mining methods.
A Break-down of Millennial’s World-Class Projects
The company’s two flagship projects consist of the advanced-stage Pastos Grandes Project and the early-stage Cauchari East Project. Both are located within an emerging mining district that is home to several world-class lithium mines and in-development deposits.
The Pastos Grandes project is currently being drilled to outline a preliminary resource estimate (PEA) and to determine the potential for superior grades at depth.
The publication of a PEA is being targeted for the summer. This will be the first major step towards determining an ultimate production decision.
If all goes according to plan, Pastos Grandes could be commercialized in as little as three years time, according to the company’s president Kyle Stephenson.
Additionally, Millennial also intends to drill the Cauchari East Project later this year with a view to compiling enough data to begin work on its own PEA.
The odds in favour of an initial blueprint for an economically-viable mine at Cauchari East are encouraged by the project’s strategically-ideal location. More specifically, it borders both the world-class Olaroz lithium mine (owned by Orocobre Ltd.) and an in-development mine (operated by Lithium Americas).
A third project, the 2,500-hectare Cruz Project in the Pocitos salar basin in Salta Province, is being optioned out to Southern Lithium Corp.
By spending as much as US $2.2 million, Southern Lithium can earn up to a 70% interest in the project. An additional 10% interest can be earned upon the completion of a bankable feasibility study.
On a technical note, Millennial benefits from a tight share structure of only around 34 million shares outstanding (about 43 million fully diluted).
Furthermore, all the outstanding share warrants and stock options are priced above $1.00. In other words, there is no major overhang of cheap stock to potentially jeopardize the stock’s upward trajectory.
This reality -- matched with the company’s recent positive news flow – helps explain the stock’s solid performance so far this year.
From a risk/reward perspective, exploratory drilling in the southern portion of the Pastos Grandes deposit is expected to yield impressive economic grades (assuming they corroborate historic drill results).
Such a reality will be a key value driver, especially in terms of demonstrating the true economic potential of the emerging Pastos Grandes deposit.However, the real proof in the pudding will come with the announcement of a PEA at Pastos Grandes this summer. In fact, this milestone de-risking development should set the company on a course to a very bright future.At the very least, it will also offer considerable intrinsic value to backstop the company’s ascendant share price.
About the Author:
Marc Davis has a deep background in the capital markets spanning 25 years. He is also a longstanding financial journalist, having worked for leading digital financial news agencies in North America and in London’s financial centre. He is also a former on-camera business reporter for CBC Television.
Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, ChinaDaily, and AOL.