American Lithium (LI) & Plateau Energy Metals (PLU) - Acquisition Time

American Lithium has recently reached an agreement with Plateau Energy Metals to consolidate their development-stage Lithium assets. Lithium demand is rapidly growing due to the increasing focus on electric vehicles, energy storage and renewable energy generation. It is expected that Plateau shareholders will hold approximately 21% of American Lithium’s shares on an outstanding undiluted basis upon completion of the transaction.

American Lithium is engaged in the acquisition, exploration and development of Lithium resources within mining-friendly jurisdictions throughout the Americas. American Lithium currently holds a significant land position within 3-4 hours drive of the Tesla Gigafactory consisting of over 4,000 acres at their TLC project near Tonopah, NV, one of the most promising and underdeveloped Lithium sedimentary basins in North America today. 

Plateau Energy Metals is a Canadian based company involved in the exploration and development of its Falchani Lithium project and its Macusani Uranium project in southeastern Peru. The Company, with 100% control of mineral concessions covering over 93,000 hectares, has significant and growing Lithium resources and all reported Uranium resources known in Peru, all of which are situated near infrastructure.

We met with Simon Clarke, Director of American Lithium and Laurence Stefan, President & Interim CEO of Plateau Energy Metals to discuss the recently announced agreement between the 2 companies.

Company Overviews

Plateau Energy Metals has a long history in South America starting in 2007 as a Uranium based company and also discovered Lithium on the Macusani platform. Over the years, they've been able to evaluate around 124Mlbs of Yellowcake in the ground high in the Andes and Macusani which is probably one of the largest undeveloped Uranium jurisdictions in the world. They published the first Lithium resource around their Uranium deposits in 2015 and realised that the amount of Lithium available on the Macusani plateau was huge. The Rhyolitic Province, one of the most acidic volcanic rocks that erupted to the surface, brings a lot of Uranium and in some conditions, also Lithium. The area of about 80kms long by 45kms wide has potential to find many sources of Lithium-ion and in 2017, they identified the source of the Falchani.

American Lithium was set up several years ago in Nevada and is focused on Lithium. Initially, the company focused on brine assets near to Clayton Valley, but those assets did not work out and they then put together an interesting land package of sedimentary claystone further north in Nevada which had been the traditional sources of Lithium. The big question is whether it is possible to process the sedimentary claystone and recover battery grade Lithium which is what they’ve been focused on over the last few years. The American Lithium assets have Lithium which is very close to the surface and they have put together a large, measured and indicated and inferred resource and now need to prove that they can process the Lithium.

Proposed Merger: Conversations, Similarities, & Potential 

The proposed merger brings together American Lithium with a market cap of CAD$430M and Plateau Energy Metals with a market cap of around CAD$18M, so it is not a merger of equals. 

American Lithium started looking at other projects in December as they felt it was time to add another quality asset and to bulk up. American Lithium considers Plateau Energy to be undervalued in the Lithium world and Falchani has huge potential on the Lithium side as a great asset. Plateau Energy has 3 key assets, Falchani on the Lithium side, Macusani on the Uranium side and a project in Nevada which is a great opportunity to make a material acquisition.  Although the company valuations are significantly different, they think the combination will be accretive going forward. 

The Assets: Concerns Over Lithium & Uranium

One concern from the market is the question whether Uranium could contaminate the Lithium and the answer is most definitely not. They are on the same platform but are in distinctly different areas. The 2 products will be different processing groups and will probably be in different companies as they consolidate the South American assets and North American assets in the Lithium company and spin out the Uranium project. 

One of the reasons that Plateau has been so undervalued was due to Fukushima, and after the accident happened in 2011, the market wasn’t interested in Uranium assets. Plateau Metals had to reinvent themselves and moved into the world of Lithium. Lithium is considered a non-metal so an environmental impact assessment study can be completed in 4-6 months, whereas Uranium requires 12 to 18 months plus another year for building. 

Value of the Uranium Component & Opportunity at Hand

American Lithium is very focused on the Nevada assets because of the unique characteristics and as Lithium is a critical mineral in the state, having a big asset close to the Tesla Gigafactory at a time of concerns about the domestic supply of battery metals in particular and other critical minerals is a huge strategic asset for the company.  The company has a lot of US shareholders with a lot of recent interest in their stock. 

Falchani in Peru is the main reason that American Lithium is focused on Plateau Energy Metals and the potential to move it up the development scale very quickly. Then there is the Uranium asset which on the face of it, doesn’t fit with a company focused on Lithium in the Americas but it is part of the energy complex, and Uranium is a huge potential piece. Long term, it may distract from the Lithium side but they will continue to evolve the asset to the point where they will maximise value by spinning it out, doing a dividend or making a sale. 

Like Lithium, the Uranium market has had a bit of a spike over the past 3 months and people are expecting something later this year. People are excited about Uranium again going forward but for American Lithium, this merger is very much about Lithium and the team at Plateau and they also like Peru as a jurisdiction. Peru is ranked as one of the best emerging markets in the world as it's very mining focused and they're very pro-mining as it's a huge part of their GDP and their exports. 

American Lithium's Claystone Advancements & Progress in Technology

Claystone is a little understood aspect of Lithium. There's been a lot of good work done by American Lithium as they’ve moved from a brine into the claystones, and have done extensive work in Nevada. Water supply is necessary which American Lithium has sorted out. They've looked at the major environmental side and there are no concerns there. They’ve advanced the metallurgy and the processing and have been able to show under laboratory conditions that they can separate Lithium in 10 minutes which is highly unique. Laurence and his technical team from Plateau Energy will really help to drive that process faster and more efficiently with their expertise and extensive knowledge gained from working within their Lithium projects in Peru.  

Lithium is not a commodity, it's a chemical component so not simple to understand. There are no two identical Lithium deposits in the world. The team at Plateau Energy will be able to take the database that American Lithium has put together and consolidate it to the next phase. 

Benefits of Merger to Plateau Energy

When Uranium was a hot commodity, Plateau Energy Metals, had a market cap of $124M. They had the resource of 10Mlbs of U308 in the ground and no Lithium. Today they have 124Mlbs of Uranium in the ground which is a great Uranium asset. The Lithium asset has 4.7Mt of Lithium Carbonate equivalent and by doing the deal with American Lithium, they will be able to enlarge the shareholder base and the enlarged company will have a Lithium resource close to 12Mt of Lithium Carbonate equivalent. This makes them the junior with the largest Lithium resources producing Lithium in South and North America for the Americas. Nevada and Peru are both excellent mining jurisdictions so the merger makes sense for both companies. 

Now that they will have 2 of the largest Lithium assets under one platform they will focus on the development and moving it up the chain which will create a lot of news flow which will continue to market and promote the company. They will have the asset base and the team to  reach milestones, create news flow, and take the assets to the next level.

Financing it All: Cash Position & Allocation 

American Lithium has a very supportive shareholder base and the combined cash of the two companies, when they started this transaction was around $6M. They're not desperate for cash but when the right opportunity comes along, they will add significant capital to the treasury. 

Timing of Merger: A Potential Distraction Until Finalized?  

It is expected that this transaction will be completed in Q2/21 but the companies are able to technically move both projects forward  at the same time as managing the merger transaction. There is already a good team growing between both companies and they are getting on with things now rather than waiting for the official completion. 

It was great to receive an update on the agreement between American Lithium and Plateau Energy Metals and see the two teams working together to create a global Lithium developer with their world class, scaleable Lithium assets. With Lithium demand set to increase, it will be interesting to see how the merger between American Lithium and Plateau Energy Metals will progress and we look forward to following up with the story very soon.