American Lithium (TSX-V: LI) - Uranium Spin Out and PEA Explained

American Lithium Corp. is developing world-class lithium projects in the Americas and also has one of the largest underdeveloped uranium projects globally. The company has a near-term focus on mining-friendly jurisdictions and has an advantage when it comes to geographic and geological diversity in the development of world-class, scalable projects. American Lithium is a developer of advanced lithium projects in the Americas focused on Nevada and also some really high-grade, high-quality projects in Peru.

Matt Gordon caught up with Simon Clarke CEO, and Director, American Lithium. Mr. Clarke brings over 25 years of experience in building companies and implementing successful capital markets and growth strategies focused on mining, energy, and energy technology. Most recently, Mr. Clarke was the Founder, CEO, and Director of M2 Cobalt Corp. (cobalt/copper exploration in East Africa), which was acquired by Jervois Global in June 2019. Jervois is a world leader in the development and mining of cobalt and nickel projects and is operating cobalt and nickel refineries, benefitting from a market capitalization exceeding CDN$1Bn. The transaction involved Mr. Clarke remaining with Jervois for 12 months as a Director and Senior Executive. Mr. Clarke was also a Co-founder, Executive, and Director of Osum Oil Sands Corp. a company valued in excess of US$1Bn at its peak market capitalization. Osum grew its production to approximately 20,000 bopd (barrels of oil per day) before being acquired by Waterous Energy Fund for around CDN$400M in 2021. Mr. Clarke benefits from extensive experience and knowledge of the battery metals space spanning more than a decade. This includes his past senior executive roles with M2 Cobalt and Jervois Mining, as well as advisory roles in the vanadium exploration/development sector. Mr. Clarke holds an LLB and Diploma in Legal Practice from Aberdeen University, Scotland.

Company Overview

American Lithium Corp. (formerly known as Menika Mining Ltd.) is a mining and exploration company focused on the development of its world-class lithium projects located in the Americas. The company is listed on the Toronto Stock Exchange (TSX-V: LI), the OTC Markets (OTCQX: LIACF), and the Frankfurt Stock Exchange. (FSE: 5LA1). The company was founded in 1974 and is headquartered in Vancouver, Canada. Lillooet Mining Ltd., Exploraciones Macusani S.A.C, and Minergia S.A.C are the company's subsidiaries.

American Lithium is a lithium developer with the large TLC claystone deposit in Nevada, it also has the massive Falchani hard rock deposit in Peru along with the Macusani Uranium deposit in southern Peru.

The Market Landscape

The company’s CEO, COO, and EVP recently attended the African Mining Indaba, the world’s largest mining investment conference dedicated to the capitalization and development of mining in Africa. This year, the conference was held in Cape Town, South Africa between 6th-9th February 2023. The conference is the best place for Australian, European, and North American investors that are interested in South Africa’s mining sector.

In recent times, the company has started to see an increase in generalist investors attending the conference. It anticipates that there is still a lot of institutional money that is yet to start flowing into battery metals. There’s a lot of cash on the sidelines, which is starting to move into investments. Previously, the company saw a spike in share prices when a big resource was published on the TLC deposit. A second jump in share prices was observed following the Plateau acquisition. During this time, the company’s stock was following the market highs. Despite its 2022 and 2023 achievements, the company stock is underpinned by the fundamentals.

At the TLC deposit, the company was looking to demonstrate that lithium mineralization is difficult. Claystones are extremely difficult to process, but they contain a lot of lithium. The past work that was carried out at the Falchani deposit helped the company better understand the underlying mineralization. The company’s goal was to showcase that it could recover high-purity lithium by employing the best conventional techniques.

American Lithium isn’t looking to have any Chinese input in its projects, which is important, especially for US-based companies. It seeks to demonstrate the project’s robust economics. DRA Global and the company’s lead engineer have done a fantastic job on the deposit. Though it took longer than expected, the company was able to achieve all its key goals and more. Currently, the company has a $3.3Bn NPV (Net Present Value) on lithium, along with a strong IRR (Internal Rate of Return) that is in the high 20s. The project offers a good payback over a 3-year timeline. The company has plans to ramp up production from 24,000t a year to 48,000t a year.

