Resources Top 4: How many bags? Lithium M&A barrage continues as Chilean developer eyes big payday
Here are the biggest small cap resources winners in early trade, Thursday September 28.
Just a handful of days ago Nero Resource Fund’s value guy Rusty Delroy gave us the lowdown on Chilean brine play Lithium Power International and its Maricunga project, calling the whole thing ‘ridiculously deep value’.
There’s been some angst about Chile’s plan to nationalise mining assets and the stock, owner of one of the world’s highest grade undeveloped lithium brines at the Maricunga project in the Atacama, is down around 30% YTD.
One question, Delroy said, was what was Codelco’s role in the whole thing going to be?
We now have some idea. It wants Maricunga like Victoria Park wants to see Darcy Moore holding the AFL Cup. The project is one of the only development or near development ready brine assets in Chile not in the hands of majors Albemarle and SQM.
That has Chile’s state-owned copper miner Codelco licking its lips. It’s keen to diversify into lithium with the support of the South American nation’s government, which wants a bigger slice of the electric vehicle pie for itself.
Until recently Chile was the largest producer of the battery material, but it’s been surpassed by faster moving hard rock miners in Western Australia.
Both LPI, which has Canaccord Genuity on board for defence, and Codelco have confirmed the talks in a statement today, which had LPI shares sharply up at the open.
“Lithium Power confirms that it is in discussions with Codelco regarding a potential transaction,” the $180 million capped junior said in response to media reports about Codelco’s courtship.
“However, at this stage, discussions between Lithium Power and Codelco are incomplete and no agreement on terms has been reached. Codelco has been granted due diligence and is continuing to undertake its due diligence investigations.”
Codelco said … basically the same thing. But it’s out there making statements, and that’s the important part for LPI — at least you’ll know who they are.
A study in Jan last year predicted the project would produce 15,200t of lithium carbonate a year for two decades at capex of US$626m (around $985m on today’s money).
That’s a nice start in lithium for a well-heeled player like Codelco, which has seen its copper growth dry up as mines get deeper, grades fall and expansion costs at its ageing ops blowout.
Investors are baying for a premium early doors. Watch this space.
And now for things that make you go hmmm… or was it oo?
Ookami is no more, in its place is First Lithium, whose re-listing on the ASX this morning sparked a flurry of buying from the bleachers, as punters had the tightly held junior up by a third this morning (NB: 33.3%).
It is hunting spodumene in Mali, just down the road from Goulamina where China’s Ganfeng and $700 million capped ASX developer Leo Lithium (ASX:LLL) plan to open Africa’s first major spod mine next year at a world class 500,000tpa.
There have been better times to be an explorer in the West African nation, well known for its large gold industry but also, like many of its neighbours, its political instability.
It’s currently run by a junta which has flagged big increases in the government benefit from its new mines.
After a long suspension that ended with Leo halting plans to ship DSO out of Goulamina, another has begun for the region’s ASX incumbent as it flags a response to Malian correspondence around its new 2023 Mining Code.
Little sign that is in the minds of First Lithium investors today.
What have they got after the backdoor entry of 28% substantial shareholder Intermin Mines and its projects into Ookami?
100% ownership of a two exploration permits in Mali at Faraba and Gouna over 17,500 hectares.
Blakala at the Gouna permit is the priority. FL1 has already found multiple spodumene bearing pegmatites in the novel lithium district across both permits with surface expressions (i.e. outcropping pegs) of up to 500m in length.
A 6000m diamond drilling program is expected to begin ‘imminently post listing’, with assays expected every 3-4 weeks.
Trenching has also confirmed historic work that demonstrates spod concentrations of over 30%, with assays from 15 samples showing an average Li2O grade of 1.6%. If drilling confirms grades like those Blakala could be very interesting indeed.
Another 5000m of drilling is planned across Gouna and Faraba in the first half of 2024, where similar surface samples and outcropping pegs have been identified.
What role Mali plays in the EV revolution remains to be seen, but First Lithium is at least putting its foot in the door as one of the few listed companies to take the plunge, and at a $20m market cap it’s a much cheaper punt than Leo or London AIM listed Kodal ($157m).
The long-time gold project developer has finally caved to the lithium hype, buying a “district scale” project in good ol’ James Bay, Canada.
The 300sqkm Sauvolles project runs along the same rock belt hosting the Adina project, where Winsome Resources (ASX:WR1) is pulling up speccy intersections like 107.6m @ 1.34% Li2O.
That hit – just 3km from Sauvolles – and a bunch more like it are expected to result in a maiden resource at Adina Main of +40Mt “with upside”, according to lithium veterans Canaccord.
MTC is in a good spot. It also has a lot of ground, with Sauvolles covering an area almost seven times larger than Adina and ~1.5 times larger than Patriot Battery Metals’ (ASX: PMT) Corvette project.
Early exploration will kick off in the coming weeks, MTC says.
The company is also completing an updated scoping study on the 2.7Moz gold, 22Moz silver Sturec gold project in Slovakia, which is expected to be completed in mid-October.
First sales are imminent after CKA finally received its a Jetty Operations Permit for the 60%-owned Bumi Barito Mineral (BBM) metallurgical coal mine in Indonesia.
This is welcome news — first production and sales from the 2Mtpa BBM mine was supposed to happen in Q4, 2021.
“The delay encountered for the issuance of the permit was due to additional regulatory compliance and are lengthy processing time,” it says.
“The process of securing this permit led to unanticipated delays in Cokal’s first sale of coal.
“Notwithstanding, Cokal is now excited to move forward with the immediate priority of scheduling the maiden shipment of BBM coal at the earliest possible time.
“Cokal’s team is working diligently to finalize the shipment schedule with the buyer, and will provide updates as we finalise first coal sales for the domestic market.”
Between August and September premium hard coking coal futures went on a tear, rising to over US$270/t.
Met or coking coal, essential to produce steel, attracts a premium price.
Expert investors like the beforementioned Rusty Delroy like met coal “because it’s hard to find quality assets and even harder to get them developed”.
“There really isn’t a viable option today to replace metallurgical coal from the steelmaking process,” Delroy says. “It most likely will come over time but here and now there isn’t one.”