American Lithium (LI) - US Automotive Firms Want Domestic Supply

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.

Merlin-Marr Johnson caught up with Simon Clarke CEO, and Director, American Lithium. Mr. Clarke has over 25 years of experience in building companies, capital markets, and growth strategies in the mining, energy, and energy technology sectors. He is the founder and former CEO of M2 Cobalt Corp, which was acquired by Jervois Global in June 2019. Mr. Clarke was also a Co-founder, Executive, and Director of Osum Oil Sands Corp, a company valued in excess of $1Bn at its peak market capitalization. He has extensive experience and knowledge spanning over a decade in the battery metals space. His educational credentials include 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 in the Americas with two development stage projects, namely, the TLC project in Nevada, and the Falchani project in Peru. The company is also advancing the highly prospect uranium asset in Peru.

The Lithium Market

The last major downturn in the lithium market was directly followed by the drop in commodity prices. At the end of 2020, lithium carbonate was trading at $6,500/t spot prices. The current spot price for lithium carbonate is $17,000/t. As per the company, the previous downturn was for different reasons and the industry as a whole is in a much better position. One such example is Albemarle Corporation. The company was able to increase its guidance on three occasions within a short time frame. The company has successfully moved a lot of contracts.

As lithium is a fairly young market, it does have spot prices, however, most of the market is based on forward contracts. A number of producers have been successful in increasing the number of contracts. Lithium producers are making a lot of money. Meanwhile, explorers and developers are hit by the risk-off trade. Overall, the sector continues to perform really well. Lithium as a commodity is very strong, and it’s expected to get stronger as the demand-supply deficit continues to grow.

There has also been an increase in M&A (Merger and Acquisition) activity in the lithium market. Automakers and end-users are securing investments in the form of offtake agreements in early-stage companies. Quality assets in South America are seeing a jump in acquisitions. Pluspetrol Resources Corporation B.V. being acquired by Ganfeng Lithium Co. Ltd. and American Lithium’s acquisition of Millennial Lithium Corp. are two such examples. Overall, quality assets are seeing a lot of interest within the sector.

Operational Challenges

According to American Lithium, there is a dearth of quality lithium projects globally. The company is looking to carry out additional work in order to de-risk the Falchani project, which is currently in the advanced stage. The TLC project has also received a lot of strategic interest. However, the company anticipates that the TLC project won’t realise its full value until the maiden PEA (Preliminary Economic Assessment) is released. It is working diligently on the PEA, which has faced delays in the past due to covid closures among other factors. The company is working with DRA Global for the PEA. A completed PEA will be a major milestone for American Lithium in the US.

The company faced operational challenges in Peru from the perspective of permits, and approvals along with government and cabinet-related changes. The company has now started gaining traction as it plans to conduct significantly more drilling. It is moving the project into a Feasibility Study and is focused on advancement and de-risking. Recent M&A activity has shown that buyers are now looking to move further up the chain. The company seeks to demonstrate the potential of its world-class projects.

During the acquisition of the Falchani project, American Lithium was cognizant that it was one of the few global projects capable of producing battery-grade lithium. This means that the company does not need to refine or upgrade the material, an aspect that is evident on the flow sheet. Plateau Energy Metals Inc, Falchani’s previous owner, was dealing with concession ownership issues, which led to a loss in shareholder confidence. This factor enabled American Lithium to acquire the project at a great price.

The company has started working on the environmental side of the Falchani project. Before the project moves through the Feasibility Study, the company wants to convert the project resource into the reserved category. In order to move the resource into the M&I (Measured and Indicated) category, the company would need to carry out infill drilling. The EIA (Environmental Impact Assessment) process is currently being carried out with SRK Consulting. The EIA and Feasibility Study will enable the company to conduct hydrology-based drilling, which is expected to provide a better insight into an asset. The company is looking to attain full permits for the bigger program, enabling a PEA update from a resource perspective.

Previously, American Lithium did not factor in the by-products such as SOP (Sulphate of Potash) as a major strategic mineral. The ongoing Russia-Ukraine conflict hasn’t impacted fuel prices for a lot of countries, however, since Ukraine is a massive fertiliser supplier, the conflict has had a major impact on the agricultural industry. A domestic SOP supply would serve as a huge strategic kick for the company. Alongside the updated PEA and the launch of a Feasibility Study, the company is also looking to produce cesium as a by-product. The company anticipates that it will be able to enter PFS (Preliminary Feasibility Study) at the Falchani project fairly quickly based on the previous work.

