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Summary

Chinese investment continues to flow into advanced junior lithium exploration projects; Lithium X is being acquired by a large Chinese energy metals fund.

NeoLithium, Millennial Lithium, and Advantage Lithium are advancing their lithium brine projects in Argentina.

Lithium X takeover price reflects 1% value for in-ground lithium resources; a valuation which can be applied to other advanced lithium explorers.

One significant megatrend in 2017 was Chinese global investment into strategic energy metals such lithium, cobalt and others. Chinese battery manufacturing capacity is currently being scaled up to meet the emerging demand from the electric vehicle industry. In the second half of 2017, the Chinese government unleashed requirements that all automakers producing 30,000 vehicles per annum must shift 10% of their supply to electric drive or buy credits from other automakers. These developments have driven Chinese investment upstream throughout the energy metals industry, a trend which will likely continue throughout 2018.

In July 2017, Ningbo Shanshan a large Chinese lithium battery anode materials company invested $265 million into China Molybdenum a major global energy metals miner who is ranked as the second largest cobalt manufacturer in the world. The funds were used to acquire additional assets in Brazil and Democratic Republic of the Congo.

Junior lithium exploration company, NRG Metals (OTC:OTCQB:NRGMF) who is actively exploring a property in Argentina was successful in raising early stage exploration capital from Chemphys. The private placement was valued at only $1.4 million but illustrates the level of interest from Chinese material companies. Chemphys specializes in the production of high grade Lithium Carbonate and battery grade Lithium Hydroxide for use in cathode materials and electrolytes of lithium ion batteries. Lithium carbonate is a direct input into the lithium hydroxide manufacturing process which has created a shortage of the white metal. The shortage has driven up the prices of lithium carbonate from $6,000 in recent years to over $13,000 at the end of 2017 and over $18,000 in the Chinese domestic market.

A more sizable investment of $30 million was made by Million Surge, a wholly-owned subsidiary of GCL into Millennial Lithium (OTC:OTCQB:MLNLF). Millennial is a late stage lithium exploration company focused on its flagship asset at Pastos Grandes located in the Lithium Triangle zone of Argentina. Based on the companies recently filed technical report, the lithium brine asset includes 2.1 million T of LCE in the Measured and Indicated Resource categories with an additional 878,000 T LCE in the Inferred Resource category.

Lithium X acquired by Chinese investment firm

The most significant 2017 transaction was the acquisition of Lithium X (OTC:OTCPK:LIXXF) by Chinese investment group Nextview for $265million or $2.61/ share. Nextview is a large Chinese resource focused organization who has teamed up with Tibet Summit to establish a $1.5 billion investment fund to acquire overseas mining assets with a focus on new energy resource sector. Lithium X is a junior lithium exploration company focused on its flagship project, Sal de los Angelese project in the Argentina region of the Lithium Triangle.

The acquisition price represents 1% of market price, or $130 / T LCE brine could be implied against other lithium exploration companies such as Advantage Lithium (OTC:OTCQX:AVLIF). Advantage Lithium is actively exploring its flagship asset at Cauchari which straddles both the Lithium Americas and Orocobre (OTC:OTCPK:OROCF) properties. The Cauchari asset is also owned by Orocobre who is the first lithium brine producer to bring new production capacity into the market in over 20 years. Further, Orocobre owns over 30% of Advantage Lithium’s shares and has been actively cooperating to share information and resources to expedite the development of the Cauchari asset. Orocobre drilling activities in 2011-12 confirmed a deposit of 500,000 in the Southwest region of the property, which is now being expanded upon by Advantage Lithium. The company has expanded in the Northwest region as it has never been drilled and is further defining the Southwest region. Initial drill results have come back very positively as a lithium body was discovered. This brine discovery further expands the Cauchari-Olaroz basin which has drawn investments from Orocobre, Lithium Americas (OTC:OTCQX:LACDF), Advantage Lithium, Toyota Tsusho (OTC:OTCPK:TYHOF), SQM (NYSE:SQM) and Ganfeng Lithium.

Advantage Lithium is expected to report its initial resource estimates in CY Q1 2018 which are targeted around 2.5M T LCE. Based on the Lithium X takeover valuation this implies a potential valuation of the asset at around $325million, with $245million attributable to Advantage Lithium and the balance to Orocobre. At present, Advantage Lithium has a total of around 130 M shares outstanding, representing a market value of around $1.90 per share.

Millennial Lithium (OTCMKTS:MLNLF) technical reports show a deposit of around 3million T LCE in various categories which based on the Lithium X takeover is valued at around $390 million. The company has around 70 million shares outstanding which would value its flagship asset at around $5.50 / share.

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