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EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
<strong>MetalsTech</strong> <strong>Limited</strong> Stock Rating Speculative Buy Price Target $0.97<br />
ASX: MTC<br />
<strong>MetalsTech</strong> is a cobalt and lithium explorer with its head office in Perth, Australia and a satellite office in Montreal,<br />
Canada. The identification of a world-class lithium ore body and subsequent development will be a key driver of<br />
shareholder value in 2017. We ascribe a share price target of AUD$0.97 based on reasonable expectations of exploration<br />
success and peer comparison.<br />
MTC.ASX<br />
Buy<br />
Price (as at 4pm AEDT, 27 Mar 2017)<br />
A$0.25<br />
Target Price<br />
A$0.97<br />
Up/Downside +288%<br />
52 Week Range A$0.215-$0.335<br />
Shares Outstanding<br />
76M<br />
Market Cap<br />
A$19.0M<br />
EV (estimated)<br />
A$15.0M<br />
Top 5 Shareholders<br />
No. % Name<br />
1 24 Talos Mining Pty Ltd<br />
2 15 Rachel D'Anna<br />
3 9 Glenn Griesbach<br />
4 3 Sarah Cameron<br />
5 3 Suburban Holdings Pty Ltd<br />
Price Chart<br />
A Flying Start<br />
The company has wasted no time in announcing the start of a drilling campaign<br />
after highly encouraging results at its flagship, 100%-owned, Cancet Lithium<br />
Project. A 5-day trenching and sampling programme has been completed on the<br />
outcropping spodumene-bearing pegmatite over approximately 1km of strike and<br />
a width of about 16m. 26 samples were collected with half returning grades over<br />
1.0% Li20 including a high of 5.6% Li2O. The mineralised zones remain open along<br />
strike and across width. The average value of the samples was 1.47% Li2O which<br />
is higher than any current major lithium deposit in Quebec. The 4,000m diamond<br />
core drill program targeting resource definition is expected to result in the<br />
announcement of a maiden Inferred and potentially Indicated Resource within 6<br />
months which should lead to a scoping study and subsequent development. The<br />
Company has also fast-tracked metallurgical test-work with spodumene samples<br />
from Cancet slated for lithium extraction testing early April. A bulk sample permit<br />
at Cancet has also been applied for to support larger scale metallurgical analysis.<br />
Other Positive Project Results To Reinforce Optimism<br />
Following geochemistry and geophysics activities at the company’s Terre Des<br />
Montagnes Lithium Project, drilling is expected to follow in Q3 of 2017. The<br />
project is immediately contiguous with Nemsaka Lithium’s (TSX.V.NMX) fully<br />
permitted Whabouchi Spodumene Mine boasting an NI 43-101 Resources of<br />
43.8Mt @ 1.46% Li2O. The mine will produce 213ktpa of 6% concentrate annually<br />
and NMX has a market capitalisation of approximately CAD$400M.<br />
High Grade Cobalt Additions<br />
The company has signed option agreements to acquire 100% of the Bay Lake and<br />
New Athona Cobalt Projects in neighbouring Ontario, Canada. Located within<br />
close proximity to the Township of Cobalt, the projects haves reported assays of<br />
up to an extraordinary 15.36% Co in cobalt rich veins from historical mine shafts.<br />
The addition would represent a strategic synergy as cobalt and lithium go hand-inhand<br />
as key inputs in lithium ion batteries.<br />
Spoilt For Choice<br />
The Company owns 100% of a further 4 lithium projects:<br />
- Adina – considered highly prospective and complementary to the<br />
development of nearby Cancet, drilling to commence end of May<br />
- Wells Lacourciere – considered moderately to highly prospective,<br />
sampling and mapping planned for Q3 of 2017<br />
- Kapiwak – Sampling and mapping planned for Q3 of 2017<br />
- Sirmac-Clapier - Sampling and mapping planned for Q3 of 2017<br />
Battery Market Growth Underpins Sentiment<br />
Increasing political and consumer focus on environmental issues will continue to<br />
propel demand for non-carbon energy solutions. The automotive industry is<br />
undergoing a transformative evolution from the internal combustion engine to<br />
automotive electrification. In addition, lithium ion batteries are now being<br />
manufactured for use in stationary storage, enabling the use of renewable power<br />
generation from wind and solar and off-peak charging from the electrical grid.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 1<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
Company Overview<br />
<strong>MetalsTech</strong> was incorporated on 25 May 2016 for the primary purpose of<br />
identifying, funding, acquiring, exploring and developing technology focused metals<br />
projects in Canada.<br />
MTC is focused on the acquisition, exploration and development within the highly<br />
prospective lithium regions of Quebec in Canada where a number of prominent<br />
companies are developing lithium hard rock operations, supplying both lithium<br />
carbonate (Li2CO3) and lithium hydroxide (LiOH) to a growing market for<br />
consumption in lithium related technology and products.<br />
Via a number of completed acquisition agreements, the Company has acquired a<br />
100% interest in six projects, being:<br />
- Terre des Montagnes Lithium Project;<br />
- Adina Lithium Project;<br />
- Cancet Lithium Project;<br />
- Wells Lacourciere Lithium Project;<br />
- Kapiwak Lithium Project; and<br />
- Sirmac-Clapier Lithium Project.<br />
FIGURE 1: MTC LITHIUM PROJECTS - LOCATION<br />
Source: Company Reports<br />
MTC has also entered into a Technology Partnership Agreement with Lithium<br />
Australia NL (ASX: LIT) to provide MTC with an exclusive licence to use and apply<br />
the hydrometallurgical processes developed by LIT throughout Quebec including<br />
Sileach TM and LieNA TM .<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 2<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
High grade cobalt project acquisitions<br />
assay up to an extraordinary 15.36% Co<br />
MTC recently announced the potential acquisition of two high-grade cobalt projects<br />
in Ontario, Canada. The purchase remains subject to due diligence, which is due to<br />
be completed imminently, but is expected to strengthen the Company’s presence in<br />
the supply of raw materials to the lithium battery market.<br />
- Bay Lake Cobalt Project: covers 672 Ha and has assayed up to 15.36% Co in<br />
cobalt-rich veins<br />
- New Athona Cobalt Project: covers 432 Ha and has assayed up to 2.96% Co<br />
and up to 2% Cu<br />
FIGURE 2: MTC COBALT PROJECTS – LOCATION<br />
Source: Company Reports<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 3<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
We ascribe a A$0.97 price target on<br />
MTC based on reasonable prospects of<br />
exploration success and peer<br />
comparison<br />
The average EV/resource tonne is<br />
A$293/t<br />
We expect confirmation of an Inferred<br />
and potentially Indicated Resource of<br />
around 15Mt @ 1.6% Li2O within 6<br />
months<br />
Valuation<br />
Summary<br />
Our valuation has been based on an expected lithium resource and currently has no<br />
value included for the potential cobalt acquisitions.<br />
We have used Enterprise Value (EV) per Li2O resource tonne of peer companies as<br />
the primary measure of our valuation methodology. Our valuation and share price<br />
target has been based on a conservative conceptual resource of 15Mt @ 1.6% Li2O.<br />
This results in an EV of AUD70M at an average peer comparison value of AUD293/t,<br />
which translates into a market capitalisation of AUD74M after estimated cash of<br />
AUD4M added. This is equivalent to AUD0.97 per share. The current share price<br />
represents a discount of 288% to our valuation. We would expect that the discount<br />
would be eroded steadily over the next twelve months through:<br />
- Continued exploration success<br />
- Announcement of an Inferred and potentially Indicated Resource at Cancet<br />
- Announcement of an Inferred Resource at Adina<br />
- Completion of a Scoping Study and initiating of a Prefeasibility Study<br />
- Fast tracking development<br />
FIGURE 3: COMPANY COMPARISON<br />
Company JORC/NI-43 101<br />
Resource<br />
Pilbara Minerals<br />
Ltd<br />
ASX: PLS<br />
Altura Mining Ltd<br />
ASX: AJM<br />
Sayona Mining<br />
Ltd<br />
ASX: SYA<br />
Dakota Minerals<br />
Ltd<br />
ASX: DKO<br />
European Lithium<br />
Ltd<br />
ASX: EUR<br />
156.3Mt @ 1.25%<br />
Li2O<br />
39.2Mt @ 1.02%<br />
Li2O<br />
13.7Mt @ 1.07%<br />
Li2O<br />
10.3Mt @ 1.00%<br />
Li2O<br />
6.3Mt @ 1.2%<br />
Li2O<br />
Li2O<br />
(Mt)<br />
EV (AUD$M)<br />
EV/Res<br />
AUD$/tLi2O<br />
1.95 534 274<br />
0.40 214 535<br />
0.15 22 150<br />
0.10 19 184<br />
0.08 26 325<br />
Average 293<br />
<strong>MetalsTech</strong> Ltd<br />
ASX: MTC<br />
Nemaska Lithium<br />
Inc<br />
TSX: NMX<br />
15.0Mt @ 1.6%<br />
Li2O<br />
43.8Mt @ 1.46%<br />
Li2O<br />
Source: Company Reports, EverBlu Estimates<br />
0.24 70 293<br />
0.64 CAD$412M CAD$644/t<br />
We have used Pilbara Minerals, Altura Mining, Sayona Mining, Dakota Minerals and<br />
European Lithium as our principal peers, which are all listed on the ASX. The<br />
average EV per Li2O resource tonne for this peer group is around AUD$293/t. This<br />
infers an unrisked EV for MTC of AUD70M. Recent results at Cancet indicate that<br />
this resource may be validated within 6 months.<br />
Although we have not used Nemaska Lithium as a peer in the valuation, it is<br />
interesting to note its current valuation on the Canadian market.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 4<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
SWOT Analysis<br />
Strengths<br />
High grade lithium identified in predictable hard rock geology<br />
All projects in Canada - favourable mining jurisdictions<br />
Low sovereign risk<br />
North American customers on the doorstep<br />
Access to some of the lowest cost industrial hydro-electric power in the world<br />
Experienced management & operational team<br />
Diversified portfolio of 8 projects<br />
Opportunities<br />
Upside in resource estimation<br />
Opportunity for tantalum credits at Cancet Lithium Project<br />
Strategic agreement with LIT for hydrometallurgical processing methodology<br />
Exposure to high grade cobalt<br />
Increasingly stringent pollution regulations globally<br />
Electricity grid energy storage<br />
