Farhad Abasov, President and CEO of Millennial Lithium (V.ML), has experience with shifting markets for the resource he’s looking for. As the President and CEO of Allana Potash, as he explored in Ethiopia for potash, he watched as the entire potash market changed in a couple of years. Now he is watching the lithium marketplace gyrate as his company explores for lithium in Argentina.
“The fundamentals in lithium have not changed significantly,” said Abasov. “But more people are looking at the details of particular projects. They want to understand the production issues and the costs. Which means they are separating the “fluff” from the real stuff.”
“On the demand side,” said Abasov, “the demand for electric vehicles has almost completely decoupled from oil prices. Now mass storage is becoming important.”
What all of this has done is upped the bar for lithium projects. “People are looking at the lowest cost quartile projects,” explained Abasov.
Which means that Millennial Lithium’s Pastos Grandes project in Salta Province Argentina has to demonstrate a robust resource and a path to production.
Millennial began that process in December of 2017 with a 43-101 compliant resource estimate of 2.1MMT in the measured and indicated category and an additional 0.9MMT inferred category. It followed up the resource estimate with a Preliminary Economic Assessment done by engineers at WorleyParsons and completed in February 2018. The PEA found an after-tax NPV8 of $824 million, based on production of 25 thousand tonnes per year lithium carbonate over a mine life of 25 years. So far so good. But the real test is the Feasibility Study.
Millennial has again commissioned WorleyParsons to look at the Pastos Grandes project in much greater detail. This Feasibility study will include the drilling results to date and will involve building a small-scale plant to process the lithium product. By building a pilot plant, WorleyParsons will gain real operating numbers on the actual lithium brine the project contains.
“We hope to have the Feasibility Study at the end of Q1 2019,” said Abasov. “If it is successful then we’ll be looking for financing to build the project.”
At the same time, Millennial is continuing to drill to expand and define its resource, “We hope to have results in the first week of September,” said Abasov. “The drilling is going pretty well. In line with expectations. We’ll expand the existing resource. We hope to use a high-grade resource for at least fifteen years.”
There has been some concern over the political and economic stability of Argentina in recent months but Abasov is not too worried. “We are in the very good mining jurisdiction of Salta Province. Nothing has changed there. There has been some pressure on the Argentinian peso but that seems to be stabilizing. Overall, the population is supporting reforms and things seem to be going in the right direction,” said Abasov.
In fact, Millennium is comfortable enough with Argentina and the prospects for lithium that it has acquired another lithium project to the northeast. “We a project at the Cauchari salar. We have an Environmental permit and are now awaiting community approval and hope to have drills turning in Q3,” said Abasov. “Everything is ready, the community is positive, there is plenty of infrastructure. Now we just have to go through the formal process.”
With one project heading towards feasibility and another in permitting, Millennial is committed to Argentina. However, Millennial is also committed to getting its projects built. “We’re in the process of selecting a lead financial adviser,” said Abasov. “The major funders are comfortable with Argentina. But they are also looking at reality. Only a handful of lithium projects with the best economics will come online.”
Millennial’s financial adviser will work towards either an M&A transaction or some sort of funding package. “We have people looking at our company,” said Abasov.
Resource definition, plus a positive Preliminary Economic Assessment plus a Feasibility Study backed with hard numbers from a fully functioning pilot plant all add up to an attractive acquisition target or joint venture situation. Being able to execute on the exploration and de-risking of an asset is what Abasov demonstrated at Allana.
Yes, the price of lithium has dropped from its highs but Abasov is confident, “We have very good margins even at today’s prices.”
Margins which Abasov hopes to see confirmed in Millennial’s forthcoming Feasibility Study. Stay tuned.