Cash Position

In 2022, American Lithium is looking to spend between $4M and $5M on drill operations. It has plans to develop SOP and cesium as by-products. An updated PEA is expected to cost a few $100k, while the Feasibility Study will involve a pilot project in some form, which will be carried out at the company’s ANSTO (Australian Nuclear Science and Technology) lab in Sydney, Australia. Due to covid-related closures, the company had previously faced operational challenges in Australia. The issue has since been resolved and operations are fully back up and running. A pilot program under lab conditions will help fast-track the process. This is planned as a proper bench-scale pilot project that will help the company get through the PFS.

ESG Considerations

As per the company, about half a percent of the world’s lithium is mined in the US. There are around half a dozen high-potential mines in the US, including the TLC project in Nevada. The company anticipates that the TLC project will make a meaningful difference, as long as it does not get stuck in the permitting process.

While the world is moving towards electric vehicles and greener energy sources, the need for mining continues to grow. The reason for choosing a Nevada-based project was to showcase the environmental benefits. Due to its location, the TLC project does not have an impact on endangered plant species and it doesn’t cause major cultural difficulties. Due to this, the company anticipates that it can move through the permitting process fairly quickly. Interestingly, the US government isn’t dropping the environmental requirements but is helping projects with the permitting process. Running multiple processes in parallel is another way to fast-track permitting.

In South Africa, the issue is largely at the community level, especially when it comes to the salar in the deserts of South America, Argentina, Chile, and Bolivia. Despite the benefits that mining operations bring, there have been anti-mining sentiments within the local communities as water is a premium and scarce commodity in these regions. Even though there have been changes in the government, these ongoing issues remain unsolved. Peru continues to be a historic mining jurisdiction with a strong mining code.

The Peruvian Constitution does not allow the government’s involvement in mining, and as a result, mining cannot be nationalised in the country. According to American Lithium, the country has a minority government clinging to power, making several changes in the number of ministers. While the company is looking to acquire permits, it has to deal with a revolving door of personalities and people. This has resulted in longer permit timelines for companies working on exploration and development.

Producers in Peru continue to make significant money in copper and other commodities. It is important to have ESG (Environmental, Social, and Governance) compliance which needs support from the local communities. American Lithium has garnered strong support from the local community. Peru has a strong mining code and in order to have a successful project, companies need an operation that is ESG-compliant.

The company’s investors have shown a great deal of patience because they are cognizant of the size of the prize. Peru genuinely scares investors, which is in part due to the country’s political turmoil. However, the jurisdiction is still considered better than Chile, Mexico, and Argentina on the lithium side, because, in the latter countries, operations and money divestment can be a lot more challenging. Despite these differences, Peru continues to remain a risk-off market. Peru-based assets would be worth significantly more had they been based in North America or Europe.

The Falchani project has the scale and potential to be South America's biggest lithium-producing asset. The asset is a hard rock deposit that benefits from a decent infrastructure and a healthy water supply. It is located a 40-minute drive from the 2 Oceans highway, which features deep ports on the Pacific. The Falchani project is like a low-grade pegmatite. The lithium found here is very pure as it is hosted in glass. Through metallurgical work, the company found that extracting lithium is a simple process.

Since the rocks lack impurities, the company can precipitate lithium without much difficulty. The Falchani deposit can produce up to 99.9% pure battery grade lithium. It’s a great asset that will reward patient investors. However, Peru as a risk-off market may not be the first choice for a lot of investors.

Despite the political turmoil, there are a lot of buyers across the world who are interested in acquiring assets in riskier jurisdictions. Back when American Lithium bought the Falchani project, it was competing against a Chinese buyer that continues to have significant Chinese interests. While the political situation might put off some western buyers, there is a lot of interest in the asset from other regions across the world. Ever since its acquisition, the interest in the Falchani project has continued to grow.

There are a large number of players based in Peru that are interested in buying and investing in lithium projects. If the Falchani project is sold, the company anticipates that it would have added significant value to the project through continuous de-risking and advancement, which the company was able to achieve in a short timeframe.

The Macusani Uranium Project

Following the acquisition of Plateau Energy Metals Inc, American Lithium realised that the Macusani asset is significantly larger and better than previously anticipated. While the company was unable to conduct significant drilling in recent times, it has carried out extensive fieldwork that has helped in expanding the uranium and lithium targets.

The Macusani asset is a massive plateau where extensive pre-concentration work has been conducted. The asset has an extremely robust PEA and benefits from one of the lowest OpEx (Operational Expenditures) for any uranium project on the planet. Due to the head grade, the company was able to cover about 50% of the PEA through the pre-concentration work.