Lower battery costs driven by research and further efficiencies<br />
Threats<br />
Aboriginal rights issues could delay some projects<br />
Time consuming regulatory conduits<br />
Substitution of lithium compounds<br />
Alternate battery technology<br />
Weaknesses<br />
Currently no resource estimates<br />
Low oil price favours incumbent internal combustion engines<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 5<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
The Lithium Projects<br />
Summary<br />
MTC will own 100% of all its lithium projects either directly or through its wholly<br />
owned subsidiary, LiGeneration. MTC’s main objectives are:<br />
• fund the maiden drill campaigns at each of the Cancet Lithium Project,<br />
Adina Lithium Project and parts of the Wells-Lacourciere Lithium Project;<br />
• fund the ground geochemical survey, airborne electromagnetic and<br />
geophysical survey at the Terre des Montagnes Lithium Project, and<br />
subject to further assessment fund a maiden reconnaissance drill<br />
program;<br />
• subject to one of more of the initial drilling campaigns being successful,<br />
fund the cost of a scoping study at one of the high priority projects<br />
FIGURE 4: MTC LITHIUM PROJECTS – CLAIMS AND SIZE<br />
Lithium Project<br />
Number of<br />
Claims<br />
Area* (Ha)<br />
Ownership<br />
Terre des Montagnes 420 22,458 100%<br />
Sirmac-Clapier 39 2,130 100%<br />
Kapiwak 121 6,377 100%<br />
Adina 57 2,938 100%<br />
Wells-Lacourciere # 159 9,150 100%<br />
Cancet 183 9,582 100%<br />
Source: Company Reports<br />
* Approximate area<br />
Pegmatite 101<br />
Canada has an exceptional specialty metal (SM) endowment. More than one<br />
thousand SM occurrences are reported in Canada, but only a handful are currently<br />
in production or in an advanced stage of development. Many of the occurrences,<br />
shown are unlikely to be of economic interest by themselves but their location<br />
could be used as an indicator of favourable geological conditions.<br />
Granitic pegmatites are major sources of Ta, Li, Rb, Cs, Be, Sn and a number of<br />
other industrial mineral commodities. In general, SM-bearing pegmatites and<br />
aplites, commonly belonging to the Lithium-Cesium- Tantalum (LCT) family of rare<br />
element pegmatites, are derived from a granitic source to which they are<br />
geographically and temporally related. Chemical evolution of a Li-rich pegmatite<br />
group is reflected by enrichment in volatiles, increased fractionation, and<br />
increased complexity in the zoning of individual pegmatites. Granite pegmatites<br />
containing lithium minerals occur in the Yellow-knife-Beaulieu district, Northwest<br />
Territories; the Cat Lake-Winnipeg River, the Herb Lake, and East Braintree-West<br />
Hawk Lake districts, Manitoba; and the Preissac-Lacorne district, Quebec.<br />
The bulk of the present lithium reserves in Canada are contained in pegmatite<br />
bodies that are essentially spodumene-bearing from wall to wall. These bodies are<br />
typically dyke-like or thinly lenticular in shape. The grade and grain size of the<br />
spodumene in deposits of this type are remarkably uniform.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 6<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 5: LITHIUM OCCURRENCES IN CANADA<br />
Source: Company Reports<br />
Pegmatites are igneous rocks that form during the final stage of a magma’s<br />
crystallization. They contain exceptionally large crystals and they sometimes<br />
contain valuable minerals such as spodumene (a mineral of lithium) and beryl (a<br />
mineral of beryllium) that are rarely found in economic amounts in other types of<br />
rocks. Most pegmatites have a composition that is similar to granite with<br />
abundant quartz, feldspar, and mica. These are usually called granite pegmatites<br />
to indicate their mineralogical composition. They also can be a source of<br />
gemstones. Some of the world’s best tourmaline, aquamarine, and topaz deposits<br />
have been found in pegmatites. Spodumene occurs in lithium-rich granite<br />
pegmatites which are a defined subset of granite pegmatites but are at the more<br />
felsic end (S-type) of the granite pegmatite spectrum.<br />
Large crystals in igneous rocks are usually attributed to a slow rate of<br />
crystallization. No one universally accepted model of pegmatite genesis has yet<br />
emerged that satisfactorily explains all the diverse features of granitic pegmatites<br />
but generally large crystals are attributed to low-viscosity fluids that allow ions to<br />
be very mobile.<br />
In the early stages of crystallization, the ions that form high-temperature minerals<br />
are depleted from the melt. Rare ions that do not participate in the crystallization<br />
of common rock-forming minerals become concentrated in the melt and in the<br />
excluded water. These ions can form the rare minerals that are often found in<br />
pegmatites. Examples are small ions such as lithium and beryllium that form<br />
spodumene and beryl; or large ions such as tantalum and niobium that form<br />
minerals such as tantalite and niobite. Rare elements concentrated in large<br />
crystals make pegmatite a potential source of valuable ore. The extreme<br />
conditions of crystallization sometimes produce crystals that are several meters in<br />
length and weigh over one ton. A large crystal of spodumene at the Etta Mine in<br />
South Dakota was about 13m long, 1.5m in diameter and yielded 90 tons of<br />
spodumene.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 7<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 6: PEGMATITE OCCURENCES IN QUEBEC<br />
Source: MERN<br />
The separation of water from magma also often occurs in small pockets along the<br />
margins of a batholith (a very large igneous intrusion extending to an unknown<br />
depth in the earth's crust). Pegmatite can also form in fractures that develop on<br />
the margins of the batholith, forming pegmatite dykes.<br />
Because these dykes and pockets are small in size, the operations that exploit<br />
them are also relatively small and may be mined by either underground or open<br />
cut methods.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 8<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
High grade project with near-term<br />
development opportunity<br />
Cancet Lithium Project<br />
Location:<br />
- 185 km east of La Grande, a full service, regional airport with daily flights<br />
to Montreal at a duration of 2 hours – pop 1,100<br />
Access:<br />
- Bisected by the all seasons Trans Taiga Highway<br />
- Multiple trails have been installed across the project to facilitate access<br />
for drilling<br />
Infrastructure:<br />
- Power lines cross project area<br />
Geology:<br />
- Moderate cover with regular wide spaced outcrops of 2m to 3m by 2m to<br />
3m in size.<br />
- Significant volumes of 15 cm to 40 cm long spodumene crystals.<br />
Previous Exploration:<br />
- Historic exploration has been undertaken on some of the claims.<br />
- Over several field campaigns, MTC has confirmed outcropping<br />
spodumene-bearing pegmatite open across width and along strike<br />
- Lithium assays completed in August 2016 confirmed the mineralisation of<br />
the spodumene bearing pegmatites with results including 1.71% Li2O,<br />
1.85% Li2O, 1.94% Li2O and 3.79% Li2O<br />
- CH16-01 was 12.8m in length including intervals of 1.71%, 2.35%, 3.08%<br />
and 4.95% Li2O<br />
- CH16-02 was 10.6m in length including intervals of 1.19%, 2.11% and<br />
2.50% Li2O<br />
- CH16-03 was 4.1m in length including intervals of 1.22%, 2.54%, 3.55%<br />
and 5.58% Li2O<br />
- Elevated Ta2O5 across the majority of the identified mineralisation<br />
- Average Li2O across all channels measured higher than the major lithium<br />
deposits in Quebec<br />
- Extensive spodumene-hosted pegmatites have been mapped for in<br />
excess of 1 km with an average width of approximately 16 m<br />
Metallurgical Testing<br />
- The company has fast-tracked metallurgical testing with spodumene<br />
samples going to the ANSTO laboratory in Australia, in collaboration with<br />
its technology partner Lithium Australia NL<br />
- Testing the capability of the LIT-owned Sileach TM lithium extraction and<br />
processing technology to treat and extract lithium from spodumene<br />
concentrate derived from Cancet pegmatite<br />
- Seeking confirmation that under standard operating conditions, Sileach TM<br />
is able to extract lithium from the Cancet spodumene concentrate and<br />
achieve a representative >90% Li extraction from bench scale testing<br />
Proposed Exploration:<br />
- Phase 1 Drilling has commenced with diamond core drilling testing the<br />
strike, dip, and plunge continuity of several already identified pegmatite<br />
outcrops, believed to be part of a large contiguous high grade lithium ore<br />
body which is accessible from surface.<br />
- Fifty (50) individual drill sites from which a proposed two-phase drilling<br />
campaign is to be completed.<br />
- Phase 1 includes twenty (20) diamond core holes for approximately<br />
4,000m which will be drilled over a period of approximately six (6) weeks<br />
- The company has stated it will update stakeholders iteratively with<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 9<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
respect to both visual estimates of spodumene content when drill core is<br />
produced (a strong leading indicator of lithium content) and secondly<br />
when Li2O results are received following ultimate core analysis and<br />
laboratory assay<br />
- The balance of the proposed drill holes will be completed in Phase 2<br />
which will commence during the spring-summer period once the results<br />
of Phase 1 drilling have been modelled and following the completion of a<br />
regional geochemical survey and a regional ground-based magnetic<br />
survey<br />
- A map identifying the proposed drill site locations for the two-phase<br />
diamond core drilling campaign is outlined in Figure 7<br />
- The campaign has been designed in such a way to target the primary<br />
outcrops and outline the contiguous nature of the ore body<br />
Subsequent ground based exploration and drilling will then be able to<br />
target extensions of this lithium rich ore body in three directions, being<br />
along strike, down dip and laterally down hole<br />
