new coverage from Hallgarten Wednesday, May 10, 2023
Hallgarten & Company (44) 795 08 53 621
HALLGARTEN +
COMPANY
Initiation of Coverage
Christopher Ecclestone
cecclestone@hallgartenco.com
Century Lithium
(TSX-v:LCE, OTCQX: CYDVF, FSE: C1Z)
Strategy: LONG
Key Metrics
Price (CAD) $1.03
12-Month Target Price (CAD) $2.38
Upside to Target 131%
12mth hi-low $0.84-$1.53
Market Cap (CAD mn) $151.82
Shares Outstanding (millions) 147.40
Options & Warrants (millions) 27.80
Fully Diluted (millions) 175.20
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Century Lithium
In the Hotspot of US Lithium Development
+ The company has secured what is probably the best address in the rapidly evolving Lithium
zone in the Clayton Valley
+ The Clayton Valley Lithium project is immediately adjacent to the US’s only production
lithium operation, the Silver Peak facility of Albemarle
+ The company is collaborating with a part of the Koch empire, Koch Technology Solutions
(KTS), to utilize their Li-ProTM process for Direct Lithium Extraction (DLE) at the project
+ Water rights permit and geothermal assets for cheap power generation secured
+ Nevada is, by most measures, regarded as the best jurisdiction in the US for the extractive
industries
+ Cash balance as at Q4 2022 was a very healthy CAD$27.7mn
+ Despite the recent retreat of Lithium spot prices have been the firmest aspect of the
minerals’ universe in recent months as almost everything else has retreated in the face of
weak equity markets and higher interest rates
+ Under the Defense Production Act, the US Federal Government is providing Grants and
Loans for US critical mineral projects, notably in Nevada
The retracing of Lithium spot prices, in China, from ludicrous levels has taken down
valuations in almost the whole Lithium complex, when no-one was using the high prices as a
benchmark
There is a proliferation of Lithium development at the current time and getting a correlation
between new supply being added and the still unknown level of demand at any given point
is a challenge
The environment for funding Lithium project builds through capital markets alone is
challenging
Lithium Rising
Before the Biden Administration launched its curiously named Inflation Reduction Act as a vehicle to
kickstart the Green Revolution in the US, the global playing field was fairly even but with US-based
projects mainly disadvantaged by the torturous permitting process. That most of the Lithium projects
were in Nevada (excepting a notable exception in the Carolinas) helped mitigate concerns on permitting
due to Nevada’s long-term status as a mining-friendly jurisdiction. However, US-based projects did not
have much of a home team advantage, but that is now radically altered.
With Lithium in short supply, at least for now, the investment and development dollars are heading for
the US jurisdiction that provides most opportunities at the least degree of hassle, which is Nevada.
Century Lithium (until recently called Cypress Development) has positioned itself next to Silver Peak, the
only producing Lithium mine in the US (belonging to Albemarle). In a few short years they have brought
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the project up to Feasibility stage and are now advancing on development having secured water rights
and geothermal rights in the vicinity. Most recently they have partnered up with the mighty Koch
Industries on the processing technology.
In this initiation of coverage we shall look at the project, its prospects, its technology partner, the road
to production and the Lithium outlook.
The Clayton Valley Lithium Project
The project is located in west central Nevada, some 220 miles southeast of Reno, Nevada. The regional
town of Tonopah is 41 miles northeast of the project, and the small community of Silver Peak lies six
miles west of the project. Access from Tonopah, Nevada, is by traveling 22 miles south on US Highway
95, then 19 miles west on Silver Peak Road.
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The original project package was comprised of 129 unpatented placer mining claims and 212
unpatented lode mining claims. The claims are 100% owned by Century and cover 5,430 acres and
provide Century with the rights to access all brines, placer, and lode minerals on the claims.
Then in February of 2022 the company announced that it had cut a deal with Enertopia Corporation
(OTCQB: ENRT) to acquire its Clayton Valley Lithium Claystone project, located immediately adjacent (to
the northeast) to Century’s own Clayton Valley Project.
Century (Cypress at the time) paid US$1.1mn in cash and issued 3,000,000 common shares to purchase
100% ownership interest in Enertopia’s project. The claims are subject to a 1% NSR royalty to a third
party.
