Transcript: American Lithium (LI) - Uranium Bonus & FS Focus for Lithium
American Lithium Corporation is focused on two jurisdictions, Nevada and Peru with two large development lithium projects. The company also has the world’s 5th largest uranium project which is in Peru known as Macusani.
In the US, American Lithium owns the TLC claystones lithium deposit, which is in close proximity to the Tesla giga-factory in Nevada. Following the acquisition of Plateau Energy Metals, American Lithium is advancing the large-scale Falchani hard rock lithium deposit in Peru. American Lithium originally bought Plateau Energy Metals for the lithium asset and the Macusani uranium project came with it. The uranium project is looking like a much smarter deal now, given what has been happening in the uranium space recently and it is a question of timing with this exciting project. American Lithium is considering spinning out the project to a strategic investor with uranium expertise but will keep a significant stake going forward.
American Lithium has been approached by several interested parties in the Macusani uranium project initially and now as the uranium market has started moving, the company has had further interest. The company plans to do some near-term work which will advance the project whilst they consider their options. The company is not in a rush to make a decision and they are open to discussions on the project.
The two lithium projects are also moving forward with exploration drill programmes and the company aims to release a PEA at the TLC project in Q1, 2022 and update the existing PEA at the Falchani project shortly. The Falchani project is further ahead than the TLC project and could be in production sooner. The company is working to gather additional data on all three of their projects to plan how to tackle each in what is a fast changing market for both lithium and uranium.
0:00 – Company Overview
0:54 – Recent Uranium Project, New Interest, Future Potential vs Cashing in Now
6:46 – Short-Term Plans, Project extension Options, Management Change?
10:13 – Decision Making, Lithium MnA Activity & Competitive Tension
13:34 – Environmental Restrictions, Constraints, Permission, CapEx & OpEx
17:25 – Order of Play with Lithium, Advancements, Nationalization Factor
24:21 – Cashflows: Current Position, Treasury, Dilution, Equity Position
26:32 – Quick Summary & Situational Analysis
28:22 – Outro
Simon Clarke: Hi Matthew, it's Simon Clarke, I'm the CEO of American Lithium. American Lithium is focused in 2 jurisdictions we have 2 large development lithium projects, one in Nevada, one in Peru. We also have the world's 5th largest undeveloped uranium project also situated in Peru so a lot's been going on and looking forward to updating you as we go through the interview.
Matthew Gordon: Good to see you again Simon. We saw you back in July, been seeing you've been banging out the press releases so I'm excited about that, I want to talk to you about some of the things you've been doing there, certainly on the technical front but I want to deal with your uranium project, okay? It's looking like a smarter and smarter deal quite frankly, given what's happened in the uranium space over the past couple of months but it sort of begs the question, what are you going to do with it?
Simon Clarke: Yeah it's a great question and we obviously bought Plateau Energy for the lithium asset and the uranium came with it. I would also say we also bought it for what we see as an exceptionally strong technical team that had developed Falchani and took them through to battery grade and we're now leveraging that expertise into what we're doing in Nevada. But yes it was certainly great to pick up Macusani at the same time, 5th largest undeveloped uranium resource and we think scope to actually build the value further in the short term but clearly it doesn't sit within a lithium producer. We've had a number of investors and shareholders say to us that we're never going to maximise value with it there and we've always know that so it's a question of timing. Our favoured approach is likely to spin it out, where we keep a significant stake in it and have some Board management representation but also bring in potentially a really strong separate team and it operates then in a standalone uranium company which we think will ultimately attract a better valuation and be better for everyone. But we want to maximise things for our shareholders, we have had some people approaching us with offers and our sense has always been it's not yet the time but I think with what's happening with uranium we're probably getting closer to that time and again we continue to work the asset, we think adding value as we go ahead here.
Matthew Gordon: It's really interesting what's happened in the uranium space in the last couple of months, obviously driven by Sprott Physical Uranium Trust and obviously now others entering that space too. Have you been approached recently? Because we're hearing the MNE phrase mentioned more and more in the space because there aren't too many decent sized projects out there to go after. This would probably qualify, we'll talk about you know, politics and legal and so forth in country in a bit, but a project of this scale is interesting so any new interest in it?