FIGURE 7: CANCET LITHIUM PROJECT – DRILL PLAN<br />
Source: Company Reports<br />
A recent channel sampling program at Cancet yielded assays of up to 5.58% Li2O as<br />
well as elevated Ta2O5 across the majority of the identified mineralisation.<br />
The average value from all samples collected was 1.47% Li2O which is higher than<br />
the current major lithium deposits in Quebec.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 10<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 8: MAJOR LITHIUM DEPOSITS IN QUEBEC<br />
Nemaska Lithium (TSX:NMX) Whabouchi Deposit 43.8Mt @ 1.46% Li2O<br />
Galaxy Resources (ASX:GXY) James Bay Deposit 22.2Mt @ 1.28% Li2O<br />
Sayona Mining (ASX:SYA) Authier Deposit 13.75Mt @ 1.06% Li2O<br />
Critical Elements Corp (TSX-<br />
V:CRE)<br />
Source: Company Reports<br />
Rose Deposit<br />
37.2Mt @ 0.95% Li2O<br />
Cancet is located in the eastern Superior Geological Province. The age of these<br />
rocks varies from 2600 Ma to 3400 Ma and they have been deformed by the<br />
Kenoran orogeny, between 2660 and 2720 Ma. The La Grande and Opinaca<br />
subprovinces are intruded by Proterozoic gabbro dykes. The La Grande<br />
subprovince is a volcano-plutonic assemblage composed of an ancient tonalitic<br />
gneiss (2788–3360 Ma) of the ‘Langelier Complex’ and many volcano sedimentary<br />
sequences from the Guyer Group (2820 Ma). The Guyer Group is composed of<br />
tholeiitic basalts, komatiites, calc-alkaline felsic tuffs, turbidites, iron formations<br />
and many ultramafic to felsic intrusions. A north western Ontario equivalent to<br />
these rocks are those of the Sachigo-Uchi-Wabigoon subprovinces.<br />
The Opinaca subprovince is a metasedimentary and plutonic sequence similar to<br />
the English River and Quetico subprovinces in Ontario. The age of these rocks<br />
(
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
Adjacent to one of the highest grade<br />
and largest lithium deposits globally<br />
Terre des Montagnes Lithium Project<br />
Location:<br />
- 4 properties surrounding the Nemaska Lithium Inc. Whabouchi<br />
Spodumene Mine<br />
o Terre des Montagnes Project, previously known as Whabouchi East.<br />
o Terre des Montagnes Southeast Project previously known as<br />
Whabouchi Southeast.<br />
o Terre des Montagnes Southeast Extension Project previously known<br />
o<br />
Southeast Whabouchi.<br />
Terre des Montagnes Southwest Project previously known as<br />
Whabouchi Southwest.<br />
- Within 45 km east of the Cree nation settlement of Nemaska, close to the<br />
Nemiscau regional full service airport<br />
- Approximately 300 km north-northeast by road of the town of<br />
Chibougamau – pop 7,500<br />
- All properties are located adjacent or very close to the Nemaska<br />
Lithium’s, Whabouchi Spodumene Mine and Hydromet Plant Project<br />
Access:<br />
- Access by road<br />
Infrastructure:<br />
- Airport ~20km away<br />
- Hydro-Quebec has several facilities in the area<br />
Geology:<br />
- Presence of basalt and/or amphibolite remnants in a gneissic formation<br />
intruded by granites<br />
- Geological formations and, like all the rocks of this area with the<br />
exception of the pegmatites, are strongly deformed.<br />
- Numerous localized topographic highs can be attributed to late intrusions<br />
of leucogranites and biotite-bearing white pegmatites<br />
Previous Exploration:<br />
- MERN completed a geological survey in 1975<br />
- Electromagnetic surveys identified several electromagnetic and magnetic<br />
trends which might indicate a lens of massive sulphide along a geological<br />
contact – no follow-up recorded<br />
- The Nemaska Lithium Inc. Whabouchi Spodumene Mine is located<br />
approximately 1.7 km southwest of the Terre des Montagnes property<br />
- In mid-2016 various pegmatite outcrops were identified and sampled and<br />
anomalous mineral values<br />
Proposed Exploration:<br />
- Phase 1 ground based electromagnetic survey (3 properties) - Cost<br />
CAD$0.24M.<br />
- Phase 2 to consist of trenching, outcrop sampling and exploration<br />
diamond drilling to establish an understanding of the geology at depth.<br />
Independent of Phase 1 (3 properties) – Cost CAD$1M<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 12<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 10: TERRE DES MONTAGNES LITHIUM PROJECT FEATURES<br />
Complementary exploration project to<br />
nearby Cancet Lithium Project<br />
Source: Company Reports<br />
Adina Lithium Project<br />
Location:<br />
- 350 km east of La Grande – pop 1,100<br />
Access:<br />
- Helicopter supported exploration, with an established field camp at the<br />
Mirage Lodge, located less than 20 minutes by helicopter<br />
Infrastructure:<br />
- Approximately 60km from major road and power<br />
- Mirage Lodge is located less than 20 minutes away by helicopter, which is<br />
full service to support exploration activities and field crew<br />
Geology:<br />
- Quebec government conducted regional surface mapping in 2014<br />
indicating a continuous zone of pegmatites<br />
- Field work indicates this is not the case, as there are rafts of country rock,<br />
metavolcanics and metasediments present indicating pegmatites are<br />
discontinuous and / or the geological contact between the pegmatites<br />
and the interbedded ultramafics might not be well known.<br />
Previous Exploration:<br />
- August 2016 - verify the presence of low grade green blue spodumene<br />
bearing pegmatites reported in the 2014 Quebec government regional<br />
mapping campaign.<br />
- Work on the ground included a 1 km traverse to locate and sample<br />
pegmatite outcrops. Eleven samples of spodumene bearing pegmatite<br />
were collected from several pegmatite outcrops. The outcrops were<br />
measured at approximately 680 m in length over an area of 200 m in<br />
width.<br />
- Assay results of the eleven chip samples confirm the presence of the<br />
spodumene bearing pegmatite dykes range of 0.24% to 3.12% Li2O with 7<br />
samples of eleven above 1.0% Li2O<br />
Proposed Exploration:<br />
- Phase 1 exploration will consist of an initial four to five drill holes at 200m<br />
length, drilled along strike of the sampled outcrop. Cost – CAD$0.35M<br />
- Phase 2 will involve project scale mapping, sampling and trenching – Cost<br />
CAD$0.11M<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 13<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 11: ADINA LITHIUM PROJECT GEOLOGY<br />
No exploration planned in near future<br />
but M&A opportunities exist<br />
Source: Company Reports<br />
Kapiwak Lithium Project<br />
Location:<br />
- 2 properties (Kapiwak North and Kapiwak South)<br />
- 10 km south of the Eastman River<br />
- 100 km east of James Bay<br />
- 510 km northwest of Chibougamau – pop 7,500<br />
Access:<br />
- Access by road but remote<br />
Infrastructure:<br />
- Minimal<br />
- Located north and south of the Galaxy Resources <strong>Limited</strong> (ASX: GXY)<br />
James Bay Lithium Deposit which hosts a JORC Resource of 22.2Mt @<br />
1.28% Li2O<br />
Geology:<br />
- Paragneisses (Auclair Formation), probably of sedimentary origin, which<br />
surround pegmatites from the north-west to the southeaster extremities.<br />
- Amphibolite dykes and ultramafic intrusions have been identified<br />
throughout this unit as well, with a prominent diabase dyke striking<br />
north-south through the centre of the project.<br />
Previous Exploration:<br />
- During mapping in 1978 observed white coarse grained tourmaline and<br />
muscovite pegmatites.<br />
- Spodumene was observed in 2011 in 10 cm to 30 cm sized “boulders” –<br />
source unknown as no outcrop.<br />
- 6 samples were collected and assayed from the boulders<br />
- All samples were positive for lithium with assays of 0.84 - 2.9% Li2O<br />
- Levels of beryllium, tantalum and niobium were also elevated.<br />
- In 2011 a helicopter-borne aeromagnetic geophysical survey identified<br />
conductive structures across the project.<br />
- Adjacent to James Bay Lithium Pegmatite Project (Galaxy Resources<br />
<strong>Limited</strong> ASX: GXY)<br />
Proposed Exploration:<br />
- Early stage exploration project.<br />
- Field mapping and ground truthing to take place in Q3 of 2017<br />
- No current exploration targets.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 14<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 12: KAPIWAK (NORTH AND SOUTH) LITHIUM PROJECT GEOLOGY<br />
No exploration planned in near future<br />
but M&A opportunities exist<br />
Source: Company Reports<br />
Sirmac-Clapier Lithium Project<br />
Location:<br />
- Lac Assinica section of the region of James Bay<br />
- 105 km northwest of Chibougamau – pop 7,500<br />
Access:<br />
- Access by road for most of the year<br />
- Located along strike of the Nemaska Lithium Inc. 100% owned Sirmac<br />
Lithium Project and the Lac Clapier-Nord Lithium Outcrop, also owned<br />
100% by Nemaska Lithium Inc.<br />
Infrastructure:<br />
- <strong>Limited</strong> – maintained camp situated 25km away<br />
Geology:<br />
- Mainly quartzite sandstone with a dyke of dioritic to gabbroic<br />
composition occurring at its southern most edge<br />
- Glaciation has carved ridges and hills from northeast to southwest.<br />
Previous Exploration:<br />
- No recent exploration work including drilling has been undertaken.<br />
- No lithium mineralisation has been identified<br />
- 3 km east of the main zone of lithium mineralisation at Nemaska Lithium<br />
Inc. Sirmac Property<br />
Proposed Exploration:<br />
- Early stage exploration project.<br />
- Field mapping and ground truthing to take place in Q3 of 2017<br />
- No current exploration targets.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 15<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 13: SIRMAC-CLAPIER LITHIUM PROJECT GEOLOGY<br />
Moderate to highly prospective<br />
Source: Company Reports<br />
Wells-Lacourciere Lithium Project<br />
Location:<br />
- 35 km west by road of the town of Malartic – pop 3,500.<br />
- 60 km west by road of the town of Val-d’Or – pop 32,000<br />
Access:<br />
- Predominantly sealed road from Val-d’Or<br />
- Well maintained logging roads<br />
Infrastructure:<br />
- A CN rail line and a Hydro-Quebec power line run near the project.<br />
Geology:<br />
- The pegmatite dyke at the Wells-Lacourciere occurrence outcrops in a<br />
large hill of granite and strikes 310° and dips steeply to the north.<br />