The Enertopia package consisted of 17 unpatented mining claims totaling 160 contiguous acres. The
map showing this “sliver” can be seen below.
A NI 43-101 compliant technical report on Enertopia’s project was prepared by Bradley C. Peek, of Peek
Consulting, Inc and was published in March of 2020.
This report estimated that the property has an Indicated resource of 82mn tonnes of 1,121 ppm Li and
an Inferred resource of 18mn tonnes of 1,131 ppm Li (using a cutoff grade of 400 ppm Li). The resource
was calculated using assay data from four core holes drilled on the property in 2018.
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Above can be seen a drill at work on the Enertopia piece.
The Enertopia piece was a strategic addition to the Century’s holdings as it will be noticed from later
discussion that the proposed pitshell runs up to the northeast border of Century’s original claim block,
so this acquisition adds what is likely to be the area of likely extension of the pit. Moreover, the price
was a bargain considering the strategic nature of the package and the fact that it had a recent extant
resource.
Local Context
The valley has a total watershed area of about 1,430 km2 and the floor of the valley lies at an altitude of
4,320 ft above sea level. The surrounding mountains rise several thousand feet above the valley floor,
with the highest surrounding mountain, Silver Peak at 9,380 ft asl. The valley is bounded to the west by
the Silver Peak Mountain Range, to the south by the Palmetto Mountains, to the east by Clayton Ridge
and the Montezuma Range, and to the north by the Weepah Hills.
There is no permanent surface water in the Clayton Valley watershed, all watercourses are ephemeral
and only active during periods of intense precipitation. At the project itself, the terrain is dominated by
mound-like outcrops of mudstone and claystone, cut by dry gravel washes across a broad alluvial fan.
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View of the project from flanks of Angel Island looking East
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Geology
The project is in the Great Basin physiographic region, within the Walker Lane province of the western
Great Basin. The Clayton Valley is a closed basin near the southwestern margin of the Basin and Range
geo-physiographic province of western Nevada.
The Clayton Valley is the lowest in elevation of a series of local playa filled basins, with a playa floor of
about 100 km2 which collects surface drainage from an area of about 1,300 km2
. The valley is fault-
bounded on all sides, delineated by the Silver Peak Range to the west, Clayton Ridge and the
Montezuma Range to the east, the Palmetto Mountains and Silver Peak Range to the south, and Big
Smokey Valley, Alkali Flat, Paymaster Ridge, and the Weepah Hills to the north.
The western portion of the project area is dominated by the uplifted basement rocks of Angel Island
which consist of metavolcanic and clastic rocks, and colluvium. The southern and eastern portions are
dominated by uplifted, lacustrine sedimentary units of the Esmeralda Formation. Within the project
area, the Esmeralda Formation is comprised of fine grained sedimentary and tuffaceous units, with
some occasionally pronounced local undulation and minor faulting. Elevated Lithium concentrations,
generally greater than 600 ppm, are encountered in the local sedimentary units of the Esmeralda
Formation from surface to at least 142 meters below surface grade.
The Lithium-bearing sediments primarily occur
as silica-rich, moderately calcareous,
interbedded tuffaceous mudstone, claystone,
and siltstone.
Formation
The valley lies within an extensional half-graben
system between a young metamorphic core
complex and its breakaway zone.
Multiple wetting and drying periods during the
Pleistocene resulted in the formation of
lacustrine deposits, salt beds, and Lithium-rich
brines in the Clayton Valley basin. Extensive
alteration of vitric material to zeolites and clay
minerals has taken place in the tuffaceous
sandstone and shale of the Esmeralda
Formation, and anomalously high Lithium
concentrations accompany the alteration.
The lacustrine sediment near the center of
pluvial lakes in Clayton Valley is generally green
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to black calcareous mud. According to (Davis, et al., 1986), about half of the sediments, by weight, are
smectite and illite, which are present in nearly equal amounts, with the remaining half composed of
calcium carbonate (10-20%), kaolinite, chlorite, volcaniclastic detritus, traces of woody organic material,
and diatoms.
