Hey dude, have you found the lithium yet? Pic: Getty Images
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Your standout small cap resources stocks for Friday, November 22.
SQM, one of the world’s largest lithium producers, underlined the struggles for the sector this week as third quarter profits fell 73% YoY to US$131 million.
But its enthusiasm for the sector continues to remain strong. While it sees prices continuing to fall in the current quarter amid an oversupply of raw materials, demand growth is continuing strongly and the Chilean giant isn’t planning to curtail production at the moment like some of its Australian peers.
It largely produces lithium carbonate from high grade brines in Chile’s Atacama, but also owns a half share in the Mt Holland mine and Kwinana refinery with Wesfarmers in WA and is partnering with Gina Rinehart and Mark Creasy on the Andover project in the Pilbara.
There are a few imperatives for SQM to expand outside its native Chile, notably a nationalist shift in the country that has forced it into a partnership with state-owned copper miner Codelco to ensure its continued interest in the Atacama salar.
Today’s further foray into Australian lithium exploration is to the benefit of $12 million capped tiddler iTech, which will farm out up to 70% of its Reynolds Range project’s lithium rights in the NT.
Subject to due diligence, SQM can earn 30% of the JV by paying $2m and can earn up to 51% by spending $7m on exploration within 4.5 years of commencement. It has to spend a minimum $2m in the first 1.5 years.
The 70% benchmark will be hit when SQM pays an additional $3m to ITM and defines a JORC resource of 50Mt at 1% Li2O equivalent or above, or spends an additional $15m on exploration.
A one-off success fee will also be payable by SQM on a DFS and decision to mine.
“The Reynolds Range Lithium Project is a new lithium pegmatite discovery in the Northern Territory,” ITM MD Mike Schwarz said.
“With high grade rock chips of up to 8% Li2O at the GMF Pegmatite and known pegmatites outcropping over the entire 60km tenement package, iTech believes it will take the technical capability and financial resources of one of the world’s largest lithium chemical producers, like SQM, to fully capture the value of this exciting new project.
“With SQM initially funding and managing all aspects of lithium exploration and development, iTech can focus its resources on exploration of the copper and gold potential of the Reynolds Range tenement package of which it retains 100% ownership. iTech looks forward to a valuable and productive working relationship with SQM as we explore this exciting new region side by side.”
Located 90-230km north-northwest of Alice Springs, the project contains 375km2 of the Aileron province in central Australia, with another licence application in train over 416km2 to the south and east of its three existing tenements.
5EA is an interesting play, promising to become the first western company outside Rio Tinto to supply boric acid, an important chemical in fertilisers, smartphones and renewables among other things.
Aside from Rio, which supplies around 30% of global demand from its operations in California’s Mojave Desert, the bulk of supply globally comes from Eti Maden in Turkiye.
Its Fort Cady complex in California has delivered its first truckload now of ‘boric acid super sacks’ to a US customer.
But the lead item from its strategic update on Friday is a change in scope to include production of calcium chloride, a by-product that could reduce capex in the mine’s first commercial phase by 15%.
Another $2.2m of cost optimisations are expected to be made next year.
The cost savings are welcome after the company was forced to restructure its lending arrangements last year and announced the resignation of former CEO Susan Brennan in June.
Its stock is down 73% over the past year, with today’s 25% bump a welcome reversal of fortune for the US$32m dual-listed company. It hasn’t been helped by falling prices for lithium, an intended co-product.
“Over the last three months, 5E has made significant progress across the most critical elements of our strategy and go-forward plan as we advance our 5E Boron Americas project (the “Project”) towards commercial scale production,” new CEO Paul Weibel said.
“We’ve made the critical strategic decision to pursue calcium chloride as our byproduct and have now begun incorporating this decision into our commercial basis of design.
“We believe that the pursuit of calcium chloride for our by-production alongside boric acid has the potential to ultimately yield a significant decrease in our CAPEX needed for our commercial scale development, to meaningfully improve the Project’s rate of return, and to further embed long-term shareholder value creation to the Project.”
Weibel said 5EA was in the process of negotiating contracts for 25-50% of initial boric acid production from the mine’s first phase.
“Our commercial strategy execution has gained encouraging momentum as we’ve advanced customer offtake discussions and recently delivered our first shipment of boric acid to a customer. We will remain diligent with a keen focus on operational and commercial execution to help support our long-term funding strategy,” he said.
“We have a clear roadmap ahead of us in the next twelve months, and we look forward to delivering on our Project’s value enhancing catalysts as we complete pre-feed engineering and prepare the Project for commercial scale development and production in the coming year.”
(All up on no news)
A few gains across the sector have come from companies with little news to report, though Tim Goyder’s uranium explorer DevEx was chatting to investors at its AGM today.
The Todd Ross led explorer was hit with an ASX price and volume query, which drew a ‘nuthin’ to see here’ from the small cap.
Goyder’s address included a mention of the maiden inferred resource at the Kennedy rare earths project in Queensland alongside exploration across 14,000km2 in the NT’s McArthur Basin.
Heavy Rare Earths is progressing the acquisition of uranium exploration assets from Havilah Resources in South Australia.
It will acquire an 80% initial interest by spending $3 million over three years, including a minimum of $1m in the first year on exploration and development activities.
TechGen, meanwhile has a string of early stage exploration projects across the north of WA and NSW, with its focus currently on the Blue Devil project in the Kimberley which has returned high grade gold and copper in rock chips.
At Stockhead, we tell it like it is. While iTech Minerals is a Stockhead advertiser, it did not sponsor this article.
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