- Traceable along surface for a distance of about 600 metres and width<br />
varies from 8 to 15m<br />
- Spodumene in this dyke occurs as large, stubby crystals in random<br />
orientation<br />
- Overburden thickness varies between 0 to 35 metres<br />
Previous Exploration:<br />
- Spodumene mineralisation first documented in 1955 by MERN geologists<br />
in a pegmatite dyke outcrop.<br />
- Contains a 200m2 excavation site containing high grade lithium from bulk<br />
samples of 2.87% to 4.0% Li20<br />
- 1 sample located assayed at 7.0% Li2O.<br />
- In June 2016 grab samples were collected from multiple locations and<br />
large spodumene crystals were observed.<br />
Proposed Exploration:<br />
- Phase 1 exploration would include project scale mapping, sampling and<br />
trenching – Cost CAD$0.16M<br />
- Phase 2 exploration would include approximately 2,000 m of diamond<br />
drilling for 10 to 15 drill holes targeted at known anomalies independent<br />
of Phase 1 – Cost CAD$0.45M<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 16<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 14: WELLS-LACOURCIERE LITHIUM PROJECT GEOLOGY<br />
Source: Company Reports<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 17<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
The Cobalt Projects<br />
Summary<br />
MTC has announced that it has entered into two binding option agreements to<br />
acquire a 100% interest in the New Athona Cobalt Project and the Bay Lake Cobalt<br />
Project, both located near the town of Cobalt in Ontario, Canada. The agreements<br />
generally each have the following conditions:<br />
• cash deposit of CAD$20,000 (paid);<br />
• 45 day due diligence period;<br />
• cash completion payment of CAD$80,000;<br />
• share completion payment of 125,000 MTC shares;<br />
• NSR 1.5%;<br />
• 6 month anniversary share payment of 100,000 MTC shares; and<br />
• project performance payment (>7Mt @ 1.5% Co resource) CAD$125,000<br />
in cash or MTC shares.<br />
FIGURE 15: MTC COBALT PROJECTS – CLAIMS AND SIZE<br />
Cobalt Projects<br />
Number of<br />
Units<br />
Area (Ha)<br />
Ownership*<br />
New Athona 1,082 432 100%<br />
Bay Lake 672 100%<br />
Source: Company Reports<br />
* Subject to due diligence<br />
The Cobalt area is an established Tier-1 mining district, with extensive road, rail<br />
and port infrastructure, able to target future production to key North American,<br />
and export markets. The district is a proven mining region with over 600Moz Ag<br />
and 45Mlbs of Co production from previous operating mines. Much of this silver<br />
was extracted in early 1900’s, with minimal focus on Co or on high-grade Co<br />
regions, which were typically left behind or used as a tracer to track silver.<br />
We have taken the liberty of identifying listed ASX peer companies which are<br />
tabulated below. Many of the projects mentioned are also polymetallic deposits<br />
and as such cobalt cannot be evaluated in isolation. Due diligence still needs to be<br />
completed on the MTC properties. Assuming the purchase is concluded, more<br />
exploration is required in order not only to delineate an orebody, but also to<br />
assess tonnages and grades.<br />
FIGURE 16: COBALT PEER COMPANIES<br />
Company JORC/NI-43 101<br />
Resource<br />
Equator<br />
Resources Ltd<br />
ASX: EQU<br />
Nzuri Ltd<br />
ASX: NZC<br />
Barra Resources<br />
Ltd<br />
ASX: BAR<br />
Corazon Mining<br />
Ltd<br />
ASX: CZN<br />
-<br />
7Mt @ 0.6% Co<br />
32Mt @ 0.6% Co<br />
-<br />
Location<br />
Cobalt Camp Projects<br />
Ontario, Canada<br />
Kalongwe,<br />
DR Congo<br />
Mt Thirsty<br />
Norseman, WA<br />
Mt Gillmore,<br />
North-East NSW<br />
Mkt Cap<br />
(AUDM)<br />
93<br />
54<br />
42<br />
38<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 18<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
Cobalt Blue Ltd<br />
ASX: COB<br />
Conica Ltd<br />
ASX: CNJ<br />
33Mt @ 0.08% Co<br />
32Mt @ 0.13% Co<br />
Riva Resources<br />
Ltd<br />
-<br />
ASX: RIR<br />
Alloy Resources<br />
Ltd<br />
-<br />
ASX: AYR<br />
Celsius Resources<br />
Ltd<br />
-<br />
ASX: CLA<br />
Berkut Minerals<br />
Ltd<br />
-<br />
ASX: BMT<br />
Hammer Metals<br />
Ltd<br />
6Mt @ 0.1% Co<br />
ASX: HMX<br />
Cohiba Ltd<br />
ASX: CHK -<br />
Thakaringa,<br />
Broken Hill, NSW<br />
Mt Thirsty,<br />
Norseman, WA<br />
Tabac Project,<br />
Western Australia<br />
Ophara Project,<br />
Broken Hill, NSW<br />
Opuwo,<br />
Namibia<br />
Kobald Mineral Projects,<br />
Scandinavia<br />
Milenium Projects,<br />
North-West QLD<br />
Cobalt X,<br />
Mt Isa, QLD<br />
32<br />
21<br />
19<br />
12<br />
11<br />
11<br />
10<br />
7<br />
Moderate to highly prospective<br />
Source: Company Reports, EverBlu Estimates<br />
New Athona Cobalt Project<br />
Location:<br />
- 35 km south of the town of Cobalt – pop 1,100.<br />
- 10 km north east of the town of Temagami – pop 800<br />
- The project is bordered north and east by claims held by Tri-Origin<br />
Exploration <strong>Limited</strong><br />
Access:<br />
- Access to project is granted by a combination of paved roads and offsurface<br />
tracks<br />
Infrastructure:<br />
- Approximately 60km southwest of the town of Cobalt and only 10km<br />
west of the Silver Centre Mining area within the Cobalt Mining Camp in<br />
Ontario, Canada<br />
Geology:<br />
- The eastern portion of the project is underlain by Coleman formation<br />
conglomerates of the lower part of the Huronian Super Group and<br />
Nipissing Diabase Sill gabbro<br />
- The western portion of the project is underlain by Archean rhyolitic<br />
volcanic rocks and Archean grabbroic intrusive rocks mineralised on<br />
surface with veins containing semi-massive sulphides<br />
Previous Exploration:<br />
- Veins containing pyrite, pyrrhotite, chalcopyrite and sphalerite returning<br />
values, from surface rock samples, of Cobalt 2.96%, 0.94% and 0.14%<br />
respectively and Copper of up to 2%.<br />
Proposed Exploration (subject to due diligence):<br />
- Conduct an airborne EM survey;<br />
- Conduct an IP survey; and<br />
- Complete a drilling program targeted for mid-2017 following detailed first<br />
phase data analysis.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 19<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
FIGURE 17: NEW ATHONA PROPERTY<br />
Moderate to highly prospective<br />
Source: Company Reports<br />
Bay Lake Cobalt Project<br />
Location:<br />
- 15 km west of the town of Cobalt– pop 1,100.<br />
- 60 km west by road of the town of Temiskaming Shores – pop 10,000<br />
- 5 km North-North-West of Equator Resources <strong>Limited</strong> (ASX: EQU), the<br />
owner of the Cobalt Camp Project<br />
Access:<br />
- Access to project is granted by a combination of paved roads and offsurface<br />
tracks<br />
Infrastructure:<br />
- Located less than 10 km south-south-west of the Historic Silver Mining<br />
Camp of the Cobalt Township on the eastern shore of Bay Lake in<br />
Coleman Township, Ontario, Canada<br />
Geology:<br />
- Majority of historical work was completed in 1913 by the Bay Lake and<br />
Montreal River Mining Company and included six (6) shafts in Nipissing<br />
diabase and extensive stripping of the Nipissing diabase-Lorrain sediment<br />
contact<br />
- Several Calcite veins occur within the lowest part of a Nipissing diabase<br />
sill near the contact with arkoses of the Lorrain Formation<br />
Previous Exploration:<br />
- The majority of historical work was completed in 1913 by the Bay Lake<br />
and Montreal River Mining Company and included 6 shafts in Nipissing<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 20<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
diabase and extensive stripping of the Nipissing diabase-Lorrain sediment<br />
contact.<br />
- Sub-surface rock samples taken from a cobaltite-rich vein on the 27m<br />
level produced assays including 15.36% Co, 15.29% Co, 14.31% Co and<br />
15.27% Co<br />
- Historical reports indicate substantial cobalt grades in silver ore however<br />
the project’s cobalt potential remains untested – cobalt was used as a<br />
tracer for silver mineralisation but not targeted in its own right.<br />
Proposed Exploration (subject to due diligence):<br />
- Conduct an airborne EM survey;<br />
- Conduct an IP survey; and<br />
- Complete a drilling program targeted for mid-2017 following detailed first<br />
phase data analysis.<br />
FIGURE 18: BAY LAKE COBALT PROPERTY<br />
Source: Company Reports<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 21<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
The Sileach TM Process<br />
The Agreement<br />
On 11 October 2016, MTC entered into a Technology Partnership Agreement (TPA)<br />
with LIT in relation to the use and application of two proprietary hydrometallurgical<br />
processing technologies (Sileach TM and LieNA TM ) owned and developed by LIT, as<br />
well as any other lithium processing or lithium related technology that is owned,<br />
developed, acquired or patented by LIT in the future.<br />
The Licence will grant MTC the exclusive right to use the licensed technology for<br />
any project owned or for any ore originating from a project within Quebec.<br />
LIT will be entitled to receive a royalty of 2% of gross revenue derived by MTC from<br />
selling all products that were beneficiated using the technology in addition to the<br />
issue of 5M shares and 3M options in MTC on achievement of performance<br />
milestones.<br />
FIGURE 19: THE SILEACH TM PROCESS<br />
Source: Company Reports<br />
Milestones<br />
Milestones achieved:<br />
- Completion Payment: 1M shares on execution of TPA and MTC listing<br />
Future milestones (based on spodumene provided by MTC and sourced from one of<br />
the projects and the use of the licensed technology to produce lithium carbonate<br />
and/or lithium hydroxide on cost competitive terms):<br />
- Proof of Concept: 0.5M shares on achieving representative >90% Li<br />
extraction from bench scale tests.<br />
- Quality Tests: 0.5M shares on LIT achieving representative >95% Li2CO3<br />
purity from leach liquors<br />
- Pilot Tests: 1M shares and 0.5M options achieving representative<br />
extraction >90% Li recovery and >85% from leach liquor, in a continuous<br />
pilot plant operation.<br />
- Scoping Study: 1M shares and 0.5M options on MTC delivering a scoping<br />