At the Macusani project, the uranium is present at-surface and requires very little acid to process. This is one of the most attractive projects in the world with about $17/lb operational expenditures. The company anticipates that the project will continue to grow in size. Prior to the Fukushima Daiichi Accident, the Macusani asset had a 120Mlbs-130Mlbs cap. During this time, the project resource was 10Mlbs. The project currently has a combined resource of 126Mlbs today. The company anticipates that the market will continue to strengthen with time.

American Lithium’s team is highly-skilled when it comes to in-house admin work. The company is looking to time the window in order to maximise shareholder value. Unless the market falls out completely, this window is expected within the next 6-9 months. Currently, the company is placing itself in a position where it has the flexibility to pull the trigger once the market conditions are favourable, helping the project attain the support it rightfully deserves. In recent times, the project has seen increased interest from the market.

The company anticipates that uranium will see a big market run at some point. The goal is to maximise the asset value for both the company and its shareholders. Going the transactional route is one way to achieve this goal.

Lithium is often considered a highly-challenging mineral. This is because, despite the abundant lithium supply across the world, the majority of the supply cannot be extracted economically. On the other hand, uranium is often associated with nuclear energy, which often leads to complexity. As the uranium is hosted at surface, the company has successfully proved that it can pre-concentrate and bring the other 50% of the resource into the economics. This promotes mine extension and can help improve the economics of both lithium and uranium.

The Macusani project is expected to be a relatively simple operation with a low CapEx (Capital Expenditure) and OpEx. The project is located at a 4,500m altitude. Since there are projects in Chile and Peru located at similar altitudes, there is a precedence for successful projects located in similar terrains. It is one of the most straightforward deposits to develop and move into production despite the high altitude.

The TLC Project

In Nevada, American Lithium has faced issues with securing drills and getting assays. In fact, the company had to wait up to 6 months for some drill results due to the assay turnaround times. The company has since remedied the situation by finding a new fully QC/QA (Quality Control/ Quality Assurance) lab. The lab is run by a well-known group and the company was able to start working with the lab at the right time, circumventing some of the issues.

Nevada is a great place to operate. There are a lot of quality people involved in the mining industry. Lithium is in a nascent stage in Nevada, and as a result, there aren’t many qualified experts in the space.

When American Lithium acquired Plateau Energy Metals Inc, it was able to bring Dr. Laurence Stefan and Ted O’Connor on board. They are credited with discovering a new and unique lithium asset and taking it to battery grade within a 2-year timeframe. Their knowledge about lithium processing and unique styles of mineralization has been a valuable asset for the company. 

The TLC project is challenging from a metallurgical perspective. The lithium is hosted in sedimentary claystones, which leads to a number of impurities that the company has to deal with. It is important to note that none of these impurities are deleterious.

Though it took some time for the company to move the project through the flow sheet, it resulted in a great project. The company is working with DRA Global and ANSTO for the TLC project. Notably, ANSTO is well known for its expertise in the lithium and uranium space. It has done an excellent job at the Falchani project. However, the covid-related issues have caused a delay by a few months.

Overall, American Lithium has made great progress on drilling. It has a highly-skilled team working on the deposit’s core. The company announced some initial results that were high grade. The results were also helpful in validating the deposit’s scale. Once the PEA is completed, the company seeks to develop a mine plan, which would be followed by drilling and mining.

The permitting side of the operations can be challenging at times. The company is looking to carry out extensive environmental and cultural work. In terms of the development phases, the company is learning from the issues faced by other companies such as Lithium Americas.

American Lithium has a strong working relationship with Albemarle Corp. which is located nearby at Silver Peak and Lithium Americas. Recently, the company’s representatives were at a roundtable event in Reno, Nevada where the government and developers came together to discuss a forward strategy. Nevada has a huge opportunity to become a major player in the lithium space.

Panasonic and Tesla have factories in Nevada and are currently working to develop infrastructure in the region. According to American Lithium, Nevada is well-positioned to ultimately have a turnkey lithium solution along with a big lithium production base where lithium starts out as raw material and is processed into the end product. There is also potential for lithium recycling.

People have now begun to realise the benefits lithium operations can bring to Nevada and America as a whole. The TLC project benefits from a benign environment. The company is carrying out extensive work in order to validate and showcase the project’s environmental and cultural aspects.

American Lithium is focused on getting the mines built. Politicians are now beginning to understand the rising demand for lithium. End users, auto manufacturers, and OEMs (Original Equipment Manufacturers) are now focused on securing a lithium supply. Lithium is a key element that does not have a viable substitute in battery manufacturing. The demand for most critical metals is expected to increase in the coming years.

To find out more, go to the American Lithium website