The ramping-up announcement came out shortly after the news that General Motors will be investing $650M into Lithium Americas to develop the Thacker Pass Mine. The announcement was significant because not only was a major OEM (Original Equipment Manufacturer) automaker making a substantial investment into mining, but also the fact that the OpEx (Operational Expenditure) and CapEx (Capital Expenditure) figures for the asset were released. Notably, the figures previously announced to the market were quite outdated. This also provided validation for American Lithium whose asset has around the same OpEx numbers, just over 7,000/t. The company has carried out extensive work to validate these metrics.

The Thacker Pass Mine has $4Bn CapEx for an 80,000t yearly production, while American Lithium is targeting a 48,000t yearly production with $1.4Bn-$1.5Bn CapEx requirements. In the first phase of operations, the company is looking to start with $800M. The numbers seem to stack up well against Thacker. The Thacker Pass Mine has higher production numbers due to better grades, however, the style of mineralization is quite complicated. In comparison, the mineralization at the TLC project is relatively easier to extract.

Last year, at a LA conference in November, one of the senior guys from GM confirmed the company’s decision to transition into electric vehicle production fully. In Europe and North America, hundreds of billions of dollars of infrastructure is being built on the EV (Electric Vehicle) thematic. This indicated that the market demand for lithium and uranium will continue to grow.

Targets 2023 and Beyond

American Lithium slowed down operations to get the PEA (Preliminary Economic Assessment) done on a higher level. As a result, the company has the flexibility to go straight into a PFS (Preliminary Feasibility Study), with the goal to complete the study by the end of the year. Yesterday, the company had discussions with DRA Global on the study. The company is also working on a pilot plant with ANSTO (Australian Nuclear Science and Technology Organization) under lab conditions. To achieve this, the company would need to take a lot of core using wide-diameter drilling in Nevada. This plan is expected to start in a month or so, following which the samples will be sent across to ANSTO to carry out the pilot work. At the same time, the company is moving ahead with DRA Global on the PFS.

The company took the time to better understand the mineralization and determine the ideal ways to produce from the deposit. American Lithium has 2 world-class, very large lithium deposits that it is looking to move forward. Moving ahead with the right partners opens doors for significant capital availability from groups like GM and Ford along with the US government. This leads to a lot of momentum in the market. The company anticipates that the recent announcements will generate a lot of interest in the market.

American Lithium is looking to push the project forward as quickly as possible. On the permitting side of the equation, the company only needs to obtain permits for a mine. The process will commence once the company moves into a BFS (Bankable Feasibility Study) next year. There are a lot of discussions around streamlining the process. If the company can complete the BFS over the course of 2024, it can potentially enter construction in 2025. This means that the company can enter production by late 2026 or early 2027. The company is open to potential partners that can help it reach production either through capital investment or from a technological perspective.

Acquiring contracts could benefit the project’s capital cost. The company believes that people would be interested in taking these projects forward through billions of dollars in capital investment to advance the assets and develop the required infrastructure. The company is seeking a potential partner that isn’t necessarily going to stop at the end game if it’s the right thing to do. The company’s technical team is one of the better ones out there, possessing the skills and the ability to drive two very large projects.

The first phase of operations for 2023 is focused on the PEA, a major milestone for the company. In December 2022, the company announced its decision to spin out the uranium asset into a separate vehicle. Over the next few weeks, the company intends to announce the definitive agreements on the same. The company wants the entire process to be completed in the first half of 2023, and by that time, the shareholder votes, and the other work will be complete.

According to the company, the current market timing is favorable as uranium has continued to strengthen. There’s substantial interest in the Macusani asset, one of the biggest uranium projects out there. A lot of comparable projects usually have an OpEx of around $65/lb-$70/lb. American Lithium has a $17/lb OpeEx for the Macusani asset. The metrics are expected to get even stronger with the work that was been carried out since the last PEA. It is important to note that the project already features great economics.

The PEA was done at $50/lb with an IRR of over 40%. The company anticipates that a combination of pre-construction, tank leaching and the work done with ANSTO will help further improve the extraction rates. Taking all these factors into consideration could lead to much stronger project economics, despite the rise in input costs such as sulphur due to an inflationary environment. The Macusani asset needs very little acid for processing and the project benefits from a simple flow sheet.

To find out more, go to the American Lithium website