study on one of the projects.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 22<br />
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- Definitive Feasibility Study: 1M shares and 0.5M options on MTC delivering<br />
a definitive feasibility study.<br />
- Offtake: 0.5M options execution of a binding offtake agreement(s) for the<br />
supply of >5,000tpa.<br />
- Commencement of Plant Construction: 0.5M options on commissioning<br />
construction of a full-scale processing plant.<br />
- First Commercial Production: 0.5M options on achieving first commercial<br />
production and sales of lithium carbonate and/or lithium hydroxide.<br />
The shares issued to LIT will be escrowed for 24 months from the date of issue and<br />
the options will have an exercise date of 3 years from issue with an exercise price<br />
that is a 30% premium to the 5 day VWAP calculated for the 5 days prior to the<br />
milestone achievement produced at any of the projects.<br />
Agreement Rationale<br />
The Sileach TM process is still undergoing pilot testing in Australia. An engineering<br />
study to build a large-scale pilot plant is currently underway and completion is<br />
expected by mid 2017, at which stage we expect a commitment to be made to its<br />
construction. The partnership with LIT and the use and application of the Sileach TM<br />
hydrometallurgical processing technology could allow MTC to achieve its goal to<br />
establish a low-cost lithium production profile, similar to that of the brine<br />
producers.<br />
FIGURE 20: TARGET HYDROMETALLURGICAL PROCESS COST<br />
Source: Company Reports, Deutsche Bank<br />
It is expected that collaboration with LIT will ensure the following benefits to MTC:<br />
- Further development of the ore extraction technology specific to the<br />
spodumene at the MTC projects.<br />
- Fast-track the development and process for the production of lithium<br />
carbonate and lithium hydroxide from the spodumene concentrate.<br />
- Generate a well-designed flow sheet designed to maximise the recovery of<br />
the lithium from the spodumene concentrate.<br />
- Enhance the potential economics of the production of lithium products.<br />
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- Provide the necessary parameters to ensure that the sampling of the<br />
spodumene and the design criteria of the hydrometallurgical processes for<br />
the production of lithium carbonate and lithium hydroxide are aligned.<br />
- Improve the rate at which MTC is able to demonstrate its ability to<br />
produce value add lithium products.<br />
- Remain in a cost competitive environment within the lowest quartile of<br />
the cost curve.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 24<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
Quebec Mining Regulatory Regime<br />
Introduction<br />
The Mining Act governs the registration of mining rights in Québec. The Ministère<br />
de l'Énergie et des Ressources naturelles (MERN) is responsible for the<br />
administration of the Mining Act, including its Public Register where records and<br />
maps which indicate the location and status of mining rights are kept and made<br />
accessible online.<br />
The mission of the Ministère de l'Énergie et des Ressources naturelles (MERN) is to<br />
promote knowledge acquisition and to ensure the development and optimal use of<br />
energy, land and mineral resources in Québec from a sustainable development<br />
perspective, for the benefit of the entire population.<br />
Québec's mining rights system is based on a first come first served basis. The<br />
mining rights conferred by the Mining Act are immovable real rights divided in two<br />
categories:<br />
- exploration rights; and<br />
- extraction rights.<br />
Québec’s strength lies not only in its raw materials, but also in the quality of its<br />
labour pool, training institutions and specialist research centres. In addition, it is a<br />
world leader in the capture and processing of geoscientific data. The Fraser<br />
Institute has regularly ranked the province in the top ten in the world for its<br />
favourable mining environment, based mainly on its mining policies and mineral<br />
potential.<br />
Exploration Rights<br />
The claim gives the holder an exclusive right to search for mineral substances in the<br />
public domain, except sand, gravel, clay and other loose deposits, on the land<br />
subjected to the claim.<br />
A claim can be obtained:<br />
- by map designation, the principal method for acquiring a claim; or<br />
- by staking on lands that have been designated for this purpose.<br />
The term of a claim is two years. It can be renewed indefinitely, provided the claim<br />
holder meets the conditions stipulated in the Mining Act, including the carrying out<br />
of exploration work, the nature and amount of which is established by regulation.<br />
Mining Lease<br />
To obtain a mining lease, a claim holder must first establish the existence of<br />
indicators showing the presence of a workable deposit, and must submit a report<br />
certified by an engineer who is a member of the Ordre des ingénieurs du Québec or<br />
a geologist who is a member of the Ordre des géologues du Québec, describing the<br />
nature, extent and probable value of the deposit, as well as a project feasibility<br />
study and a scoping and market study about processing in Québec.<br />
Mining lease applicants must provide the MERN, at its request, with any document<br />
and information relating to the mining project. The MERN may subject the mining<br />
lease to conditions designed to avoid conflicts with other uses of the territory.<br />
When entering into the lease, the Government may, on reasonable grounds,<br />
require maximization of the economic spinoffs, within Québec, of mining the<br />
mineral resources under the lease.<br />
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A mining lease will be granted only when:<br />
- the rehabilitation and restoration plan has been approved;<br />
- the certificate of authorization in accordance with the Environment<br />
Quality Act has been issued; and<br />
- the project’s survey plan has been formalized by the Office of the<br />
Surveyor-General of Québec.<br />
The initial term of the lease is 20 years. The lease may then be renewed no more<br />
than three times for a period of 10 years each time. After the third renewal, it may<br />
be renewed for periods of five years.<br />
Mining Tax Regime<br />
The purpose of the mining tax regime is:<br />
- to obtain fair profitability for the State without compromising the ability of<br />
operators to compete;<br />
- to stimulate mineral exploration and mining activities;<br />
- to encourage development in Northern Québec;<br />
- to promote processing and conversion in Québec.<br />
A new mining tax calculation method for operators applies to every tax year<br />
beginning after December 31, 2013. An operator is required to pay the higher of<br />
the following two amounts:<br />
- A minimum mining tax based on the well head value of output, at the<br />
following rates:<br />
o 1% on the first $80 million<br />
o 4% on the remainder<br />
- Mining tax on the annual profit, at a graduated rate ranging from 16% to<br />
28%, depending on the operator’s profit margin.<br />
Well head value is established as follows is defined as the gross value of the mine’s<br />
annual output minus:<br />
- Expenses incurred in respect of the mine that are reasonably attributable<br />
to crushing, milling, sieving, processing, handling, transportation or<br />
storage of the mineral substance derived from the main, from its first site<br />
of accumulation after leaving the mine and, where applicable, processing<br />
products obtained and marketing activities for the mineral substance,<br />
including general and administrative expenses relating to these activities.<br />
- The depreciation allowance (goods used from the first site of<br />
accumulation).<br />
- The processing allowance (the same as that deducted when calculating the<br />
annual profit from the mine).<br />
To encourage mining investment, companies that process ore in Québec can<br />
benefit from an allowance based on the cost of the assets used for ore processing.<br />
This allowance corresponds to:<br />
- 10% for a mining company that engages in concentration;<br />
- 10% for a mining company that processes ore from a gold or silver mine;<br />
- 13% for a mining company that engages in smelting or refining outside<br />
Québec;<br />
- 20% for a mining company that engages in smelting or refining in Québec.<br />
Other fiscal incentives exist for eligible mining corporations that incur qualified<br />
exploration expenses in Québec.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 26<br />
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EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
Aboriginal Issues<br />
General<br />
Canadian courts have established a duty to consult with Aboriginal Peoples on<br />
decisions that may impact land and resources subject to aboriginal claims. In<br />
practice, however, there is a lack of clarity on who is consulting, how much<br />
consultation is required, and when this requirement has been satisfied. This lack of<br />
clarity has led to frustration on the part of both mining companies and aboriginal<br />
groups, in some cases delaying projects that are in the interest of both groups.<br />
The Canadian constitution recognizes three groups of Aboriginal Peoples: First<br />
Nations, Métis, and Inuit. In Canada, the government [usually the provincial<br />
government] is obliged to consult with and perhaps accommodate aboriginal<br />
groups if there is a prospect that aboriginal or treaty rights will be affected by a<br />
resource development authorized by government. The obligation to consult and<br />
accommodate was affirmed by the Supreme Court of Canada in landmark decisions.<br />
Third parties, such as mining companies, do not have a legal obligation to consult<br />
aboriginal groups and the ultimate responsibility for consultation and<br />
accommodation rests with the government.<br />
The government is able to delegate aspects of consultation to mining companies.<br />
The federal government in its decision-making process can use information<br />
collected during consultation. However, the ultimate responsibility for consultation<br />
