RE: NewsJuly 11, 2011 Dear SHAREHOLDERS, In responJuly 11, 2011
Dear SHAREHOLDERS,
In response to Rodinia Lithium Inc.’s(“Rodinia” or the “Company”) letter to shareholders datedJune 1, 2011, set out below, the Company received a written response from ashareholder containing various questions raised from the corporate updateprovided by the Company. As such correspondence refer to comments raised in anon-line discussion board with a number of other current investors in Rodinia andgiven that the questions are shared by more than a few investors, management ofthe Company would like to take this opportunity to address such questions andcomments and provide a response to all of its shareholders. Accordingly, wehave set out a Q&A style update we hope will serve to universally respond tothe issues raised.
Please note such questions are based on comments and questions received fromshareholder correspondence, however, for the purpose of this update have beenreworded slightly where applicable to fit the context of this update.
Q: In the June 1st letter, the Company discussedthe Preliminary Economic Assessment (“PEA”) and stated that the PEA wasinitiated for Diablillos on April 4, 2011 and goes on to say “We are in theprocess of entering into various engagement letters with the appropriateconsulting groups involved in this process.” The two months between April4th and June 1st appear to be a sufficient amount of timeto hire consultants to conduct the PEA. Why has there been such a longdelay in hiring a contractor?
RM: Rodinia has all the necessary contracts in place tocomplete the PEA. Further, work is well underway with these consulting groupstowards the completion of the PEA. Information on the results of the PEA andcertain steps within the PEA process will be disclosed once such information isavailable. At that time we will also disclose, where appropriate, whichconsulting groups have been involved in completing the work. We are confidentthat we have hired the best the industry has to offer and the quality of thework will become evident as we develop the Salar de Diablillos.
Q: In the June 1st letter, the Company states:“To date we have spent one-on-one time with over eight analysts; fiveanalysts have spent time visiting our project sites and another three are in theprocess of scheduling visits.” How long ago did the Companyinitiate contact with the eight analysts? When did the five analysts visit theDiablillos project site? Do you anticipate more analysts, which have visitedDiablillos, to initiate coverage of the Company? If so, when do you think thismight happen?
RM: Rodinia is continuously looking to engage additionalanalysts to increase our coverage. Initial site visits occurred during thefirst half of 2010, starting with Jon Hykawy of Byron Securities. Jon initiatedcoverage shortly thereafter and the team at Byron has been very supportive eversince. Thereafter, a team at Genuity Capital Markets initiated coverage.Unfortunately for the Company, Genuity was acquired by Canaccord Financial andboth the analyst team at Genuity and the team we were engaging at Canaccordmoved on to new firms and new roles where lithium coverage was no longer part oftheir mandate. On a positive note, however, the Company was pleased to learnthat David Talbot at Dundee Securities initiated coverage on Rodinia on June 9,2011. In addition to coverage initiated by Byron and Dundee, the Company alsohas research coverage from UBIKA and from RB Milestone Group. We are workingdiligently to attract a broader research following and anticipate additionalinitiating reports within 2011. While the Company is hopeful that such coveragewill be initiated, it is important to note that investment banking researchcoverage is completely independent of Rodinia.
It is also worth noting, that as of the date of this Q&A, and usingBloomberg as the source for investment banking research coverage, the juniorlithium comparator group of eight companies listed on slide 22 of our corporatepresentation, has an average following of 2.37 analysts (range zero to four).With two currently publishing on Rodinia, and having lost a third to industrychanges, management believes it has been successful in attracting the necessarycoverage and will endeavour to attract a broader research following whereapplicable.
Q:With a rough, projected production of 10,000tonnes per year from Diablillos, how many customers in the Lithium market arethought to be necessary for the Company? Is Shanshan part of this projectedmarket or is this organization solely working to develop the research andengineering for resource extraction from Salar deposits? Is an off-takeagreement with Shanshan anticipated?
RM: Our relationship with Shanshan remains strong andmanagement expects this relationship to continue to evolve as we further developthe project. Shanshan is a significant end-user of lithium carbonate and not amining company with research and engineering expertise.
Q: Could the Company provide an update regarding the progress of theClayton Valley project? As this is now Q2 2011, are we to expect that theseobjectives are behind schedule, and if so, any reasons for the delay? Does theCompany project a new timeline for these events (i.e. permitting, drilling,Feasibility Study, pilot plant, financing, construction) becompleted?
RM: Clayton Valley is experiencing delays due to drillpermitting issues. The Company expects to resolve these issues shortly andcomplete additional drilling and the resource estimate by the end of this year.The delays experienced are unfortunate and we are doing everything in our powerto commence drilling on the project again. Clayton Valley remains one of theCompany’s key assets and management is working diligently to continueexploration and unlock its potential value for shareholders.
Q: The Company has indicated that it is currently wellfinanced for the majority of the work planned for 2011. What type offinancing is the Company interested in pursuing towards the end of 2011? Is theCompany considering equity, debt or another partner? When does the Companyanticipate this financing?