These tuffaceous lacustrine facies of the Esmeralda Formation contain up to 1,300 ppm Lithium and an
average of 100 ppm Lithium. Lithium bearing clays in the surface playa sediments contain from 350 to
1,171 ppm Lithium. More recent work in 2012 confirmed elevated Lithium concentrations in the range
of 160-910 ppm from samples collected on the northeast side of Clayton Valley. Miocene silicic tuffs and
rhyolites along the basin’s eastern flank have Lithium concentrations up to 228 ppm.
Closeology
There are three known Lithium clay projects that are advancing toward potential commercial production
in the Clayton Valley. Some of the projects have completed extensive metallurgical testing.
The playa in the center of Clayton Valley was mined for salt as early as 1906, and later explored for
potash during World War II. Lithium was noted during the 1950s. In 1964, Foote Minerals acquired
leases and began production of Lithium carbonate at Silver Peak by 1967. Production of Lithium
carbonate from brine has continued to the present under several companies, currently under Albemarle
Corporation.
The only Lithium mine in production in North America is in Silver Peak, Nevada, and is owned and
operated by the Albemarle Corporation, based in North Carolina, USA.
During World War II the area was explored for other minerals and the American Potash Corporation
leased the Clayton Marsh. In the 1950s Leprechaun Mining picked up the leases and determined that
Lithium was present. In 1964 Leprechaun Mining reached an agreement with Foote Minerals to have
Foote reconfigure the silver mill and started Lithium production in 1967.
In 1988 Cyprus Minerals acquired the Foote operation and became Cyprus Foote Minerals. In 1998
Chemetall acquired the operation, and the name was changed to Chemetall Foote Corporation. Then in
2004 Rockwood Holdings acquired the Lithium operation. In 2010 a project funded in part by a $28.4mn
grant from the U.S. Department of Energy doubled the Lithium production. Albemarle Corporation
purchased Rockwood Holdings for $6.2bn in 2014.
The table below shows the players in the Clayton Valley, in some ways the table also represents the
North to South distribution of the projects, with clearly less work having been done by those farther
away from the motherlode of Albemarle’s operation.
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Nevada Lithium Projects
Clayton Valley Project Mineralisation Status
Albemarle Silver Peak Brine Producing
Schlumberger/Pure Energy Clayton Valley Brine PEA, Pilot Plant
Century Lithium Clayton Valley Clay/Claystone PFS, Pilot Plant
Noram Lithium Zeus Clay/Claystone PEA
Sienna Resources Clayton Valley Brine
Spearmint Resources McGee Clay/Claystone Resource
Cruz Battery Metals Clayton Valley Brine
Other - Nevada
Ioneer Rhyolite Ridge Clay/Claystone Feasibility, Pilot Plant
Lithium Americas Thacker Pass Clay/Claystone FS, POO, Pilot Plant
Lithium Brines Formation
Lithium (from Greek: λθος, romanized: lithos, lit. 'stone') is a chemical element with the symbol Li and
atomic number 3. It is a soft, silvery-white alkali metal. Under standard conditions, it is the least dense
metal and the least dense solid element. Lithium ranks 27th in
rank of elemental abundance.
Even with this relative scarcity there are a fairly large number of
both Lithium mineral and brine deposits, but only comparatively a
few of them are of actual or potential commercial value.
The deposits have been formed because of Lithium’s higher
solubility in hot water than most other cations, so it sometimes
has concentrated in flowing and cooling magma and/or its
accompanying aqueous fluids, as well as in evaporating brines.
Thus, hydrothermal fluids may be an important Lithium source.
The high-Lithium brines usually have obtained most of their Lithium from geothermal waters, with
perhaps some of the Lithium coming from surface leaching of volcanic ash, clays or other rocks.
However, Lithium is very difficult to leach from the lattice structure of all rocks and minerals, so little is
dissolved unless the water is very hot.
Exploration
The occurrence of Lithium in sediments of Clayton Valley was reported as early as the 1970s by the
United States Geological Survey.