and accommodation rests with the government. Consultation responsibilities may<br />
also be delegated to mining companies as part of a provincial or a federal<br />
environmental assessment process.<br />
While mining companies are not legally obliged to consult with aboriginal groups, it<br />
is often preferable for them to be active in the process. Mining companies have a<br />
vested interest in the consultation process since their project may be at risk if<br />
consultation is inadequate. Court decisions have disallowed private companies<br />
from relying on existing provincial authorization where the consultation process<br />
was deemed inadequate.<br />
By consulting with aboriginal groups early on, mining companies can also help build<br />
good relationships, share necessary information, and reduce the risk of future<br />
challenges to government decisions. Creating good relationships with aboriginal<br />
groups can help mines attract a motivated workforce after mining operations begin.<br />
Mining companies face a growing skill and labour shortage and aboriginal workers<br />
can help fill this need. Aboriginal communities can also benefit from the<br />
employment, training and economic growth opportunities of mining.<br />
Project Specific<br />
The Projects appear to be mainly located on Cree Territory - referred to as Eeyou<br />
Istchee-James Bay Territory - south of the 55th parallel as delimited by the James<br />
Bay and Northern Québec Agreement (JBNQA) signed in 1975 by Grand Council of<br />
the Crees of Québec and the federal and provincial governments.<br />
This agreement remains the most important element of the First Nations<br />
landscape. It settled all claims of native people relating to ownership, fishing,<br />
hunting and trapping in the territory. Treaty Rights replaced the aboriginal rights<br />
claimed by the Cree Nation as defined in the JBNQA in order to clarify and secure a<br />
legal framework that would allow the use of the resources of the territory for the<br />
benefit of all Quebecois and the protection of the way of life of the native people<br />
concerned.<br />
On February 7, 2002, the Québec Government and the Crees signed another<br />
important agreement dubbed as the “Paix des Braves”. This fifty-year agreement is<br />
of a political and economic nature. Its goal is to favour the beginning of new<br />
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relations between the parties based on cooperation to achieve the full<br />
development of the territory and ensure autonomy and increased management by<br />
the Crees of their own development while respecting the principles of sustainable<br />
development and the traditional way of life of the Crees. A final agreement giving<br />
effect to “La Paix des Braves” was signed on July 24, 2012 (the 2012 Agreement).<br />
These agreements have been implemented by legislation. A special land regime<br />
applies to the Eeyou Istchee-James Bay Territory. A specific environmental<br />
protection regime included in the Environment Quality Act ensures special<br />
participation by the Crees to environment assessments by way of consultation and<br />
representation mechanisms.<br />
A Cree Regional Authority created in application of the JBNQA and designated as<br />
Cree Nation Government by the 2012 Agreement has jurisdiction over Category II<br />
Lands notably with respect to management of natural resources. But the 2012<br />
Agreement specifically stipulates that third parties interests such as permits, leases,<br />
mining claims, etc. existing on Category II Lands as of the date of coming into force<br />
of the agreement are maintained in accordance with applicable laws.<br />
All mineral substances other than surface mineral substances contained in the lands<br />
remain part of the domain of the provincial government but the MERN is<br />
responsible for the application of the Mining Act and must take into account the<br />
Cree communities’ rights and concerns when exercising powers to authorize<br />
exploration or exploitation of minerals.<br />
There are three main categories of lands on Eeyou Istchee-James Bay Territory:<br />
- Category I Lands: lands surrounding villages set aside for the exclusive use<br />
and benefit of the Crees;<br />
- Category II Lands: public lands on which the Crees have exclusive hunting,<br />
fishing and trapping rights;<br />
- Category III Lands: public lands with non-exclusive rights to the Crees for<br />
hunting, fishing and trapping without a permit subject to the conservation<br />
principle but no exclusive rights.<br />
On Category I Lands, the consent of the Cree Community concerned is required for<br />
any mining exploration or exploitation.<br />
On Category II Lands, no project may be authorized without prior consultation with<br />
the Crees. Furthermore, if the project is to interfere substantially with the Crees’<br />
exclusive rights to fish, hunt or trap in the area, a compensation must be<br />
determined. The 2012 Agreement also provides that Québec shall notify monthly<br />
the Cree National Government, the Cree Mineral Exploration Board and the<br />
relevant Cree communities of the grant of mining claims on Category II Lands and<br />
provide the Crees with all the information on mineral activity on Category II Lands.<br />
On Category III Lands, the agreements also require a prior consultation with the<br />
relevant Cree community before any authorization is granted. Furthermore, the<br />
Cree Nation Government has the authority to devise territorial development plans<br />
and adopt plans of land use and development that apply on Category III Lands.<br />
Those regulations must be taken into account in any decision in relation to mining<br />
activities as well as other resources uses.<br />
The tables below indicate the proportion of active claims (not the surface area)<br />
affected by the different categories of land with regards to each project, as well as<br />
other limitations affecting the claims.<br />
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Project<br />
Number of<br />
Claims<br />
FIGURE 21: PROJECT CATEGORIES AND LIMITATIONS<br />
Area* (Ha) Category of Lands Other Limitations<br />
I II III<br />
Terre des Montagnes 143 7,655 - 78.3 % 36.4 % -<br />
Sirmac-Clapier 39 2,130 - - 100% Park Assinica Project (10 claims)<br />
Kapiwak South 40 2,112 - - 100% Power Line (4 claims)<br />
Kapiwak North 81 4,270 - - 100% Power Line (12 claims)<br />
Adina 57 2,938 - - 100% -<br />
Terre des Montagnes<br />
Southeast<br />
Terre des Montagnes<br />
Southwest<br />
45 2,400 - - 100% Hydroelectric Installation (18 claims)<br />
163 9,302 - - 100% Hydroelectric Installation (25 claims)<br />
Power Line (2 claims)<br />
Terre des Montagnes<br />
58 3,048 - - 100% -<br />
Southeast Extension<br />
Terre des Montagnes<br />
11 588 - - 100% -<br />
Southwest Extension<br />
Wells-Lacourciere # 135 7,769 - - - -<br />
Wells-Lacourciere<br />
14 802 - - - -<br />
Northwest Extension #<br />
Cancet 187 9,585 - - 100% Hydroelectric Installation (109 claims)<br />
Source: Company Reports<br />
*Approximate area<br />
#<br />
Located in municipality of Rouyn-Noranda and not subject to Category of Lands<br />
Other Limitations<br />
In terms of the Mining Act, the MERN may reserve to the State or withdraw from<br />
prospecting, exploration and mining operations any mineral substance forming part<br />
of the domain of the State and required for any purpose it considers to be in the<br />
public interest, in particular for:<br />
- the creation of parks or protected areas;<br />
- conservation of vegetation and wildlife;<br />
- development and utilization of water power, power transmission lines,<br />
storage tanks or underground reservoirs;<br />
- protection of eskers that may be a source of drinking water;<br />
- compliance with protection areas established under the Groundwater<br />
Catchment<br />
- Regulation;<br />
- protection of rehabilitation and restoration work carried out in<br />
accumulation areas; and<br />
- classification as an exceptional forest ecosystem or designation of<br />
biological refuge status under the Sustainable Forest Development Act.<br />
MERN may also impose conditions and requirements on a claim holder relating to<br />
work to be performed on the parcel of land.<br />
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Directors and Management<br />
Board of Directors<br />
MTC has two Canadian-based independent directors. The company will seek to<br />
appoint additional suitably qualified non-executive directors as the projects are<br />
advanced. Appropriate management is also expected to be employed when<br />
required.<br />
Mr Russell Moran – Executive Chairman<br />
Mr Moran is a co-founder and Executive Chairman of the Company. He is an<br />
experienced natural resources and technology investor with focusing on bulk<br />
commodities, base metals and mining and engineering services sectors. He is the<br />
Founder and former Executive Director of Canadian anthracite mine developer<br />
Atrum Coal (ASX: ATU) and has significant experience in Canadian exploration and<br />
resource development.<br />
Mr Moran is currently Chairman of Oceanic Dental Pty Ltd and 3G Coal NL, and<br />
Non-Executive Director K2 Technology Pty Ltd and K2fly <strong>Limited</strong> (ASX: K2F).<br />
Mr Gino D’Anna – Executive Director<br />
Mr D’Anna is a founder and Executive Director of the Company. Mr D’Anna has<br />
significant primary and secondary capital markets experience and has extensive<br />
experience in resource exploration, public company operations and administration<br />
and financial management. Mr D’Anna has particular experience in Canadian<br />
Government and First Nations relations in the mining sector. Mr D’Anna was a<br />
founding shareholder and founding Executive Director of Atrum Coal (ASX: ATU)<br />
which is developing the Groundhog Anthracite Project, located in British Columbia,<br />
Canada.<br />
Mr D’Anna is currently a Director of 3G Coal NL, Non-Executive Director of Metals<br />
Australia <strong>Limited</strong> (ASX: MLS) and K2fly <strong>Limited</strong> (ASX: K2F) and Director of Lac<br />
Grande Gold Pty Ltd.<br />
Mr Shane Uren - Independent Director<br />
Mr Uren is a Registered Professional Biologist in British Columbia with a Masters in<br />
Civil Engineering. He has extensive Environmental Assessment experience including;<br />
