Advantage Lithium Has a ‘Winning’ Edge Over Most Lithium Juniors
Expect plenty of news flow from Advantage Lithium Corp. (TSXV: AAL) leading up to the completion of its Phase 1 drill program by year-end 2017
SmallCapPower | September 13, 2017: Lithium-related stocks have received much attention from investors over the past couple of years due to the expected demand surge from a proliferation in the number of rechargeable batteries, especially for use in electric and hybrid vehicles and for energy storage. For those comfortable with the higher risk/higher potential reward for junior lithium stocks, don’t forget the importance of the ‘Ps’ – the top two being People and Property. With that in mind, one company, Advantage Lithium Corp. (TSXV: AAL), caught our attention as having a good chance of success.
Advantage Lithium is led by CEO David Sidoo, who has proven he knows how to win. First, as a star football player that helped the University of British Columbia capture a Vanier Cup, which allowed him to play five seasons in the Canadian Football League. Then, as a successful businessman who was a top revenue generator at Yorkton Securities before becoming a founding shareholder of American Oil & Gas Inc. which was sold to Hess Corporation in 2010 for more US$630 million.
Now, Mr. Sidoo expects to duplicate that achievement with his latest venture, Advantage Lithium. On March 27, 2017, Advantage acquired a 50% interest in the Cauchari JV lithium exploration project in Argentina from Orocobre Limited (TSX: ORL), and will soon own 75% as Advantage is expected to spend the required US$5 million minimum by year end. In addition, AAL acquired 100% interest in five other lithium properties totaling over 81,000 hectares. Partnering with an established lithium producer in the area should prove to be a big help for Advantage Lithium in its development, as Orocobre recently reported a fiscal 2017 profit of US$19.4 million, driven by record production of 11,862 tonnes of lithium carbonate.
“We already have an existing resource in Cauchari we inherited from Orocobre. And we’re embarking on a 17-hole drill program that started four months ago. We are completing three holes right now down to a depth of approximately 400 meters, which will be some the deepest holes in that basin. And we’re in the process of increasing the scope of that resource that we have right now,” David Sidoo told SmallCapPower recently.
He added that Advantage Lithium expects to increase its resource from the current 470,000 tonnes of Lithium Carbonate Equivalent (LCE) equivalent, convert it into economic reserves, and advance through engineering studies towards a permitted project in 2019-20.
The Cauchari property has what could be called a ‘built-in’ advantage in that it’s just 10 kilometres from its partner Orocobre’s lithium processing facility, which cost more than $400 million to build in 2012. The Cauchari property also benefits from a corridor of road and power infrastructure that passes within a few kilometres.
Given that building a processing facility for this type of operation takes a lot of time (for construction and permits) and money (in the $300 million to $400 million range), Advantage Lithium could potentially build a pipeline system at reduced CAPEX to supply lithium brine directly to Orocobre’s processing facility. And if the resource becomes big enough, there will always be the possibility a major battery producer will fund a standalone plant.
The ‘lithium triangle’ overlays Argentina, Bolivia and Chile and, according to The Economist, is thought to contain 54% of the world’s lithium resources. The lithium occurs in what are known as brine deposits hosted in salt flat aquifers. About 66% of global lithium reserves are found in brine deposits, which are sometimes concentrated to high enough levels to make economic (source: Visual Capitalist). Compared to hard-rock lithium deposits, brine deposits are easier to explore, faster to put into production, and require less capital depending on the proximity to roads, power, and water.
Global Lithium LLC President Joe Lowry, considered by many to be one of the world’s leading lithium market experts, expects lithium demand to nearly triple by 2025 (source: The Economist). The rush to fill that demand sparked a lithium stock boom in 2016, where nearly every company with ‘lithium’ in its name saw a substantial share price increase.
While much of that ‘froth’ has come off the market, those lithium juniors with the ‘Ps’ – People, Property and now Pending Production – will likely continue to see buying interest in its shares.
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