Categories: Energy
Topics: General Energy

Lithium X CEO Brian Paes-Braga on Its Heavyweight Backing & Path to Lithium Production

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is founder and CEO of Lithium X, Brian Paes-Braga. Lithium X (TSX-V: LIX)(OTC: LIXXF) is a lithium resource explorer and developer with a focus on becoming a low cost supplier for the lithium battery industry. Brian has spent almost a decade in the international financial sector working with firms ranging in services from underwriting, mergers and acquisitions, and asset management, to venture capital and private equity. In addition to his many corporate accomplishments, Brian is also a board member of Community First Foundation which focuses on childhood hunger in the Vancouver, Canada area through its program Back Pack Buddies.

Brian, thank you so much for joining me this morning.

Brian Paes-Braga: Thank you Gerardo. Great pronunciation of the last name. Never easy, so well done.

Gerardo Del Real: I appreciate that. I provided a brief introduction there, but can you please share with us a bit more on your background and how you got involved with Lithium X?

Brian Paes-Braga: Again, my background as mentioned has really been focused in the capital markets and financial states, but really at my core I'm an entrepreneur at heart. Started multiple businesses in high school. Had many, many summer jobs and part-time jobs during high school early days. I've really always been focused on trying to build my own company. Last summer, actually almost a year ago today, where I drove over the hill into Clayton Valley, Nevada and saw the Rockwood or Albemarle lithium facility. It was around the same time that Elon Musk was really pushing forward with his Nevada Gigafactory. I thought to myself that there was such a screaming opportunity in the space that no one had really taken it in a global way and put together a world class team to really go and focus on this lithium space.

That was about a year ago today and the company went public a couple months after that. November 30th 2015 was our first trading day. Over the past 8 or 9 months we've raised about $25 million of equity from family offices, strategics, institutions and high net worth retails, and built a market capital of over $150 million and armed ourselves with, as I mentioned, a world class team into really, really great assets in the space.

Gerardo Del Real: Definitely. You mentioned the world class team. As I mentioned in the introduction, Lithium X is obviously focused on becoming a low cost producer for the lithium battery industry. The flagship, the Sal de los Angeles project in Salta province Argentina, provides a path for that. Before we talk about Sal de los Angeles, I would like to talk about the experience of the management team and the board. You've been able to put together a very accomplished group that has actually built and operated lithium operations before. Can you share with us a few of those names and why having them on board is so important to being able to take lithium X from a great lithium story to an actual producer?

Brian Paes-Braga: It's a great point Gerardo. It's a key differentiator for our company. It all started with last year. It was last September that I approached Frank Giurstra initially as a keystone investor, a very large investor to this day. He actually invested $2 million in the last round that we did at $1.65 a share Canadian. He's a big high level visionary. He's had multiple success stories. I think most notably he's known for being the founder of Lionsgate Films which is the world's largest independent film studio now. I think it's a $5 or $6 billion market cap.

Very quickly we realized that we wanted to have another really strong mining executive on our team. That's when we brought on Paul Matysek as our executive chairman. It was last October we did that. Paul's background is he sold his last 4 companies, one being the uranium space, one being the potash space, one being the gold space, and one being in actually lithium space as well, for just under $2.5 billion as CEO and founder.

We had Frank as a high level door-opener and visionary and obviously a large pool of capital. We had Paul in there as a really experienced and successful shareholder value creator as a CEO.

Very quickly we said, "We've got to go get a big asset." That's when we got Sal de los Angeles. With getting that asset we realized quite quickly in this lithium space, which is still a growing market, but it's a small marketplace today. There isn't the breadth of talent that exists, let's say, in the oil and gas space. Oil and gas space has thousands of projects around the world, tens of thousands. You've got lots of great engineers. You've got lots of great land men and geologists.

In the lithium space there's really two core assets that produce most of the lithium supply. That's the Salar de Atacama brine operation in Chili, and obviously Greenbush complex, which is a hard rock complex in Australia. We focused very quickly on that brine Atacama which is just an absolute cash cow for SQM in Albemarle. We were able to hire, who ran Rockwood Lithium South America for 23 years as their president and CEO, a gentleman by the name of Eduardo Morales and his whole team.