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After the company (in its Cypress guise) obtained control of its Clayton Valley project, it launched two
successive drill campaigns at the project, one from Fall 2017 through Spring 2018, and a second in Spring
2019. These ultimately fed into the MRE dating from August 2020 used in the March 2021 PFS.
From 2017 through 2019 Century drilled a total of 29 vertical, NQ-size (1.87-inch diameter) core holes
with hole depths from 33 to 142.3 meters (108-467 feet), totalling 2,574.9 meters (8,448 feet) drilled. In
2018, four HQ-size (2.5-inch) core holes were drilled on claims contested in a lawsuit. Century defended
title and acquired the complete, whole core from these drill holes in 2020. These holes range in depth
from 88.8 to 124.3 meters (291.5-408 feet), totalling 397.4 meters (1,304.5 feet) drilled.
The drilling results indicated a favourable section of claystone extending from surface to depths of
approximately 120 meters, where a strong, apparently planar, alternating oxidation/unaltered zone
exists. The Lithium content through these zones appears consistent, as do other geochemical factors
found within these mineralized lithological units.
Work in 2022
During the 2022 drill season (May 2022), Century undertook a sonic drilling campaign at its existing
project and the newly acquired Enertopia claims. The results thereof were announced in August of 2022.
A total of 580 meters were drilled in eight holes. The hole depths were limited to intersect lithium-
bearing claystone to a depth of 61 to 76 meters and to obtain approximately 15 tonnes of material for
metallurgical testing at the company’s pilot plant in Amargosa Valley, Nevada.
Four holes, CSV1 through CVS4, were drilled in the central portion of the project in the vicinity of the
planned starter-pit. CVS2 was located outside of the reserve pit outline from the 2021 Prefeasibility
Study, nearest the location of the anticipated plant site for the feasibility study. CVS3 is located adjacent
to a reclaimed test pit where 500-tonnes of claystone were collected in April 2022.
Four additional holes, CVS5 through CVS8, were drilled in the northeast portion of the project on and
near the parcel of property acquired from Enertopia.
Features of the results were:
Best intersection of 70.1 meters of 1,336 parts ppm Lithium
Successful use of sonic drilling to obtain six- and four-inch diameter cores
Completed 580 meters in eight drill holes ranging from 61 to 76 meters in depth
The assay results were in line with Lithium grades predicted at all eight locations by the resource block
model developed by Global Resource Engineering (GRE). The overall estimated lithium grade for all eight
locations from the model of GRE was 1,060 ppm. This compares to the compiled weighted-average
lithium grade from all eight holes drilled of 1,080 ppm.
Management deemed that the results not only confirmed the resource model built by GRE, but also
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verified the drill data obtained with the acquisition of the Enertopia claims.
Resource & Reserves
The effective date of the Mineral Resource Estimate is August 5, 2020. The QP for the estimate is Ms.
Lane of Global Resource Engineering (GRE).
Mineral Resource - Clayton Valley
Domain Mineralised Li Grade Li Contained
Tonnes (mns) (ppm) kgs (mns)
Indicated
Tuffaceous mudstone 91.4 656.8 60.1
Claystone all zones 956.9 973.9 932
Siltstone 255.8 734.2 187.8
Total 1304.2 904.7 1179.9
Inferred
Tuffaceous mudstone 39.9 560.2 22.3
Claystone all zones 146.2 792.5 115.9
Siltstone 50.3 821.9 41.4
Total 236.4 759.6 179.6
The pit constrained Mineral Resource totals 1,304.2 million tonnes averaging 904.7 ppm Li in the
Indicated Resource. Lithium contained in the pit-constrained Indicated Resource totals 1,179.9 million kg
of Li, or 6.28 million tonnes of Lithium carbonate equivalent (LCE).
The Mineral Reserve for the Clayton Valley Lithium project is:
Mineral Reserve - Clayton Valley Lithium Project
Mineralised Li Grade Li Contained
Tonnes (mns) (ppm) tonnes (mns)
Probable 213 1129 1.28
GRE constrained the Mineral Resource to a Whittle generated “ultimate” pit shell that extends to most
property boundaries and is bounded by Angel Island rocks in the west, as shown on the following page.