BHPs Ekati Diamond Mine, Cambior's Rosebel Mine, Inco Ltd.'s Goro Project,<br />
Novagold's Galore Creek Project, Thompson Creek Metal's Davidson Project, Atrum<br />
Coal’s Groundhog Project and Copper Fox Metal’s Schaft Creek Mine.<br />
Mr Michael Velletta – Independent Director<br />
Mr Velletta has more than 20 years’ experience in corporate law, building public<br />
companies, mergers and acquisitions, financing and corporate governance. He is a<br />
Director of MNP Petroleum (TSX.V:MNP), African Metals Corporation (TSX.V:AFR)<br />
and privately held gold exploration companies. He is a member of the Association<br />
of International Petroleum Negotiators, the Law Society of British Columbia and<br />
past governor of the Trial Lawyers Association of British Columbia.<br />
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Shareholders<br />
FIGURE 22: TOP SHAREHOLDERS<br />
Rank Name Shares %<br />
1 Talos Mining Pty Ltd ATF Talos Mining Trust 17,914,000 23.60%<br />
2 Rachel D'Anna 11,716,000 15.40%<br />
3* Glenn Griesbach 6,900,000 9.10%<br />
4 Sarah Cameron 2,250,000 3.00%<br />
5 Suburban Holdings Pty Ltd (Suburban Super<br />
2,250,000 3.00%<br />
Fund)<br />
6 Lithium Australia NL 2,000,000 2.60%<br />
7* John Moran 1,950,000 2.60%<br />
8 J P Morgan Nom Aust Ltd 1,385,000 1.80%<br />
9 Tets Pty Ltd 1,350,000 1.80%<br />
10 Chifley Portfolios Pty Ltd 1,210,000 1.60%<br />
11 Pheakes Pty Ltd (Senate Account) 1,020,000 1.30%<br />
12 Keith and Penny Huxtable (Huxtable Super<br />
Fund)<br />
960,000 1.30%<br />
13* Jason Peterson 800,000 1.10%<br />
14 Gregory M and LM Pinkus (Pinkus Family Super<br />
Fund)<br />
700,000 0.90%<br />
15 Samantha Moran 600,000 0.80%<br />
16 Mandalay Mining Pty Ltd ATF Hudson Ave<br />
Investment Trust<br />
600,000 0.80%<br />
17 Dorel Oran Raphael 500,000 0.70%<br />
18 Resourserve Pty Ltd (Hamlyn Super Fund) 384,000 0.50%<br />
19 Ryan Kalt 375,000 0.50%<br />
20 Fairborn Holdings Pty Ltd 375,000 0.50%<br />
Top Shareholders 55,239,000 72.6%<br />
Source: Company Reports (*denotes merged holding)<br />
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Appendix 1<br />
Lithium in its high grade form is rare and<br />
highest energy density of any metal and<br />
……….<br />
……. has a broad range of uses from<br />
energy storage to pharmaceuticals<br />
The Lithium Market<br />
Background<br />
Lithium (chemical symbol: Li) is soft and silvery white and it is the least dense of the<br />
metals. It is highly reactive, does not occur freely in nature and is contained within<br />
stable minerals in a range of hard rock types or in solution in brine bodies within<br />
salt lakes (salars), in seawater or geothermal brines. The contained concentration of<br />
lithium is generally low and there are only a limited number of known resources<br />
where lithium can be economically extracted.<br />
Lithium’s high electrochemical potential makes it the standard material for lithiumion<br />
(high energy-density rechargeable) batteries. Lithium ion batteries generally<br />
have a very high efficiency, typically in the range of 95% - 98%. Nearly any discharge<br />
time from seconds to weeks can be realized, which makes them a flexible and<br />
universal storage technology.<br />
Lithium can be processed to form a variety of different chemicals depending on its<br />
end use. Lithium carbonate represents approximately half of the total global<br />
consumption of lithium chemicals. The next most common chemical is lithium<br />
hydroxide, which represents 16% of total global consumption. Other forms of<br />
lithium consumed include lithium bromide, lithium chloride and lithium minerals.<br />
Uses are:<br />
- As lithium carbonate, it’s a pharmaceutical. It’s been prescribed for<br />
conditions such as manic depression and bipolar disorder. It acts on the<br />
nervous system, and can modify your actions and behaviour.<br />
- It is also used as an alloy mixed with aluminium, so that it can strengthen<br />
aircraft. This alloy can also be used for high-speed trains and high quality<br />
bicycle frames.<br />
- Alloyed with magnesium, it is used to make armour plating.<br />
- It is used as lithium oxide in glass ceramics and special glasses.<br />
- It is also used as a desiccant in air conditioning systems, as lithium bromide<br />
and lithium chloride.<br />
- As lithium stearate (grease), it is used as an all-purpose lubricant although<br />
it is especially ideal for high temperatures.<br />
- And as lithium hydride, it can store hydrogen so it can be used as fuel.<br />
Industry has divided product specification into 3 broad categories:<br />
- Industrial grade (+96% Li) - glass, casting powders and greases.<br />
- Technical grade (~99.5% Li) - ceramics, greases and batteries.<br />
- Battery grade (>99.5% Li) - high end battery cathode materials<br />
Lithium and lithium compounds are often measured in terms of Lithium Carbonate<br />
Equivalent (LCE) but other measures such as lithium hydroxide (LiOH), lithium oxide<br />
(Li2O) and lithium metal (Li) are also used. The following table summarises<br />
conversion factors between the compounds.<br />
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Current demand is estimated at 160kt<br />
LCE with most market commentators<br />
expecting annual growth around 10%<br />
FIGURE 23: LITHIUM CONVERSION FACTORS<br />
Convert from<br />
Convert to Li<br />
Convert to Convert to<br />
Li2O<br />
Li2CO3<br />
Lithium Li 1.00 2.15 5.32<br />
Lithium Oxide Li2O 0.46 1.00 2.47<br />
Lithium Carbonate Li2CO3 0.19 0.40 1.00<br />
Source: Company Reports<br />
Demand<br />
The consumption of lithium has experienced exceptional growth with the overall<br />
market more than doubling in just twelve years from 2000. Market demand for<br />
lithium products is largely driven by the increase in use of rechargeable batteries in<br />
portable electronic devices and electric transportation. Lithium-ion batteries<br />
provide power for cell phones, smartphones, tablets, laptop computers, power<br />
tools, and many other mobile consumer devices. Larger format lithium-ion batteries<br />
provide power for electric cars, scooter, electric bikes, buses, forklifts and other<br />
forms of transportation. New applications for lithium are emerging in the areas of<br />
grid energy storage, solar and nuclear energy generation, and other industrial uses.<br />
Current demand is estimated at 160kt LCE with most market commentators<br />
expecting annual growth around 10%<br />
FIGURE 24: GLOBAL LITHIUM CONSUMPTION (2012-2017)<br />
Battery demand currently dominates<br />
lithium demand<br />
Source: Roskill – Lithium Market Outlook to 2017<br />
EVs are likely to provide explosive<br />
growth<br />
In the automotive sector, the advent of lithium-ion hybrids (HEV), plug-in hybrids<br />
(PHEV) and fully electric vehicles (EV) require large format batteries. These<br />
batteries will require kilos of lithium, rather than the grams used today in portable<br />
electronic applications.<br />
Electric vehicles can be grouped into three main categories:<br />
- Hybrid Electric Vehicles (HEV): Capable of storing charge (usually only in<br />
small amounts). Do not plug into an electric outlet, but instead are<br />
recharged by a separate internal combustion engine which is the principal<br />
power source (e.g. Toyota Prius). HEVs consume approximately 0.5-2.0 kg<br />
Li per vehicle.<br />
- Plug-in Hybrid Electric Vehicles (PHEV): Have both electric and<br />
conventional motors, but are distinct from HEVs in that they can be<br />
recharged from an electric outlet via a plug (e.g. Chevy Volt). PHEVs<br />
consume approximately 1.8-4.2 kg Li per vehicle.<br />
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Government incentive programs and the<br />
drive for lower carbon emissions will<br />
underpin demand<br />
Car companies are rushing to construct<br />
battery production capacity in<br />
anticipation of EV demand<br />
- Electric Vehicles (EV): Fully electric vehicles that do not contain a<br />
combustion engine. Their battery packs and driving ranges between<br />
recharges tend to be much larger than other EVs since they do not have<br />
auxiliary power sources such as an internal combustion engine. Example:<br />
Tesla Model S. EVs consume approximately 10-20 kg Li per vehicle.<br />
While portable consumer goods alone continue to provide impressive growth in<br />
demand for lithium batteries, the start of mass production of hybrid, plug-in hybrid<br />
and electric vehicles presents the most significant upside “step growth” potential<br />
for lithium demand.<br />
Given the increasing political and consumer focus on environmental consciousness,<br />
auto manufacturers are striving to lower both carbon emissions and fuel<br />
consumption in transport applications. In 2013 alone the number of electric vehicle<br />
models grew from 11 to 17 with a wide range of consumer choices offered by all<br />
the major global automotive brands. Electric vehicle options range from the zippycity-drive<br />
Nissan Leaf to the long-range sporty performance of the Tesla Model-S.<br />
Determining the future growth in electric vehicles is difficult to predict and there<br />
are a wide range of forecasts as to the number of electric vehicles that will be on<br />
the road within the next decade and the resultant additional potential lithium<br />
consumption requirement. However, there has been a large number of government<br />
incentive programs, globally, recently announced to advance the development,<br />
production and use of HEVs, PHEVs, and EVs. Despite near-term uncertainty as to<br />
the growth of lithium-ion batteries in the electric vehicle segment, we believe the<br />
increasing drive for lower carbon emissions by governments and consumers,<br />
significant investments by a number of parties globally in new battery technology<br />
for transport applications, and technology improvements within car manufacturers<br />
themselves, will provide significant future demand growth for lithium.<br />
According to Goldman Sachs lithium demand for all EV applications could grow<br />
more than 11x by 2025, adding more than 310,000mt of LCE demand. This<br />
compares to current EV demand that represents only 27,000mt of LCE (17% of the<br />
current overall lithium market). In short, growth in EV applications alone could<br />
triple the size of the entire lithium market from 160kt today to 470kt by 2025.<br />
