Categories: Energy / General Market Commentary
Topics: General Energy / General Market Commentary

Northern Miner: Advantage Lithium to acquire up to 75% of Orocobre’s Cauchari project

Northern Miner: Advantage Lithium to acquire up to 75% of Orocobre’s Cauchari project

Lithium producer Orocobre (TSX: ORI; ASX: ORE) plans to partner with junior Advantage Lithium(TSXV: AAL) on its Cauchari lithium project in northwestern Argentina’s Jujuy province.

Cauchari is about 15 km south of Orocobre’s flagship Olaroz lithium facility, and sits adjacent to a project of the same name owned by Lithium Americas Corp. (TSX: LAC) and Sociedad Quimica y Mineral (NYSE: SQM).

Under the letter of intent, Advantage Lithium will receive a 50% stake in Cauchari in exchange for giving Orocobre a 31.12% stake in the company, a 1% royalty, the right of first refusal for future brine production, and the right to nominate two members to Advantage Lithium’s board.

Advantage Lithium can earn a further 25% stake in Cauchari by spending US$5 million over three years or completing a feasibility study in that period. The partners will set up a joint-venture for Cauchari, which has an inferred resource of about 470,000 tonnes of lithium carbonate equivalent and 1.6 million tonnes of potash (potassium chloride).

The resource was based on five drill holes and covers two adjoining areas of the Cauchari salar, with a total of 230 million cubic metres of brine at average grades of 380 mg/L lithium and 3700 mg/L potassium. The resource tested only to an average depth of 170 metres in the northern resource area and 50 metres in the southern area.

In a press release announcing the letter of intent, Orocobre said there is “considerable potential to add to the existing resource,” given that the drilling to date has been fairly shallow. It noted that of the six holes it has drilled into the project, the deepest was 249 metres. Orocobre also pointed out that drilling on adjacent properties within the salar by Lithium Americas Corp. intersected brine-bearing salar sediments to 450 metres. Recent drilling of its own to the north in Olaroz intersected brine bearing sediments to a depth of 450 metres.

David Sidoo, Advantage Lithium’s president and CEO, notes that his management team approached Orocobre directly about a deal because they saw Cauchari as a strategic asset. “They were one of our main targeted companies that we wanted to work with,” Sidoo says in an interview. “We wanted to go after some of the larger producers with experience in lithium and producing lithium, rather than picking up grassroots properties on the fringes. We thought it’s a better strategy to joint-venture with a 300-pound gorilla.”

Sidoo notes that there was no shortage of competition for closing the Cauchari deal, including “all the juniors you can think of,” along with “Japanese and Chinese offering outright cash.” But in the end, he says, Orocobre chose Advantage Lithium because of its management team. “They were being courted by many companies,” Sidoo says. “They wanted to work with a management team that had people who had developed projects and raised money.”

Advantage Lithium’s board includes geologist Ross McElroy, who will also serve as a technical director, and Dev Randhawa, founding CEO and chairman of Fission Uranium (TSX:FCU; US-OTC: FCUUF).

McElroy received the Bill Dennis Award in 2014 for leading Fission Uranium’s team of geologists in one of the biggest uranium discoveries in northern Saskatchewan’s Athabasca basin region in recent years. The Patterson Lake South property is a high-grade, shallow-depth uranium discovery on the southwestern margin of the Athabasca basin.

As for Sidoo, he started off as a broker with Yorkton Securities before forming his own company, American Oil and Gas, which he sold to Hess in an all-stock transaction valued at about $630 million.

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