American Lithium: Pioneering Domestic Lithium Production with Advanced Projects in US & Peru

• American Lithium made significant progress on its TLC lithium project in Nevada, completing a Preliminary Economic Assessment (PEA) that demonstrated favorable economics and a conventional processing approach.
• The company's Falchani lithium project in Peru has seen substantial resource growth and is advancing towards pre-feasibility, with potential for rapid development due to its classification as a non-metal.
• American Lithium also owns a major undeveloped uranium asset in Peru, which it is looking to potentially spin out or monetize to unlock value.
• The company is well-funded with $11 million in cash and sees potential upside in its strategic investment in Surge Battery Metals.
• Management views claystone lithium deposits as having advantages in producing battery-grade material domestically, which aligns with U.S. government priorities for critical mineral supply.

TLC Project: Advancing Claystone Lithium in Nevada

American Lithium Corp. (TSXV: LI) is positioning itself as a key player in the lithium market, with advanced projects in both North and South America. One of American Lithium's flagship assets is the TLC (Tonopah Lithium Claims) project in Nevada, USA. The company recently completed a Preliminary Economic Assessment (PEA) for TLC, marking a significant milestone in the project's development.

Conventional Processing Approach

A key highlight of the TLC PEA is the adoption of a conventional processing approach. American Lithium CEO Simon Clarke emphasized this point, stating,

"We didn't want to be subject to any new technology or direct lithium extraction. We wanted to use conventional mining approaches and prove that the recovery from claystones is very achievable and obviously produces good economic results."

This focus on proven technologies could potentially de-risk the project from an investor perspective, as it reduces technological uncertainties often associated with novel extraction methods.

The PEA outlines a sulfuric acid leach process, which is similar to the approach being taken by other major players in the claystone lithium space. This alignment with industry trends suggests that American Lithium is on a credible development path for TLC.

Competitive Economics

The PEA results indicate favorable economics for TLC. Clarke noted, "The operating cost that we came out with was very similar to where Thacker Pass was at. They're about $7,100-$7,200 a ton, and we are about $7,400."

This competitive operating cost structure positions TLC well within the industry cost curve. Moreover, Clarke highlighted that American Lithium's capital intensity for TLC appears more favorable compared to some peers, potentially offering a capital efficiency advantage. The initial production target of 24,000 tons per year, expandable to 48,000 tons, provides a scalable development pathway that could align well with market demand growth.

Resource Quality & Scale

TLC boasts a significant resource base, which Clarke described as the second biggest claystone project behind Thacker Pass in terms of M&I resources. The ability to high-grade the resource and employ pre-concentration techniques results in a head grade that is second only to Thacker Pass, according to Clarke. This resource quality and scale provide a solid foundation for long-term production potential.

Optimization & Future Development

Looking ahead, American Lithium is focused on optimizing the TLC flowsheet and advancing the project towards pre-feasibility. Clarke indicated that there are areas where they believe further optimization is possible, which could potentially enhance the project economics. The company is also undertaking environmental monitoring work, laying the groundwork for future permitting processes.

Falchani Project: A High-Grade Lithium Opportunity in Peru

American Lithium's second major lithium asset is the Falchani project in Peru, which represents a different style of lithium mineralization compared to TLC but offers compelling economics and development potential.

Unique Mineralization & Processing Advantages

Falchani's lithium mineralization is hosted in volcanic tuff with volcanic glass, which Clarke described as offering processing advantages:

"Because it's a purer form and a higher grade form of lithium mineralization, the impurity removal tends to be more straightforward at Falchani, leading to an operating cost of about $5,000 a ton, which puts it in and amongst the best projects on an opcost profile globally."

This low operating cost profile could position Falchani as a potentially highly competitive project in the global lithium market, particularly if it can be brought into production in the coming years as lithium demand continues to grow.

Significant Resource Growth & Economic Potential

Recent work at Falchani has yielded impressive results. Clarke noted, "Our M&I resource increased by close to 500% through the drilling we did." This substantial resource growth enhances the project's long-term production potential and could make it an increasingly attractive asset as the lithium market expands.

The updated Preliminary Economic Assessment (PEA) for Falchani has also demonstrated robust economics. Clarke highlighted, "We've updated all the economics, the vendor side of things, and so we're very confident in the numbers that PEA put forward, which would give us a net present value at Falchani of over $5 billion."

While PEA-stage economics should always be viewed with appropriate caution, this figure underscores the potential scale and value of the Falchani project.

Permitting Advantages & Development Timeline

An interesting aspect of Falchani's development potential lies in its classification as a non-metal in Peru, which Clarke suggests could streamline the permitting process. Clarke stated, "The permitting process, the approval process, once we have all the pieces in, can be as little as 6 months, assuming the processes are working as they should."

This potentially expedited permitting pathway could allow American Lithium to advance Falchani more rapidly than might be possible in other jurisdictions. Clarke indicated that if everything progresses smoothly, the project could reach a final investment decision "late next year or early the following year."

Macusani Project: Unlocking Value from Uranium

While American Lithium's primary focus is on its lithium assets, the company also owns a significant uranium project in Peru, which presents an interesting value proposition for investors.

Strategic Options for Value Creation

The Macusani uranium project, described by Clarke as the fourth largest undeveloped uranium project globally, represents a substantial asset that doesn't necessarily fit within American Lithium's core lithium strategy. Clarke explained the company's approach:

"Our goal here is to find the right way to put it in its own vehicle and the right team to drive it forward, but obviously on a cooperative basis with our team on the ground who've built that project over a 20-year period."