RM: Rodinia monitors its capital needs very closely andassess financing opportunities as they are needed or presented to the Company.At this point, the Company does not anticipate requiring additional financing inthe near term. When required, Rodinia will attempt to secure the necessaryfinancing to develop the projects with a view to minimizing the dilutive impactto current shareholders. It is our aim to reach production in as short a timeperiod as possible without overly diluting the Company. We believe we willdemonstrate this strategy as we continue to develop.
Q:Does the Company envision taking its propertiesto production or does it hope for the properties to be bought out pendingsuccessful results of respective Bankable Feasibility Studies?
RM: Rodinia does not speculate on market activity, nor doesthe Company chase projects that we don’t believe have the potential to becomeimportant lithium producers. We intend to develop these assets with the clearmandate of putting them into production. We have compiled a team of theindustry’s top experts to ensure timelines are met and the most efficient andprofitable production facilities are built and operated.
Q: Does the Company have an opinion as to why current SP has declinedso dramatically since the last refinancing and why the current SP languishes inan apparently moribund state? While global economic uncertainty hasbeen factors in investment, it does not explain much of the current SP valuerelative to other Lithium Juniors.
RM: We are wholeheartedly disappointed with the share priceperformance thus far in 2011. We believe we are working very hard and mostimportantly achieving the right results with the project, however, these effortsare not reflected in the share price. We believe that much of the downwardpressure on the stock has come as a result of global economic uncertainty andthe flight of investment capital away from junior names in lesser knowncommodities like lithium to liquid gold names or into cash. In addition, theCompany believes that it may have suffered from an increasingly cautious juniorlithium market which management believes may have resulted from the materialrestatement of one of our competitor’s initial resource estimate. While theCompany cannot foresee complications our competitors may have, managementremains optimistic that it is developing its properties with view to unlock thepotential value for its shareholders.
Our goal is to be a leader in the junior lithium market and we will continueto strive to achieve this. Since our last financing, we see as ourselves asmiddle-of-the-pack performers. This is not where we want to be and we hope todemonstrate, in the near future, multiple reasons why we should be a leader.
Q: What is the type and amount of proposed production of lithium andpotash targeted at this stage by the Company?
RM: Initial production estimates are between 10,000 to15,000 tpa LCE. The facilities will be scaled upwards as warranted and asapplicable.
Q: When will RM have a good idea about the economics (e.g. costs pertonne and revenues per tonne) of the proposed production levels?
RM: These items will be addressed initially in the upcomingPEA scheduled for the second half of this year. These parameters will befurther refined during the subsequent Feasibility Study.
With respect to revenues per tonne, we draw your attention to a press releaseissued by FMC Lithium on June 23, 2011 announcing a 20% price increase forlithium carbonate effect July 1, 2011. https://www.prnewswire.com/news-releases/fmc-lithium-announces-global-price-increases-124446383.html
Q: Could the Company elaborate on some of the ideas around the levelof production and time? I understand that, at a production level of10,000 to 15,000 tonnes per year of lithium carbonate, there could be as much as400 years of resource extraction given current indications of resource. Thistimeline does not appear to be beneficial from a Net Present Value perspectiveto shareholders.
RM: 15,000 tpa represents over 10% market share at thistime. While forecasts show demand increasing over the next ten years, it isRodinia’s policy to begin with a reasonable level of market participation. TheCompany anticipates it will be able to increase production as demand increases.Management believes that a more conservative approach to its production leveltargets will assist in reducing higher capital expenditures associated with muchlarger production, which the Company hopes will ultimately benefit shareholdersin the long term.
Q: In light of the announcement made by the governor of JujuyProvince in March 2011, has the Company approached the authorities in SaltaProvince to seek assurances that they are not planning a similar move indeclaring lithium a strategic material and if so what was theirresponse?
RM: While management has had private conversations withSalta’s mining authorities, Salta has publically expressed their position inregards to this issue stating on several occasions that they do not plan to follow Jujuy’sfootsteps. In fact, Salta has publically frowned upon its neighbouringProvince’s policies calling them “unsound”.
We said it last month but feel it just important to reiterate now – as ateam, our top priority is thesuccessful development of our lithium projects. An extension of thispriority is making sure that our efforts are accurately reflected in our shareprice. While we are disappointed with recent trading, we maintain our positiveattitude and are working hard to develop the company and to unlock value forshareholders. With the work we continue to complete, the news flow that willfollow our recent initiatives (drill results, processing work, etc.), andsupport from new and existing shareholders such as the individual who took thetime to compile the list of questions set out above, we remain highly motivatedto continue to grow the Company and execute our strategic plan.
Thanks again for your continued support.
Sincerely,
RODINIA LITHIUM INC.
Farhad Abasov – Executive Chairman Aaron Wolfe – VP,Corporate Development
William Randall – President & CEO JenniferWagner – Corporate Secretary
Ryan Ptolemy – Chief Financial Officer Investor Cubed Inc. –Investor Relations