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The ultimate pit shell was generated using the break-even parameters detailed in the PFS, including a
Lithium carbonate base price of US$9,500/t and an operating cost of $3,387/t of material. The ultimate
pit shell uses the slope angles of 23 to 43 degrees depending on lithological unit with no set-back from
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property lines. The area around and beneath the tail facility is excluded from the pit constrained Mineral
Resource.
The Preliminary Feasibility Study
This study was completed in May 2020 and amended in March 2021. Continental Metallurgical Services
(CMS) and GRE prepared the pre-feasibility study report for the Clayton Valley lithium project.
GRE provided the mineral resource estimate, while NORAM Engineering and Constructors, and CMS
designed and tested the flow sheet for the lithium recovery for the project.
Key Metrics of PFS
Mining Cost- ore $/t $1.98
Mining Cost - waste $/t $1.98
Processing Cost $/t milled $14.27
Process Recovery % 83%
G & A Cost $/t milled $0.65
Material Density g/cm3 1.505
Pit Slope – Overburden and Clay 1 23°
Pit Slope – Clay 2 32°
Pit Slope – Clay 3 43°
Lithium Price – Base Price $/t LCE $9,500
Mining
An open-pit mining method is envisaged for the project, with an initial mining plan based on a daily mill
feed rate of 15,000 tpd.
The mine will not require any drilling or blasting operations. The stripping ratio will be 0.15:1, and the
waste material will be hauled to a waste dump using scrapers, while the low-grade claystone is moved
to a stockpile for future processing.
The ore material will be extracted by a 12m3 hydraulic track excavator and removed from the pit using
semi-mobile feeder-breaker and conveyors. The extracted ore will be sent to a nearby processing plant
where it will be leached with dilute acid leach followed by filtration, solution purification, concentration,
and electrolysis to produce Lithium hydroxide.
Processing
A 2,500 tpd acid plant to produce sulphuric acid by burning elemental sulphur was to be built on-site as
part of the project. However, the Feasibility Study is now oriented towards using hydrochloric acid,
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produced in a chlor-alkali plant built on-site. The steam generated in the conversion process will be used
to help heat the leach tanks.
The other facilities for the project will include a tailings storage facility located to the south of the plant
site, as well as an administration building, laboratory, warehouse, reagent storage, mine shop, and fuel
and reagent storage facilities.
Clayton Valley - PFS - CapEx
US$ (mns)
Facilities $5.89
Mine $34.77
Plant $306.86
Infrastructure $25.91
Owners Costs $24.99
Contingency & Working Capital $94.70
Total Capital Cost $493.12
Next Steps – a Definitive Feasibility Study
Key to financing the eventual build of the full project is the completion of a Feasibility Study, which
commenced in March 2022 under the direction of Wood PLC, with support from Global Resource
Engineers, Continental Metallurgical Services, WSP USA Environment & Infrastructure Inc., and Century’s
own team.
The FS has pivoted to a process using Hydrochloric Acid instead of Sulphuric Acid.
Management have reported that progress on the Feasibility Study is advancing as planned, with an
expected delivery date in 2Q23. Wood and the supporting teams have completed or are near
completion of several key items, including revised resource and reserve estimates, a mine plan,
processing plant design, and tailings and waste storage facilities.
The Chlor-Akali Plant
In October of 2022, the company announced that it had chosen thyssenkrupp nucera USA, Inc. to
provide the design and engineering for the chlor-alkali plant as part of the Feasibility Study. The chlor-
alkali plant will allow the project to self-generate two key reagents required for processing Lithium-
bearing claystone through to a Li2CO3 (Lithium carbonate) product.
Thyssenkrupp nucera is well-known for its technology in high-efficiency electrolysis plants, including
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chlor-alkali electrolysis, HCl electrolysis, and alkaline water electrolysis.
The contractor’s scope of work will include the development of a facility concept for treatment of the
recovered brine stream from Century’s process and ensure compatibility with the membrane
electrolysis cells of a chlor-alkali plant. Standardized and proprietary e-BiTACv7 BiPolar type membrane
cell electrolyzers are the key elements of the chlor-alkali plant, to generate the key reagents HCl
(hydrochloric acid) and NaOH (sodium hydroxide) required to process the Lithium ore. The NaCl (sodium
chloride) and H2O (water) molecules present in the recovered brine are electrolyzed to produce Cl2
(chlorine), H2 (hydrogen) and the sodium hydroxide, where then outside of the cells, the chlorine and
hydrogen molecules are combined to produce hydrochloric acid.