Simon Clarke: Yeah, I mean we had a lot of interest at the time we did the acquisition as you would imagine and you know, we had some of the usual suspects I would say coming out of the woodwork and low-balling and trying to do something at that stage. And you know, with the guys we've brought on, you have to remember Plateau was originally a uranium focused company and they were exploring for further uranium on the Macusani plateau when they discovered Falchani. So there's a lot of technical knowledge and expertise that that team has on it so we didn't want to do anything knee jerk and our sense was, even back in April, May you were starting to see the signs that the uranium side might be moving forward. So yes we had those initial approaches, subsequently we've had, we've continued to have approaches every now and again and obviously as uranium has heated up there's been, you know one group in particular and then we've also seen some bankers start to approach us raising questions as to whether the timing is right now.
Matthew Gordon: Interesting, interesting okay I guess you'll let us know more when you know but just coming back to your phrase we'll do the best, in the best interest of shareholders. That can mean 2 things that can mean best interest now or in the future, because this things, uranium's got a long way to run it seems. Okay we're up around the, well we were up around $50 or whatever it's slightly become reset back down to now. A lot of the conversations seem to be about it's going to be at $100 by the end of the year, it's going to be $200 next year. All the kind of very excitable, frothy language that has been used around it, what are you buying into in terms of what the future potential of this is versus cashing in now and then using that to get your lithium projects going?
Simon Clarke: Yeah you know, they did a really robust PEA, IRR pre-tax at 48% in 2016 using a $50 price so the work has been done since that we believe we'll actually average that PEA into a stronger PEA still. To our mind it's just getting better and better, so we're comfortable. I don’t necessarily buy into $100 or $200, I can't profess to know uranium enough but I certainly could see it well above the numbers that… the PEA was done on long-term $50 price which most of them are. In fact it's quite conservative compared to a number of them so to my mind that's the target. So there's 2 options, do you hold onto it, work it and then sell it to another group bringing in cash as you said to help develop the others project? Or do you spin it out sooner into a vehicle where it's going to attract more attention and greater valuation and keep a good stake for the company? You know that might ultimately be the best approach because I think, in a separate vehicle it's going, I think it's going to be valued more highly as things move forward. So you just have to figure out the right time to do that, so we wouldn't be afraid of doing that sooner if it was the right team and the right opportunity. But again, we're not going to do anything on a knee jerk basis and we have technical guys in the company who believe this is the best asset they've developed in a lifetime in the mining industry so you don't want to give it up too early or without a lot of thought.
Matthew Gordon: So if that's your preferred option then that suggests to me that you're not necessarily going to spend too much more money on it now but you'll wait to say shift it from a PEA to a Feasibility or Pre-Feas depending on which route you'll go because there was a pretty robust PEA and the new spin-out company pay for that advancement. Is that in your head or are you throwing money at this?
Simon Clarke: Well in the short-term there's some short-term work we can do with it. I mean Cameco own some of these assets and did a bunch of pre-concentration work so when, you know Plateau was originally called Macusani Yellowcake, it had a valuation of $125M on its own before Fukushima. But there's a bunch of work that's been done on pre-concentration where you reduce the mass to 88% but you more than double the grades. So there's a lot of, you know that PEA we think could be reinstated relatively quickly for a number of the steps that have been made in the interim and as we announced earlier this week there's also some really nice extension drilling targets. With average grades at surface of over 2% uranium so we think there's some near-term we can do which makes sense to do as we consider, you know, what options we're going to take here. But yes, I mean I do think that at the right time in a separate vehicle with a really strong management team there's a lot of value that can be unlocked and ultimately that will really benefit us and our shareholders if we structure it right.
Matthew Gordon: And so, and management teams are really, really important okay with all of these things. Are we talking about the previous management team being allowed to go and finish the job they started or are you talking about bringing new management teams in? Because again when we go out there and we look at some of the uranium projects out there, there's some great management teams, they're good at it they know what they're doing and then there's some people just joining the party right? So you know investors will be looking at that, so have you got thoughts on either bringing people in or…?
Simon Clarke: I mean as I've mentioned to you Matthew the technical team was the 3rd asset in Plateau and they've made a huge impact on the speed that we've been evolving things in Nevada and our process engineering work and our optimisation work, they've been really key in that and it's been… The knowledge they gained at Falchani and moving that to battery grade is now full-bore on TLC in Nevada so we're not going to lose those guys. But at the same time the knowledge that they have of Macusani would make sense to, whether they go on the Board or have some kind of management role but very much remain involved with us. We wouldn't want to give up those guys because the team is, we've got a really strong team now developed at American Lithium that we're not going to dismantle. But we think, you know we think they can do, you know they can add value on the uranium side still.