Tesla exclusively makes electric cars powered by rechargeable batteries, and the<br />
company has just released its latest model – at a much lower price point than its<br />
previous models (US$35,000) – and already has 400,000 orders for the car. The<br />
company says it will build 500,000 cars a year by 2018, a massive ramp up from its<br />
existing production levels of 80,000 to 90,000 cars a year. By 2020, CEO Elon Musk<br />
says the company is aiming for one million cars.<br />
Several others are rushing to compete with Tesla, and all will require rechargeable<br />
batteries. Many countries in Europe are leading the world in uptake of EVs using<br />
lithium-ion batteries, with EVs already totalling 22% of all new vehicle sales in<br />
Norway. Lithium-ion batteries are already being produced in Europe to meet this<br />
increasing demand, and production capacity in car-producing countries such as<br />
Germany is growing dramatically to keep up, with Daimler recently announcing a<br />
new €500M battery factory, and Volkswagen likely to soon follow suit. Samsung SDI<br />
has announced a lithium battery plant in Hungary, Nissan in the UK, Tesla a<br />
Gigafactory 2 in Europe whilst Jaguar Land Rover, Ford and BMW are studying a<br />
joint lithium battery factory in Europe. In addition to batteries for EV’s there is<br />
growing understanding that Europe’s drive towards increase use of renewables<br />
requires fixed energy storage and that lithium batteries can be an important<br />
component of this which will further increase battery and lithium demand. Battery<br />
producers will need more supply from safe, nearby jurisdictions. Sourcing lithium<br />
from Europe would also reduce the carbon footprint of the car production supply<br />
chain.<br />
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The lithium oligopoly poses a challenge<br />
for EV and battery producers<br />
Supply<br />
Commercial lithium production currently comes from two sources:<br />
- Brines: lithium rich brines from salt lakes, or salars; and<br />
- Minerals: pegmatite rock deposits containing lithium-bearing minerals.<br />
The process of producing lithium from brines is generally much lower cost than that<br />
from hard rock minerals but capital costs tend to be higher.<br />
Nearly one-half of the world’s lithium production comes from lithium brines in the<br />
Andes mountains region. In the mid-1990s, the development of these large-scale,<br />
low-cost brine resources in Chile and Argentina by SQM, Albermarle and FMC<br />
Global fundamentally changed global lithium supply. With its cost advantage over<br />
mineral-based production, brine producers lowered prices to gain market share,<br />
resulting in closure of mineral conversion plants in the USA, Russia and China.<br />
Hard rock supply is dominated by Australia’s Greenbushes mine owned by Talison<br />
Lithium supplying close to 40% of market requirements. Talison is hardly an<br />
independent, being 49 percent-owned by Albemarle and 51 percent by China's<br />
Tianqi Lithium, which takes an increasing amount of the mine's output for<br />
processing in China. Talison has recently announced that it is proceeding with a<br />
lithium hydroxide plant in Western Australia supplied by concentrate from<br />
Greenbushes.<br />
Current global production of lithium is also highly concentrated, both<br />
geographically and in corporate ownership. We estimate that about 85% of world<br />
production comes from Chile (Sociedad de Quimica Minera de Chile SA (SQM) and<br />
Albermarle), Argentina (FMC Corp), and Australia (Talison Lithium).<br />
This oligopoly poses a real challenge for EV and battery producers. Interestingly<br />
Tesla seems to placing its faith in the new generation of producers. In Europe we<br />
would expect Daimler, VW and the like to also support new suppliers of lithium<br />
with particular focus on European producers, placing EUR in a strong position.<br />
Pricing<br />
There are a number of problems when looking at pricing. The first is the<br />
bewildering number of products that can be made from lithium, ranging from<br />
lithium stearate (industrial grease) to lithium fluoride (aluminium smelting) to<br />
butyllithium (organic compounds).<br />
All are normally converted for pricing into lithium carbonate, largely used for<br />
battery manufacture.<br />
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FIGURE 25: LCE PRICNG FORECASTS<br />
If lithium is going to become an integral<br />
part of the global energy supply chain,<br />
its market opacity is a big problem.<br />
Source: Orocobre, Deutsche Bank, Canaccord<br />
Lithium pricing is extraordinarily<br />
opaque………….<br />
……….but prices are on the rise.<br />
But even then the picture is complex. There are different types of carbonate, with<br />
lower-grade material for the ceramics and glass industries, while higher-grade<br />
material is used in batteries. Nor are lithium-ion batteries themselves homogenous.<br />
There are five major types, each using a different lithium compound.<br />
The second problem with lithium pricing is that most trade is conducted between a<br />
small number of producers and their customers. There is no exchange trading, no<br />
terminal storage market and only an extremely limited spot market and prices vary<br />
by product, consumer and contract types. This means that price assessments from<br />
commentators rely on published trade volumes and trade values, or contacts within<br />
industry. This is made more difficult by the complexity of the lithium product chain.<br />
Either way prices are on the rise. CRU reports that battery grade material is trading<br />
at more than USD$20,000/t on the Chinese spot market. It is believed that new<br />
contract prices for battery grade material exceed USD$7,000/t. Prices for lithium<br />
concentrates used for conversion into chemicals are correlated to, and tend to<br />
follow the same trend as, lithium carbonate prices.<br />
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Appendix 2<br />
Cobalt is considered a ‘technology<br />
enabling’ metal<br />
The Cobalt Market<br />
Background<br />
Cobalt is considered a ‘technology enabling’ substance as it is at the forefront of<br />
technological developments and innovation. In pure form, cobalt is silvery-blue<br />
and brittle. It is similar to iron and nickel, and, like iron, can be made magnetic. The<br />
only stable isotope of cobalt is Co-59.<br />
Ancient origins aside, cobalt itself was not discovered until the 1730s when<br />
Swedish scientist George Brandt pulled an unknown metal out of some ore from<br />
the Riddarhyttan mines of Sweden.<br />
Brandt described the metal and its properties, including its magnetism. The<br />
discovery was controversial, and even in 1760, Brandt was still defending the find<br />
in a talk at the Academy of Science. Fellow Swedish scientist Torbern Bergman<br />
would eventually conduct further study to confirm Brandt's findings in 1780,<br />
according to a 2011 article in Nature Chemistry.<br />
Demand<br />
Lithium cobalt oxide (LiCoO2) is widely used in lithium ion battery cathodes. The<br />
material is composed of cobalt oxide layers in which the lithium is intercalated.<br />
During discharge, the lithium is released as lithium ions. Nickel-cadmium (NiCd)<br />
and nickel metal hydride (NiMH) batteries also include cobalt to improve the<br />
oxidation of nickel in the battery.<br />
Cobalt-based superalloys consume a large proportion of produced cobalt. The<br />
temperature stability of these alloys makes them suitable for turbine blades for<br />
gas turbines and jet aircraft engines. Cobalt-based alloys are also corrosion and<br />
wear-resistant, making them (along with titanium) useful in medical orthopaedic<br />
implants that do not wear down over time.<br />
A manmade isotope, Cobalt-60, is commonly used in cancer treatments; the<br />
gamma radiation released by this radioactive isotope can target tumours,<br />
particularly brain tumours that need precision treatment.<br />
FIGURE 26: GLOBAL COBALT DEMAND FORECAST BY APPLICATION<br />
Batteries and alloys remain major<br />
demand<br />
Source: ResearchInChina<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 37<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
The DRC dominates mined supply<br />
Supply<br />
In terms of supply, two countries that present significant supply side concerns for<br />
Western companies dominate the cobalt market. The Democratic Republic of<br />
Congo (DRC), a politically unstable country, is responsible for 65 percent of cobalt<br />
mine production, and China is responsible for over 50 percent of refined cobalt<br />
production.<br />
Cobalt is typically mined as a low-grade by-product of copper or nickel. With nickel<br />
and copper prices under pressure and forecast to remain weak this by-product is<br />
an uncertain and reduced source of supply.<br />
There has also been considerable pressure from major electronics companies to<br />
secure their raw materials from ethical sources, and reduce materials from<br />
artisanal mines associated with child labour and human rights abuses. ‘Clean’<br />
jurisdictions such as Canada are expected to benefit from this supply-chain shift.<br />
FIGURE 27: COBALT SUPPLY<br />
Country<br />
‘000 Mt<br />
DRC 66.0<br />
China 7.7<br />
Canada 7.3<br />
Russia 6.2<br />
Australia 5.1<br />
Zambia 4.6<br />
Cuba 4.2<br />
Philippines 3.5<br />
Madagascar 3.3<br />
New Caledonia 3.3<br />
Source: USGS<br />
Pricing<br />
For the past four decades, cobalt metal has typically traded between USD$15/lb<br />
and USD$30/lb, only dipping below USD$10/lb briefly, and occasionally spiking to<br />
the USD$50/lb level when serious supply issues arise<br />
FIGURE 28: GLOBAL COBALT MARKET BALANCE & PRICING FORECAST<br />
Source: ResearchInChina<br />
The LME started trading cobalt in 2010 although the London Metal Bulletin free<br />
market quotation remains the main price reference. This has recently risen to<br />
above USD$20/lb. Batteries and superalloys together with supply issues are likely<br />
to persist for some time giving impetus to prices.<br />
EverBlu Research Pty Ltd | Level 39, 88 Phillip Street, Sydney NSW 2000 38<br />
Email: research@everblucapital.com
EverBlu | Research<br />
27 March 2017 | Gavin Van Der Wath<br />
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