I always look forward to interviews with Millennial Lithium’s (V.ML) CEO Farhad Abasov. He’s concise, to the point and willing to talk about both the achievements and the challenges facing Millennial’s brine lithium project in Salta Province, Argentina.
“Last year was a down year for the lithium market,” said Abasov. “Lithium prices were off a lot. Hard rock lithium production, mainly in Australia, is down because the lithium price is, at times, less than their costs of production.”
“It was an eventful year for Millennial,” said Abasov. “We completed our bankable Feasibility Study. We’re looking at 24,000 tons per year with a mine life of 40 years. We have our first solar evaporation pond in place and our pilot processing plant is nearly completed.”
On the regulatory side things are moving ahead. “We finished and filed our Environmental Impact statement with the government of Salta,” said Abasov. “We expect it will be approved In Q1, by the end of March. That will ensure we get the permit.”
Millennial also concluded a Fiscal Stability Agreement with the Government of Argentina. “This sets out our fiscal obligations going forward,” said Abasov. “What it does is ensure that there is no retroactivity. It is an important document to mitigate any political impact on the project in the future.”
Plus, Millennial was able to announce on January 13, 2020 that it had received four of the five required mining licences from the Mining Court of Salta. In that release Abasov stated, “Millennial is pleased to have received four of the mining licenses which comprise approximately 97% of the REMSA Properties area of our Pastos Grandes Project. The licenses granted total approximately 6,447 hectares (ha). Millennial expects the fifth license to be granted in the near future.”
Each of these milestones is another step in the direction of production and Abasov likes the timing. “2020 is seeing a lot of Electric Vehicles hitting the market,” said Abasov. “That means that there will be real demand for lithium. However, a lot of planned lithium supply is constrained.”
The problem with a lot of the planned supply is that the operating expenses are simply too high. This is especially true of the hard rock lithium in Australia, but Canada’s own Nemaska Lithium hit the hard rock wall in late 2019.
“This positions brine lithium producers very favourably,” explains Abasov. “Our own operation is projected to have an OPEX of $3400 per ton. The current world price is about $7000 per ton.”
“We’re projecting a 448 million dollar CAPEX to go into full, 24,000 ton per year, production,” said Abasov. “We’re working with Credit Suisse with the objective of being fully funded by mid year. We are looking for at least one strategic partner and we are working on two off take agreements. Achieving that will make Millennial attractive to the cornerstone investors we want to attract.”
Abasov is intent on the structure of any financing arrangement. “We want to fund through as much debt as possible and avoid any significant equity dilution. We have successfully raised capital with minimal equity dilution in the last two years ”
It is a goal which will please shareholders and the management which owns over 10% of Millennial’s stock and it is within reach. “We’re expecting the lithium price to stabilize and rebound in the next few months,” said Abasov. “We are also working on finalizing at least one off take agreement. We view an offtake as an important part of the financing structure and it needs to be bankable.”
Millennial has one huge advantage as it looks to fund its CAPEX – it has 22 million dollars in the bank. This allows Abasov to advance the lithium project confidently even as he is working out the financing arrangement.
Moving forward in a rising market also gives Millennial the option to bring on production in stages. Abasov already has a plan which would allow Millennial to begin initial production with a target of 12,000 tons per year and then increase that production to 24,000 to meet the expected rise in lithium demand.
There is a sweet spot for lithium production. Rising demand, constrained competitive production, contained costs and a way forward to financing. Millennial is in that spot with its projected production coming online just in time to meet that rising lithium demand.