This was absolutely the key differentiator because it's part of our thesis that the lithium market is one of a race to production. It's not a marketplace that I think wants, a huge amount of exploration and drilling up big assets. This is a race to production in our opinion, Lithium X's opinion, and we wanted to arm ourselves first with great visionaries, then with great assets, now with great operators to overlay those assets. We think with putting ourselves as shareholders and all of our other shareholders in a position to be successful in this very, very high profile growth space.

Gerardo Del Real: It leads in perfectly to my next question. You mentioned the Sal de los Angeles, the flagship asset. It's important because you recently announced the resource estimate at the project. Can you share the details of that for us please?

Brian Paes-Braga: Sure. Again, as a management team, we were so excited to see that we had over a million tonnes in the measured and indicated (M&I) category. Why that was so important is it'll be the real focus of our feasibility study that is upcoming now. If we look at the comparables down in Argentina, the other world class brine operations including Lithium Americas or Orocobre, Galaxy, these are all fantastic companies. Their feasibility studies are all revolved around between 700,000 and a million tonnes. The reason for that is that if you've got 25,000 tonne per year operation, for example, for 40 years you've got a million tonnes of recoverable reserves. We really wanted to focus on not the biggest resource, because other assets have much bigger resources then ours. We wanted to focus on a very palatable, focused 500,000 to a million tonne resource, which we hope to get into the reserve category through our feasibility study and really be up there with the other great names in the space that I mentioned.

That was really great thing that we got. Our level of grades are over 500 PPM, was also something that we were really happy about. We're very proud to have put that out in the time that we did.

Gerardo Del Real: Absolutely. Lithium X holds a 50% interest in the project with the option to acquire and additional 30%. Is that correct?

Brian Paes-Braga: That's correct.

Gerardo Del Real: Excellent. Can you tell us a little bit about the path moving forward to put Sal de los Angeles into production?

Brian Paes-Braga: Eduardo Morales, again ex-Rockwood Lithium which sold to Albemarle for $6.2 billion 2 years ago, he's leading the charge on the ground between him and his partner, Andre. The plan is to in parallel commence our ponding facility, which the plan is to produce around 2,500 tonnes per year of lithium carbonate equivalence. Alongside that finish our feasibility study. The plan is halfway through next year we hope to have the feasibility study, so it's between Q2 and Q3 next year for the feasibility study. We're just waiting on our permits right now from the Salta government to start construction on our ponding facility, which is fully funded.

We're actually sitting on about $17 million of cash right now. On that initial ponding facility we've brought in a 50% joint venture partner that's putting up about 70% of the cost and we're putting up 30%, which will be about $3 million US. That project's fully funded. Not only will that be a great cash business for us, it's a smaller one, but it's also more importantly going to be real time data for our feasibility study, which, based on historic PEA numbers, is outlining a 15,000 to 25,000 tonne per year operation. The 2,500 tonnes a year is going to give us a lot of great data for our bigger facility.

Gerardo Del Real: Wonderful. Can you share with us a little bit about the jurisdiction and the infrastructure in Argentina near the project? I know Argentina's undergone some changes that on the surface at least appear to be very mining friendly for anyone involved in the region. Can you share some of the details behind that?

Brian Paes-Braga: Argentina, when we were looking at it last Christmas, it wasn't what it is today. I think Argentina's gone through a tough 5 to 10 years, last 5 to 10 years. I think they're coming out of that tough time. President Macri has done an amazing job ensuring that foreign capital flows to the country. One of the most important things he did was pay back a lot of those funds out of New York, the vulture funds that were owed money for a very long time. He's done a great job to attract foreign capital again.

With regards to province, I think anyone will tell you that knows Argentina and I've had to learn it myself here, is province to province is very different. Salta in particular is one of the best provinces, if not the best province, to work in. It's a very mining friendly province. Our team has a lot of experience there. Actually Paul Matysek, our executive chairman, just sold his gold company this summer for around $130-$140 million. That was located in Salta. That project was fully permitted with the Salta government and really shovel-ready. That was bought by Fortuna earlier this summer.