The Pilot Plant
The company has been operating a Lithium Extraction facility at Amargosa Valley, Nevada, for some
seventeen months now. Positive results have been achieved from test work conducted at Saltworks
Technologies Inc., where high purity Lithium carbonate was made at Saltworks from concentrated
Lithium solutions produced at Century’s (below):
Saltworks has since completed a second phase of testing which examined the production of Lithium
from the blowdown-brine stream collected during the Lithium carbonate concentration in the first stage
of testing. Century reported that these results were positive and confirmed the viability of an increase in
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Lithium recovery via re-concentration of the blowdown-brine and production of additional Lithium
carbonate solids.
This step has the potential to significantly reduce the volume required to be recycled back to the
upstream direct Lithium recovery (DLE) plant and reduce size and capital cost of the DLE plant.
Century has been the first public company, globally, to achieve 99.94% purity from claystone, with the
output exceeding the standard for battery grade (99.5%).
Based on the progress and results from Saltworks, Century has pivoted to a focus on Lithium carbonate
as the end-product for the Feasibility Study and has engaged Saltworks to provide the engineering and
design for the final steps in producing Lithium carbonate on site.
Based on timelines for the major components and cost analysis, as well as to allow thyssenkrupp nucera
sufficient time to complete its design and optimization studies, Century’s management expects the
Feasibility Study to be completed in the second quarter of 2023.
Direct Lithium Extraction (DLE)
Century is pursuing a DLE processing path rather than the more traditional (and time-consuming)
evaporative process for Lithium extraction from brines, which can take 18 months at the least and often
over two years.
In June 2022, the company completed the purchase of a license in perpetuity to the Lionex DLE process.
Also, in June, Koch Separation Solutions (a division of Koch Industries) acquired exclusive rights to the
Lionex technology from the previous vendor, which is now part of KTS' Li-ProTM process.
The process developed by the Lionex process offers a fast-track production process, with Lithium brines
produced in under three hours with very high purity and with minimal environmental impact.
The process is graphically depicted below with the DLE step taking place in the ‘Lithium Recovery’ area
shown in the overall extraction process:
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The Koch Connection
In February of 2023, the company announced that it was collaborating with Koch Technology Solutions
(KTS) in the application of LTS’s Li-Pro
TM process for DLE at Century's Lithium Extraction Facility in
Nevada.
Under the deal, key components of the Li-ProTM process will be tested at Century Lithium’s Pilot Plant.
KTS will also provide engineering design and cost data for the full-scale DLE portion of the
processing plant for Century Lithium’s Project.
Independent from the Project’s ongoing Feasibility Study and will begin upon delivery of KTS
equipment to the Pilot Plant.
Century Lithium will fund the study, installation, and operation of the equipment at the Pilot
Plant, and KTS will provide training and technical support.
In mid-April, Century announced that it had received delivery of the equipment for KTS’ Li-ProTM process
and that this had been installed, and was now operating, at the pilot plant in Amargosa Valley
Now begins a field trial of the Li-ProTM equipment to treat the process solutions generated at the pilot
plant in the leaching of bulk sample claystone collected from the Clayton Valley Lithium project.
Following successful installation, operation of KTS’ equipment went very well throughout an initial
seven-day start-up.
Results from the program will enable KTS to provide engineering and cost data for a full-scale
installation of the DLE plant at the project.
Koch – A Major Player in the Making
Koch Industries, Inc. is based in Wichita, Kansas and is one of the largest private companies in the USA,
with estimated annual revenues that have exceeded US$125bn. It has a presence in more than 70
countries and employs more than 120,000 people worldwide (with about half of those in the United
States).
Its interests span industrial manufacturing, agriculture, building materials, glass, automotive
components, refining, renewable energy, chemicals and polymers, pulp and paper, packaging, consumer
products, electronics, enterprise software, data analytics, medical products, engineered technology,
project services, recycling, supply chain and logistics, global commodities trading, and investments.