Matthew Gordon: Perfect, okay that's what I want to understand because you know to lose the technical nous that you've brought in to TLC and also obviously with Falchani I think would be a shame and I don’t know, possibly even concern people but you're cognisant of that. Look, I'm excited about uranium, I'm excited to do what you decide to do and when would you maybe be making decisions on that?
Simon Clarke: You know, as I said, we're not, we're not going to rush, it just depends on what we see, what opportunities come to us. We're open to it and we're open to discussing it and you know, it could happen in the next few months it could take longer and we're going to continue to advance what is a great project and look to ultimately create value. So we're not, again I use the phrase knee jerk, we're not going to do anything knee jerk but we'll certainly look at opportunities that come to us.
Matthew Gordon: Okay, I'll wait to hear from you on that one. Now I am excited about uranium but I'm also very, very excited about lithium, there's been a lot of M&A activity going on. A lot of competition for M&A activity going on, but competitive tension's always very important in these things you know to get the right price etc. Can you just give us a little update on what's going on with your 2 projects because we've seen you're making a lot of announcements around the technical options? I think you've got 3 that you've announced, have you settled down on one of those yet?
Simon Clarke: We're still going through the optimisation approach on that, I mean the obvious choice would have been sulphuric acid which we get very high, as we've announced, we get very high recovery rates, high extraction of lithium and it's a very tried and tested route that most of our peers use in Nevada. But the roast which we started looking at later in the process is very intriguing to us as well because you know, we still get high extraction rates but the roasting process deals with a lot of the impurities up front that we deal on the, that we then have to deal with on the sulphuric acid side and, you know, it would very much lend itself to a cut and cover operation. Where you would quarry the lithium because it sits at surface and one of the key economic drivers for this project is how it's hosted and the fact it's right at surface so we'd quarry it, roast it, process it and then you're effectively left with silica which you can then backfill with it very easy so you minimise the environmental impact which is key to permitting in the US right now and you know, and you minimise tailings management, you don't need a big acid plant. You do need a roaster but lower CapEx and we think there's lots of really interesting attributes so we want to make sure that we do the work Matthew. Laurence is focused on that, you know really optimising these and then really… I mean what we don’t want to do is come out with PEA that just gets a technical grade. We could have done that months ago using sulphuric acid. We want to find the best option from an economic and environment lense, using both lenses and then we think that will drive a really robust PEA. So we'd rather take the time now and do the work and as I say that will then mean that we're looking at PEA in Q1 of next year. But this is a piece that we really want to get right, we want to get the right mix and then it will drive a really strong PEA.
Matthew Gordon: But with the roasting you're going to need gas aren't you? Does that in itself bring problems in terms of, one permission to do that and again environmentally?
Simon Clarke: I mean you have to permit it but it's, the gas is 60 miles away and there's several utilities that are keen to do it so I mean it's definitely doable. The question mark comes do you pay the CapEx and so add a bit of CapEx to the roasting route or do you pay a slightly higher long-term off-take with a utility that might move your operational costs up a bit but again we think the overall environment benefit could mean that it makes sense so you know, we have to finish the process. We have to do all the work and then we will select the best approach, again from that mix of economic and environmental lenses.
Matthew Gordon: Can we just talk about the environmental component again because we're seeing energy prices go up here in the UK and someone reminded me the other day that… of a survey which happened, I think just over a year ago, which said would you mind paying more for your energy prices if they were from renewables? Well guess what? They probably just hit the road over here and it turns out the way people voted back then is not how they feel today. So for you, and if you get to the point when you're selling, you know choosing a slightly, sorry a significantly more environmentally friendly solution which may be a little bit more costly and therefore a little bit less margin do you think buyers are prepared to pay up for that? Is that the way that this ESG narrative is going?