Not only is his experience in Salta invaluable, having Eduardo and his team located down in South America and able to fly in and really meet everyone face-to-face that we're going to need on-site to build this project, is all very, very important things for us.

Gerardo Del Real: I agree. I think it's huge to have people that know the region, know the area, and that have experience navigating the mining laws and the property laws and the jurisdictional laws. I think that's great.

In addition, Brian, you also control the largest land package, Clayton Valley, located approximately 200 miles from Tesla's Gigafactory, which you mentioned earlier. You started drilling in late July, if I'm not mistaken, at Clayton Valley North. Can you tell us a little bit about the drill program and the progress there?

Brian Paes-Braga: I'll take one step back just in terms of the strategy around Clayton Valley was, as I mentioned earlier on, I drove into Clayton Valley about a year ago to look at and tie up that initial land package that I had done, which is about 1,500 acres. This was about a year ago. I just felt that if I was right on this lithium market that I'd seen in other markets, the oil and gas market for example, really trying to tie up as much prospective land as you can that as the industry comes and catches up to you you can create shareholder value by being there and being the biggest player and having that value train raise the boat and bring in potential partners or be able to raise more capital at better prices and really be able to develop the assets.

Number 1, the strategy was try to become the biggest player adjacent to the only producing lithium mine in all of North America. We were able to do that. On the exploration side we did start to drill this summer. We are all anxiously awaiting those results. It's an area that we're focused on from a perspective of delineating a resource. Historically Clayton Valley is a lower grade operation. It's something that is going to require to be highly, highly economic, it's going to require some technology advancements not unlike any other industry, for example the oil and gas industry using fracking and bringing wells online.

I think every time you've got a commodity price push, technology comes in and unlocks value and lower grade assets that weren't economical before. I see the same thing happening in Clayton Valley. Lithium X hasn't taken a focused approach on that because there's great companies down there like Pure Energy, who's working with the like of the Department of Energy and Tesla and Tenova Bateman that are really pushing on that advancement of technology. We hope that they're successful. I believe that someone will be. That whole area is going to be a very valuable area at some point. I just don't know when.

With the team that we have and the high grade million-tonne asset we have in Argentina, that's really where our focus is, but we still are very happy to be a prominent player in Clayton Valley and hopefully successful on drilling out a resource and really being a part of that advancement. Nevada is an amazing jurisdiction to be in. The US is a great place to work. With the proximity to the Gigafactory you just can't beat it. We're happy to be down there. We're being active as we speak.

Gerardo Del Real: Definitely. Brian, we covered the strong team and the flagships Sal de los Angeles in Argentina and the land package, of course, in Nevada that we just spoke on. Advancing the projects will obviously take time and money. You mentioned the cash position earlier in passing, but I think it's very important for readers and listeners to get an idea of just where you're at cash-wise. Could you repeat that for me just one last time where Lithium X sits cash-wise?

Brian Paes-Braga: I'll comment on capital structure too. We're sitting on about $17 million of cash. We've got no debt. We have no convertible securities on our cap table other then employee stock options. We've only got 65 million shares outstanding. Capital structure is something that's very important to me, especially in such a capital intensive business. Any resource developer, I don't care who it is, gold, silver, iron ore, oil and gas, lithium, it's very easy to get caught up on diluting out common shareholders. It's something that I protect and I defend very, very closely. I'd rather see a share price increase a lot than just continue to dilute the share structure. I'm very focused on keeping this cap table intact and creating shareholder value. Our whole team is.

Gerardo Del Real: That's great to hear Brian because I know one of my biggest peeves as a watcher of the markets and investor and speculator in these markets, is seeing value added in terms of market cap but not seeing that translate over to shareholder value. It's great to hear that that's a focus and that you defend that the way that you defend it. I commend you for that.

Brian, we're obviously watching progress in Nevada and Argentina. We're looking forward to having you back on to share new developments. Is there anything I missed maybe that you'd like to add?

Brian Paes-Braga: No, it's great Gerardo. I really appreciate you taking the time and I look forward to coming back online soon.

Gerardo Del Real: Thank you for taking the time this morning. We'll have you back on soon Brian.

Brian Paes-Braga: Thank you.