Nevada-focused lithium explorer Reedy Lagoon has come up empty-handed at its Columbus Salt Marsh project – news that sent its share price down 40 per cent on Monday.
“Analysis of the brine samples collected from the recent drilling at Columbus Salt Marsh has not recovered lithium in sufficient concentration to warrant further work at this project,” the company told investors.
Lithium brine deposits are found in salt lakes and play an important role in the world’s supply of lithium. In 2015, subsurface brines yielded about half of the world’s lithium production.
Brine deposits are cheaper to extract lithium from than hard-rock deposits.
Reedy’s shares (ASX:RLC) have fallen 72 per cent from the 52-week high of 7.5c they were trading at in January.
They closed Monday out at 2.1c, down from the previous close of 3.5c.
Managing director Geof Fethers told Stockhead that Reedy still plans finish its studies into the samples taken from the Columbus Salt Marsh project.
“We still have information we can get from the drill hole on how we see lithium moving around in the system,” he said.
But Reedy won’t be doing any more drilling at the project.
Although six significant zones of volcanic ash and tuff had been identified from core drill samples, the maximum lithium concentration detected was only 10 mg/L.
Reedy says the level is not considered to be high enough to indicate potential for economic recovery of lithium.
The company concluded that the area had been “effectively leached of lithium and the contained lithium removed by ground water flow”.
The volcanic ash and tuff deposits were interpreted to be derived from the eruption of Mt Bishop and the Long Valley Caldera 110km to the west.
The Mt Bishop Tuff is believed to be the source of much of the lithium in Clayton Valley.
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Reedy said previously that the presence of extensive deposits of the tuff and ash beds in the drill hole was considered significant.
“From our point of view, it’s just exploration and nobody in their right mind expects all holes to go along and be discovery holes,” Mr Fethers said.
“We went to the Columbus Salt Marsh – hole number one, we put it in, we got great geology, we got brines. Everything was working except we didn’t get any lithium in the brines, so we lucked out, that’s exploration.”
The drill rig has now moved to the Big Smoky South project, which is located closer to the already producing Silver Peak lithium operation in Clayton Valley owned by North Carolina-based heavyweight Albermarle.
Mr Fethers said Reedy is fully funded for the next hole, which will be drilled down to 850m. Results are expected in six weeks.
Silver Peak is the only lithium brine operation, and one of only a handful of lithium mines, in North America.
North American brines have less magnesium and calcium, which gives them a cost advantage over South American brines.
Reedy spent about $853,000 on exploration and evaluation in the March quarter and had around $1.6 million cash in the kitty at the end of the quarter.
The company estimated it would spend around $1.4 million on exploration in the current quarter.