Cypress Development - Aiming to Become First US Lithium Clay Producer

1. Introduction and Background: Cypress Development Corp, led by CEO Bill Willoughby, is working on the Clayton Valley lithium project in Nevada. Their objective is to extract lithium from clay, aiming to develop a domestic U.S source of lithium catering to the EV and battery market.
2. Project Location and Infrastructure: The Clayton Valley project is located between Reno and Las Vegas, with additional facilities near Tonopah airport and a pilot plant in Amargosa Valley. The pilot plant has been operational for about a year, focusing on the Chlor-alkaline Leach process for lithium extraction.
3. Extraction Process: The process involves using a leech mechanism on the clay material that contains lithium. After tailing separation, they utilize a Direct Lithium Extraction (DLE) process based on ion exchange. This process concentrates the lithium, followed by evaporation crystallization to create lithium carbonate.
4. Development Timeline: Cypress initiated the project in 2016, with the first drill holes introduced in February 2017. After preliminary tests and evaluations, they completed a pre-feasibility study in 2021 during the pandemic.
5. Industry Perspective: Lithium extraction from clay is relatively new, with no producing mines in this domain yet. The primary challenge is extracting the lithium efficiently from the clay. If combined, the resources in Nevada could make the state one of the largest sources of lithium, trailing only Bolivia and Argentina.
   

Cypress Development Corp (CYP) is aiming to become the first lithium clay producer in the US through its Clayton Valley Lithium Project in Nevada. With lithium demand surging from the EV and battery sectors, Cypress could be well-positioned to capitalize as a low-cost US producer.

Location and Infrastructure

The Clayton Valley Lithium Project is strategically located in a prolific lithium region halfway between Reno and Las Vegas in Nevada. The project area covers 6,500 acres hosting lithium-rich claystone.Adjacent to the project is Albemarle's Silver Peak lithium brine operation, North America's only producing lithium mine. This provides Cypress with ample infrastructure including a highway, power lines, and a skilled local workforce.

Cypress also has nearby facilities to support development including a sample prep plant and a pilot plant for process testing. The favorable infrastructure and location in a prime lithium jurisdiction could help accelerate mine development.

Large Lithium Resource

Cypress has outlined a substantial lithium claystone resource at Clayton Valley. The current indicated resource estimate stands at 222 million tonnes averaging 1,141 ppm lithium, equating to 1.4 million tonnes LCE.

This makes Clayton Valley one of the largest lithium resources in the US. The large resource provides Cypress with significant upside potential as lithium demand grows in the EV and battery storage markets in the years ahead.

Proprietary Processing Method

A key part of Cypress’ strategy is its proprietary lithium extraction process. Metallurgical work since 2016 has led Cypress to utilize chlor-alkali leaching rather than the conventional sulfuric acid leaching. This provides Cypress with a low-cost method to produce both the leaching acid and neutralizing base on site. The process also avoids problematic silica gel formation that plagued early test work.

By controlling the process from mine to finished lithium product, Cypress avoids relying on third party processors as some peers do. This provides greater flexibility and control over operating costs.

Straightforward Path to Lithium Carbonate Production

With its leaching method perfected, Cypress is now focused on completing a definitive feasibility study in early 2023. An updated resource model and mine plan are already finished, with process optimization from the pilot plant underway.Key steps remaining include finalizing plant design, sourcing equipment, and evaluating the on-site acid plant. Permits are also on track to be submitted shortly after the feasibility study.

If all goes smoothly, Cypress could be on pace to become the first US lithium clay producer. The company is initially aiming for lithium carbonate production which should have strong demand from US battery makers.

Potential Strategic Partner Opportunities

As Cypress moves into construction and production, the company expects interest from potential partners for offtake deals, project investment, and funding support. Recent US legislation like the Inflation Reduction Act which provides incentives for domestic EV supply chains could attract strategic investors to the Clayton Valley Lithium Project.

Partnerships could provide capital to accelerate the timeline to production, as well as ensure downstream demand for Cypress’ lithium output.

Macro Environment

The outlook for lithium prices and demand looks strong over the next decade with surging EV sales and lithium-ion battery manufacturing capacity. Lithium prices have already multiplied over the past two years. Yet supply growth is lagging, constrained by long development timelines and limited investment to date. This supply-demand imbalance should support high lithium prices for the foreseeable future.

As a potential first mover producing low-cost lithium carbonate in the US, Cypress could be positioned in emerging lithium projects. The company offers leverage to rising lithium prices with relatively low risk compared to explorers.

The Investment Thesis for Cypress Development

With a large resource, proprietary process method, and advanced stage of development, Cypress has many good attributes. The Clayton Valley Lithium Project has a  path to production over the next 2-3 years to take advantage of surging lithium demand. Strategic partners and project financing could also catalyze Cypress’ timeline and expand market opportunities. Cypress Development presents an attractive investment opportunity for exposure to the booming lithium market. The company appears to have plans to become a major US lithium producer.

• First mover advantage in an emerging US lithium industry. Cypress could quickly gain market share and establish itself as a major domestic lithium supplier before peers reach production.
• Leverage to rising lithium prices. With demand surging and limited new supply, lithium prices are forecast to remain strong for years. Cypress offers exposure to this upside as an emerging low-cost producer.
• Potential for strategic investors and partners. As Cypress advances towards production, major battery/auto companies or mining companies could make equity investments to secure lithium supply. This would derisk the project and validate its merits.
• Strong management team. CEO Bill Willoughby has an engineering background and years of experience developing the Clayton Valley Lithium Project. The technical team has systematically advanced the project and overcome hurdles like the processing method.
• Location in a mining-friendly state. Nevada is one of the world's top mining jurisdictions with an established permitting process and respect for property rights. This helps reduce political risk.
• Scalability of the resource. With further exploration, there is significant potential to expand the resource size. The large property and thick claystone unit provide room to grow the project well beyond the 30+ year initial mine life.

Cypress Development offers investors a potential low-risk entry point into the booming lithium industry with a clear path to near-term production in the US. As a future major supplier, Cypress could generate stong shareholder returns as lithium demand accelerates in the coming decade.