Site VisitLast week : Major Bank visited the PAK Lithium Project - They reported :
Last week we visited the PAK Lithium Project in Northern Ontario. The site visit reinforced our view that this is a
strategic resource to Canada, and why it is likely to attract international interest from potential strategic partners. The PAK project is one of the largest and highest grade spodumene resources in North America. It is considered a Tier 1 spodumene resource based on scale, high grade, low strip, and low impurities. The Project is located approximately 175 km north of Red Lake Ontario, surrounded by 4 First Nations Communities - North Spirit Lake, Deer Lake, Sandy Lake & Keewayan First Nations. The total population of these communities is approximately 10,000 people. Access to the property is available via winter road, or year round by plane/helicopter. Development of infrastructure in the region, will be key to unlocking the value of this strategic resource, and would be a significant catalyst for the share price. Specifically, the construction of the government funded
Berens Bridge Project (currently being permitted) will represent near term, tangible progress of much needed infrastructure expected to open up access to the region.
We are seeing unprecedented levels of competition for lithium offtakes from high quality projects, as auto OEM and battery manufacturers seek to secure supply of raw materials required to meet EV production growth plans. FL is well situated to become a strategic regional battery metals supplier to support the multi-billion-dollar investments in EV battery manufacturing in Ontario and Quebec. This is a world class strategic deposit in an area desperately in need of infrastructure, with partners who are motivated to support the development of the area. Management and directors are aligned with local stakeholders, but also FL shareholders, with insiders owning ~25% of the float.
World Class Grades with District Potential - Since 2013 Frontier Lithium has delineated two premium spodumene bearing lithium deposits on the property, located 2.3 km apart. Pegmatites are spodumene baring rocks, and spodumene is a low-cost source for lithium hydroxide. Recently, Frontier Lithium confirmed the presence of spodumene at the Bolt pegmatite, between PAK and Spark deposits and the Pennock pegmatite occurrence a further 30 km along strike at the Project.
- Management described this 2018 drill hole, one of the best core samples which exists globally – 51 m t 4.05% Li2O from surface.
- This is a potential district play with significant upside. To date, there have been four discoveries on the property, and two of the deposits outcrop at surface. Management believes it could be sitting on ~ 100 Mt between the 3 pegmatites currently identified (Spark ~ 60Mt, Bolt 20Mt, PAK 10Mt). The area between Spark & Pak has not yet been drilled.
- 15,000 m of diamond drilling to date, with 15,000m program nearly complete for 2022. A disciplined & methodical drilling strategy has resulted in world class discoveries while remaining focused on near surface opportunities. The infill-drilling at Spark continues to be predictable, and the pegmatite remains open in all directions, with 2 drills currently active. Drilling in 2022 was designed to convert inferred material to the indicated category for the planned open pit. Approximately 11,000 m of drilling in 34 holes has been completed this year, with ~ a month left in the 2022 drill season. Bolt is the 3rd pegmatite discovered < than 1 km from Spark & has yet to be drilled - channel sampling suggests the geology is consistent with the adjacent pegmatites with grades similar to Spark. The current mine life of ~25 years, is based on the two currently drilled off deposits (PAK & Spark), both of which remain open at depth and along strike. Two pegmatites remain on the property to be further investigated and the 27,000h land package remains largely unexplored. PAK deposit hasn’t been drilled since 2018 (10,000 m total). The PAK deposit plunges towards the lake, which represents longer dated underground potential, so drilling has been focused on the considerable open pit opportunities on the property. This strategy resulted in the discovery of game changer Spark, then earlier stage Bolt)
- “this is a 60 foot face of 1.5% lithium” (a notable comment from management while at the Spark deposit)
Processing & Optimizations - Positive metallurgical results continue to derisk the project. Management commented that processing is the “death knell” of any mining project, and therefore have prioritized metallurgy & processing through the early stages of exploration & baseline work. The company completed a 300 T bulk sample at the PAK pegmatite in 2015. Metallurgical test produce a spodumene concentrate technical grade of 7.13% Li2O.
- Optimization scenarios: Although the optimal scenario is the completion of the all season road before construction/production, smaller scale production for Phase 1 could potentially be achieved using only the ice road (by~ 2027) if necessary. The 2021 PEA has the lithium chemical processing plant located in the Thunder Bay area, which is the most logical location, but the final site may be determined by agreements with other strategic partners. The tailings are considered inert, and therefore the tailings management facility will not require a liner – this is a significant positive in any project, particularly when it lies near bodies of water.
Infrastructure Development is Supported through Strong Community Partnerships - Infrastructure progress is key to development timelines, and Frontier is partnered with the local First Nation Communities seeking infrastructure upgrades. Beyond proving up the technical merits of the projects, management have prioritized relationships with the adjacent communities to assure strong alignment with local stakeholders (recall: Former Chief of Sandy Lake First Nation, Bart Meekis, sits on the FL board). Management view the development of the project as a hub & spoke concept with the project and surrounding First Nations Communities, as infrastructure is a priority for all parties.
- Road: Currently under Scoping Study. Government funded engineering study is underway for “Berens River bridge and Roads” project to improve and extend the winter road season. Internal scoping study assessing optimal all-season road access underway
- Berens Bridge Project: Permitting is progressing fall 2022. Government funded $25 m of capital required, which will improve and extend winter road season, and provide significant step towards construction of all season road. The Berens River Bridge and Roads Project is being developed by a group of seven First Nations (Pikangikum First Nation, Deer Lake First Nation, Keewaywin First Nation, McDowell Lake First Nation, North Spirit First Nation, Poplar Hill First Nation, and Sandy Lake First Nation) to improve road access to these First Nations north of Red Lake, Ontario. More than 10,000 people living north of the Berens River are expected to benefit from the improved access.
- Whitefeather Forest Primary Access Road: fully permitted 84 km. FL completing preliminary engineering on 55 km remaining to the project. The all season road would take ~2 years to complete
- Powerline: Watay Power Project (“Line that brings light”) is being built to service 17 remote First Nation Communities, fully funded by the Government ($2B). The high-voltage transmission line is located 4km from the PAK resource. The substation is nearing completion and the power line is targeted to be electrified by 2024. A construction camp (set up for the power line & substation ) with capacity of ~ 130 beds is <10 km from the project, is expected to be vacated in the spring of 2023. The construction site could also represent an option for a potential airstrip location for the projection.
Upcoming catalysts: - Resource update at Spark Q4/22
- Pre-Feasibility Study anticipated Q4/22 or Q1/23. Frontier has been advancing test programs & studies, including lithium chemical processing and all-season road access.
- Ongoing community engagements & permitting consultations.
- Frontier Lithium aims to complete final permitting, metallurgical test work and definitive feasibility in 2025 to make construct decision for a mine, mill and downstream chemical plant to produce lithium chemicals.*
Raising Price Target and Estimates on Attractive Supply/Demand Fundamentals. - Our supply/demand model shows lithium supply remaining undersupplied through 2024 and then accelerating back to undersupplied in 2026 and beyond, given the total lithium demand growth of 1.5M mt from 2023 to 2030. We expect demand to remain robust and supply to lag demand given the difficulties of lithium mining/manufacturing. We believe announced capacity additions by the “majors” have the highest probably of success, and in total, we see production growth of ~1.3M mt from 2023 to 2030.