Thibaut Lepouttre - Thu, Sep 1, 2016

Millennial Lithium Becomes Major Player in Argentina's 'Lithium Triangle'

Thibaut LepouttreCaesars Report editor Thibaut Lepouttre profiles Millennial Lithium, a company that just reinvented itself by acquiring a project in Argentina's 'Lithium Triangle.' Lepouttre explains why he believes Millennial may be poised to take off.

Lithium flats

Last week, Millennial Lithium Corp. (ML:TSX.V) started its first trading day after a true metamorphosis that changed the company from being an empty shell—when it was still called Redhill Resources—to one of the more promising lithium juniors out there.

Millennial Lithium originally acquired a lithium project in Nevada, but boosted its plans to become a major player in the lithium space by acquiring the Pastos Grandes project in Argentina. Located just over 150 kilometers from Salta at an altitude of 3,800 meters, this salar has been explored by a previous operator (a joint venture of two French conglomerates), but these companies decided to pursue another salar, and this land package became available.

The company acted quickly and secured an option to acquire 100% of the property by making staged payments totaling $2.2 million ($2.2M) in cash and 1 million shares, as well as issuing a 1.5% net smelter return (NSR) royalty, of which half could be repurchased for US$1.5M.

Whereas the original agreement covered a land package of 1,220 hectares, Millennial has applied to stake an additional 4,200 hectares from the Province of Salta, and has entered the bidding process for an additional 3,000 hectares from REMSA, a province-owned enterprise. Officially nothing has been approved yet, but the first 4,200 hectares will very likely be approved shortly. This means the company has pretty much locked up the entire salar and will be calling the shots on this 75+ square kilometer land package.

The previous operators have sampled the brines, so Millennial Lithium already has a pretty good idea of how to tackle this. The Pastos Grandes salar seems to be much more advanced than the simple grassroots projects other lithium juniors are getting involved in these days. Eramine (a subsidiary of Eramet (ERA:FP), a Paris-listed company) has spent almost $5M on exploring the salar, drilled no fewer than six exploration wells and pumped up some brine to perform evaporation tests.

On top of that, the access to infrastructure is pretty impressive. There's a 375 kilovolt power line running along the road leading to Chile, and the company could be connected to a gas pipeline less than 30 kilometers away.

That's one of the reasons the timeline to bring the Pastos Grandes salar into production will be substantially shorter than comparable projects. Millennial Lithium says it could be producing commercial quantities of lithium within three years.

The salar is located in a very rural area. The local people will be happy with the company's ambitious plans, as not only will Millennial very likely do its best to hire local labor, the quality of living in the nearby village of Santa Rosa de los Pastos Grandes will increase as well. The access road will very likely be upgraded, and should Millennial Lithium link the project to the existing power line, the village might be supplied with electrical power from the power grid rather than relying on diesel generators for its power needs.

Even though the average lithium grade of the Pastos Grandes brine is a bit lower than the nearby Olaroz and Hombre Muerto salares, that shouldn't be a deal breaker as the technical report says the impact of the lower grade could simply be mitigated by increasing the size of the evaporation ponds. On top of that, the lower zones of the brine have not been tested yet, and it's quite typical to see an increasing lithium grade at depth, so it will be very interesting to see if the lithium values will indeed increase when Millennial Lithium takes samples at a greater depth.

Additionally, the average grade of potash in the brines is relatively high, and the independent consultant who was appointed by the company to complete a technical report estimates the potash-lithium ratio could be as high as 4. Even though the potash price is currently trading at a multiyear low, a production rate of 100,000 tonnes of potash per year (using a 25,000 tpa lithium plant as base-case scenario) would allow Millennial Lithium to report a total byproduct revenue of $20M per year, and even $40M per year should the potash price increase to $400/ton again.

After the most recent capital raise at CA$0.65/share, Millennial Lithium should now have in excess of CA$5M in cash, which will most definitely help the company make the option payments and start exploring on the property. On top of that, it's not unlikely the 8 million warrants will be subject to an accelerated expiration, which will top up the treasury with an additional CA$2.4M.

This will enable Millennial Lithium to advance the property as fast as possible to make sure the company remains on track to be in production within three years from now.

Thibaut Lepouttre is the editor of the Caesars Report, a newsletter and mining portal based in Belgium that covers several junior mining companies with a special focus on precious metals and base metals. Lepouttre has a Bachelor of Law degree and two economics masters degrees that have forged his analytical approach to the mining sector. Considered a number cruncher, Lepouttre focuses on the valuations of companies and is consistently on the lookout for the next undervalued mining company.

Disclosure:
1) The following companies mentioned in the article are sponsors of Streetwise Reports: None. The companies mentioned in this article were not involved in any aspect of the article preparation or editing so the expert could write independently about the sector. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
2) Thibaut Lepouttre: I or my family own shares of the following companies mentioned in this article: Millennial Lithium Corp. I personally am or my family is paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Millennial Lithium Corp. I determined which companies would be included in this article based on my research and understanding of the sector.
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