This strategy of potentially spinning out or monetizing the uranium asset could unlock value for American Lithium shareholders while allowing the company to maintain its focus on lithium development. The timing of such a move could be favorable, given the recent strength in the uranium market.

Project Economics & Development Potential

Clarke highlighted the attractive economics of the Macusani project, noting its low operating cost profile:

"It's got a very good operating cost profile at about $17 a pound, which obviously looks really good in a $90 a pound price environment that we are in today."

This low-cost structure could make Macusani an attractive development proposition in the current uranium market. The project's advanced stage of development was also emphasized, with Clarke stating,

"It's ready to pilot, it's had a number of economic studies done on it... It's an advanced project that needs to go through feasibility and piloting and can advance very quickly."

This level of advancement could potentially allow for a relatively rapid path to production, subject to market conditions and financing.

Financial Position & Strategic Investments

American Lithium's ability to advance its projects is underpinned by a solid financial position. Clarke noted that the company has about $11 million in cash, providing a healthy foundation for ongoing development work.

In addition to its core projects, American Lithium has made a strategic investment in Surge Battery Metals. While the lithium market has faced some headwinds, Clarke indicated that this investment "is still around where we made the investment" and provides "good flexibility" for the company. This strategic holding could offer additional upside potential or liquidity if needed for project development.

Market Dynamics & Government Support

The broader market context for American Lithium's projects appears favorable, particularly in light of government initiatives to support critical domestic mineral production.

Clarke highlighted the significance of recent U.S. Department of Energy (DOE) funding for claystone lithium projects, stating,

"I think that is a huge reason why you've now seen the DOE provide billions of dollars to Thacker to build the project."

This government support underscores the strategic importance of domestic lithium production and could potentially benefit projects like TLC as they move towards development.

The emphasis on projects that can produce battery-grade material domestically without the need for overseas processing aligns well with American Lithium's strategy for both TLC and Falchani. Clarke noted,

"Unlike pegmatites, there's no need to involve refining or upgrading offshore, and I think that is a huge reason why you've now seen the DOE provide billions of dollars."

While claystone lithium deposits are sometimes viewed as "unconventional" by the market, Clarke argued that this perception may be changing. He stated, "As the sector comes back, we'll get more and more attention back on the claystones and some of the other styles of mineralization." This evolving market perception could potentially lead to increased interest in and valuation of claystone projects like TLC.

The Investment Thesis for American Lithium

• Diversified lithium portfolio with advanced projects in strategic locations (Nevada, USA and Peru)
• Conventional processing approach de-risks technology aspects of claystone lithium production
• Competitive operating costs position projects well on global cost curve
• Significant resource base provides long-term production potential
• Potential for rapid advancement of Falchani project due to favorable permitting environment in Peru
• Additional value from uranium asset with potential for spin-out or monetization
• Strong balance sheet with $11 million in cash to support ongoing development
• Alignment with U.S. government priorities for domestic critical mineral production
• Optionality from strategic investment in Surge Battery Metals
• Multiple near-term catalysts including advancement towards pre-feasibility studies

American Lithium is strategically positioned in the lithium market with advanced projects in both North and South America. The company's TLC project in Nevada and Falchani project in Peru both demonstrate favorable economics and align with the growing demand for domestic lithium production, particularly in the United States. The conventional processing approach adopted by American Lithium could potentially de-risk the technological aspects of claystone lithium production, while the company's competitive operating costs position its projects well on the global cost curve.

The potential for rapid advancement of the Falchani project in Peru, coupled with the optionality provided by the Macusani uranium asset, offers multiple pathways for value creation. With a strong balance sheet and alignment with government priorities for critical mineral supply, American Lithium appears well-positioned to capitalize on the growing demand for lithium. However, investors should carefully consider the risks associated with mineral development projects and monitor the company's progress towards key milestones such as pre-feasibility studies and permitting approvals.

Macro Thematic Analysis

The global push for electrification and decarbonization is driving unprecedented demand for lithium, a critical component in electric vehicle batteries and energy storage systems. This macro trend is reshaping the mining industry, with a particular focus on developing new sources of lithium supply to meet projected demand growth.

Claystone lithium deposits, such as American Lithium's TLC project, are emerging as a potentially significant source of supply, particularly in North America. These deposits offer several advantages, including their location in stable jurisdictions and the potential for integrated production of battery-grade material without the need for offshore processing.

Government support for domestic critical mineral production, exemplified by recent U.S. Department of Energy funding for lithium projects, is creating a favorable environment for companies like American Lithium. This support is driven by concerns over supply chain security and the desire to reduce dependence on foreign sources of critical minerals.

The evolving lithium market is also seeing increased interest in "unconventional" lithium sources beyond traditional brine and hard rock deposits. This diversification of supply could help meet the projected surge in demand and potentially lead to more stable and resilient supply chains.

However, challenges remain, including scaling up new production technologies, managing environmental impacts, and navigating complex permitting processes. The cyclical nature of commodity markets also presents risks, with recent lithium price volatility highlighting the need for projects with robust economics across a range of price scenarios.

"I think as the sector comes back, we'll get more and more attention back on the claystones and some of the other styles of mineralization."