Simon Clarke: I think so, I think to an extent and we all know where the cost will ultimately come on the roasting option, I mean we know on the sulphuric acid route we fully believe we can get close to that 4,000 number per tonne which is, you know a key one in the industry. But we don't know yet on the roasting, you may be right the natural gas side of it is definitely an input that's potentially makes your OpEx a bit higher but you know, you look at groups like whether it's Tesla or Volkswagen or other end-users and more and more there is interest in solutions. You see it on the cobalt side, you know with dirty cobalt. So you know, and I'm not by any means saying sulphuric acid is a bad route to go, it's tried and tested, there's benefits to it. You don't have as much of a CO2 footprint as you'd have with roasting, you know you'd do steps to mitigate that. Roasters do get permitted in Nevada and you know, we just think the lifecycle for the whole thing where you don't have to deal with tailings, you can cut and cover, you don't have a big sulphuric acid plant, that kind of stuff might make roasting the better approach on an environment perspective and might, you know you talk about the end-users like Tesla and Volkswagen and other people but the other key element is the regulators. You know, what's going to be the best approach to permit and you know, we will also have those discussions as well because, and again that's why we brought Enviro in early to help us do the lifecycle analysis. So, you know we can look at sulphuric acid against roasting on an environmental basis and look at what truly is the better route from an environmental footprint.
Matthew Gordon: Okay, so you've kind of got that discussion going on internally about, you know higher or lower CapEx at the beginning versus higher or lower OpEx on-going plus the environmental premium that you may be able to get for it. If, when you do come to sell is that right? Okay, okay.
Simon Clarke: Absolutely.
Matthew Gordon: Okay, let's just talk about Falchani and TLC because there's obviously one you've acquired and one you already had and you know, you talked us through with Laurence last time about his team's ability to come in and help you technically with TLC but have you now got a sense of the order of play with the lithium? You know, do you focus on Falchani or do you still stick with TLC, I mean how's it advancing?
Simon Clarke: Yeah I, you know I think, I think Falchani was a little bit parked whilst we did the acquisition and you know understood it better, but also because of the elections in Peru and the process that's happened since that so, you know, we've started to see things revert to normal in Peru. Our communities are fully engaged, we have all the necessary approvals there, we've put in the roads that we need to put in, in the roads and you know as you saw, we were invited to go and meet the President in New York a couple of weeks ago. And we had a really good conversation with him and his colleagues around lithium and they're very keen to see lithium developed in Peru within the course of this Presidency and so there's a lot of alignment there and a lot of support for what we're doing. And we were also reassured that, you know, a lot of the rhetoric that you saw in the election campaign around nationalisation and expropriation was just that, it was rhetoric and so that's very much now given us the impetus to re-launch things and you know we've had a drilling programme on the books for a couple of months down there which we're now going to move ahead and launch. So we will be doing a lot of work at Falchani as well and if you look at, if you look at each development Falchani is further ahead and if we're going to get the support locally, I mean Nevada is one of the best mining jurisdictions on the planet. But it's well publicised that the permitting can slow these projects down so you know, our approach is we like both, Falchani's further ahead right now and you know, could well be in production sooner. So, you know, we're going to keep driving both of them ahead.
Matthew Gordon: Let me ask you about Pedro Castillo because obviously, as you say, there was a lot of, and there always is, whether Peru, Chile, Ecuador, whatever. All this nationalism and nationalisation rhetoric around the time of the elections or the year preceding the elections and we in the west react the same way. Oh my goodness it's a potential Socialist Government, it's going to, the end is nigh and then you come out the other side and go, it's business as usual. It needs to be business as usual within mining communities but… Can I ask about the…? So that's something that we, you know we've been looking at, analysing, talking to people about and lawyers and politicians and you know, bankers in those countries but with Peru, with the mining constitution, sorry with the, yeah with the constitution needing to be addressed, do you think that lithium is going to be viewed differently? Is it mining versus chemicals? Is it… basically is there any chance of any aspect of this being nationalised, from your conversations in New York?
Simon Clarke: From the conversations I've had, no. I mean I'm not a political expert and as you know you deal with whichever administration comes into power. You know what I would say is from his comments he is very keen to see lithium develop and he really wants to see lithium move into production during the course of his Presidency so…
Matthew Gordon: But under what condition? But not under national control?
Simon Clarke: I don't know, I mean if they're going to nationalise things then a) I don't think they would ever get it through the Parliament because the Parliament is central right and you have to come to the centre to do things but I also believe that that's not what he wants to do. What I believe his interests are with the communities and making sure that there are jobs locally and you know that companies don't concentrate lithium or other minerals and then export them out the country. He wants to see them developed and processed in country and maximum benefits for Peruvians and so, I mean will Royalties go up? I mean the way it is in Peru right now is Royalties are relatively benign and you work them out on a case by case basis. Usually within 1-3 sometimes 5%, you know maybe there's an increase in that somewhere along the way but certainly I don’t get the impression that there's going to be anything crazy done. As long as the projects involve the local communities and benefit Peru and I think also are done in an environmentally responsible way and that's the other thing about Falchani. I mean it's in a region of Peru that has abundant water, you know you compare that to a number of the brine operations in South America and a lot of hydro-electric power so it's an area where Pedro Castillo has a lot of support and it's an area he's committed to because of that. So I think, you know our interests are very much aligned, you know we'll see, again I'm not a politician so we'll see how things evolve but certainly given the discussion we had it makes sense for us to launch our next phase of development you know down in Peru.
Matthew Gordon: Okay, did those conversations also give you a little bit of renewed hope on the case that you've inherited when you made the acquisition?
Simon Clarke: That's an interesting one, we didn't talk directly to him on that, I mean I know some of my colleagues who are down in Peru, our general manager Raul Solis is very well connected politically and so you know he's had a lot of discussions on that. What we're told and you know you have remember, the judiciary is separate from the political process. I mean is there influence? You know that's above my pay grade but what we hear on the ground is that we, you know there's a strong likelihood that this will be resolved shortly and be fully, you know we do expect it to be resolved in our favour. But again, until the judge makes the final pronouncement you never know where things are going to go but at this point I'd say we're very optimistic that we'll see those concessions returned and returned in the near future.
Matthew Gordon: Okay, let's talk cash and warrants, what's your position at the moment?
Simon Clarke: We actually had a bunch of warrants coming in recently that were well on the money so we're at about CAD$17M so we're in a good position. Obviously these are all projects, you know I mean as I've mentioned our plans are to move ahead pretty aggressively on all the projects so, you know, at some stage you know at the appropriate moment and appropriate market conditions it likely will make sense to add more capital and you know it would be nice to have 2-3 years running room in terms of Treasury. Because of, that'll really help us just focus on developing these projects and the milestones and the news flow. So Matthew we're in no rush, we're certainly not desperate we have more than enough cash for the next year but somewhere along the line we would probably look to bolster. And we do, we still have about $12M in the money, warrants and options that will likely come in over the coming weeks and months as well.
Matthew Gordon: Okay, so do the maths, if $17M gets you through the next year or so you've got more warrants coming through. So if you did go to market you’d be looking at about $30M-$40M range?
Simon Clarke: Probably $25M-$30M.
Matthew Gordon: $25M-$30M.
Simon Clarke: That's kind of where we would, you know we would be… and again we don’t want to, we don’t want over-dilute we recognise… I mean, I think, I think for us we're not here for big pay cheques you know the management and the Board have good equity positions. You know Andy's always driven, Andy Bowering the Chair's always driven that. You know we're aligned with shareholders, where we make our real returns on this is through equity appreciation and ultimately whether we sell the company or move one or more projects through to production. We’re going to do what's going to maximise the returns for the shareholders and we're a big part of that.
Matthew Gordon: Okay, well look Simon I had a bunch of questions lined up about, you know we were talking about cesium at Falchani and Ganfeng and what's going on in the market but what I'm hearing from you is there's a kind of planning and thinking phase that you're going through. So you're doing a bit of work giving you some additional data and thinking about how you tackle each one of these projects in what seems to be a fast changing market for both commodities at the moment. The lithium prices across the board are shooting up, if anything there's slight disconnect with equities at the moment which is a surprising component to this and uranium I'm always excited about. So I'm keen to see what you come back and tell us in terms of timing, order or play, allocation of capital. If indeed you do do a fund raise to give you breathing space to focus on development so yeah, stay in touch let us know how you get on.
Simon Clarke: Yeah, no we'd love to and you know one of the things you mentioned, cesium, we will at Falchani update the PEA probably as an initial step to moving into Feasibility, it's ready for Feasibility but the original PEA never incorporated cesium and potash and there's a lot of interest in both. I mean potash is imported into Peru so it’s another strong input and you know, as well as the work we're doing to upgrade, to extend the resource but also move a lot of the inferred to M&I, you know we think it'll make sense to update the PEA before then, immediately moving into PFS. But a lot's happening, as I say we're in no rush for capital but you know, we're going to continue to drive ahead on all fronts.
Matthew Gordon: Brilliant.