The Koch group had already invested, in September of 2022, around US$252mn into Compass Minerals
(NYSE:CMP) to support development of the Great Salt Lake Lithium brine project in Utah. In the wake of
this transaction, KM&T owns approximately 17% of Compass Minerals’ outstanding shares of common
stock and will have the ability to appoint two members to the expanded board of directors at Compass
Minerals.
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It is too early to posit an eventual move by Koch upon Century, but certainly the Compass deal shows
that not only is Koch intensely interested in the evolving battery metals space, but that it is also willing
and able to mobilize substantial funds in that direction. Koch has also invested around US$100mn in the
petroleum brine player in the US South East, Standard Lithium (TSX-v:SLI, NYSE:SLI, FSE:S5L).
Timeline to Production
Water Rights
The water requirement for the project will be sourced from a potential wellfield approximately 17km
away from the project site.
Century acquired a water rights permit from Intor Resources Corporation, a subsidiary of Nevada
Sunrise Gold Corp., in December of 2021. The permit allows for the appropriation of the public waters of
the State of Nevada in the amount of 1,770 acre-feet of groundwater per year for mining, milling and
domestic use. This amount represents the largest single volume of permitted water available in the
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Clayton Valley, which is a fully appropriated hydrogeographic basin.
The Geothermal Asset
Century holds a geothermal lease with the U.S. Bureau of Land Management that was acquired in 2019.
The lease totals 640 acres in all and is located five miles north of the project near Pearl Hot Springs and
Paymaster Canyon. The annual holding cost is US$3,000 and is due and payable on or before October 1st
of each year. The lease is subject to U. S. Federal royalties upon production.
Capital Evolution
In early February of 2022, the company completed a bought deal offering (with PI Financial Corp. as the
sole underwriter and bookrunner), raising aggregate gross proceeds of $18,138,720. Originally the deal
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had been announced as only $12mn, but it was upsized due to very strong demand.
As a result, the company issued a total of 9,058,000 units at a price of $2.00 per Unit and 142,000
Warrants at a price of $0.1598 per Warrant. Each Unit consisted of one common share and one common
share purchase warrant, entitling the holder to acquire one common share at a price of $2.65 with a
Warrant expiry date of February 4, 2024.
The total issued included 1,058,000 Units and 142,000 Warrants upon partial exercise of the
overallotment option granted to the Underwriter. As consideration for its underwriting services, PI
Financial received a cash commission equal to 6% of the gross proceeds, including any proceeds realized
from the exercise of the overallotment option granted to the Underwriter (and they were issued a total
of 543,480 compensation warrants, with each such compensation warrant on the same exercise terms).
Otherwise, no other financing has been undertaken by the company in the last year.
Royalties
The portion of the property which contains the Mineral Reserves is subject to a 3% net smelter return
(NSR) royalty. The royalty can be brought down to a 1% NSR in return for US$2mn in payments to the
original property vendor.
Nevada as a Mining Jurisdiction
The continual high ranking of Nevada in the Fraser Institute surveys reinforced to investors (particularly
in North America that things closer to home can be not only more convenient but safer. So during the
period when the gold price was languid (2012-19) investors preferred to focus their dollars on Canada
and “friendly parts” of the US with Nevada at the top of that list. US investors, in particular, have been
most highly-disposed towards projects in that country, with Nevada way ahead of other states in
investors’ perceptions and affections.
The latest mining survey from the Fraser Institute (the independent, non-partisan Canadian policy think-
tank) was that for 2021. However, as the data set went up to November of 2021, the survey came out in
the second half of 2022 and represents the latest version. The survey remains the most respected
(though flawed) survey of the fluctuating fortunes of the world’s mining jurisdictions.
In 2021, the top jurisdiction in the world for investment based on the Investment Attractiveness Index
was Western Australia, pushing Nevada back into the 3rd place position which it last held in 2019.
The state ranked 5th in terms of Policy Perception and 2nd in terms of Mineral Potential in 2021. The
state also came second in Best Mineral Practices (after Arizona).
In particular the timeliness of dealing with exploration and drilling permits was cited by respondents
amongst Nevada’s attractions (only matched by Quebec). The state scored ninth best amongst taxation
regimes. In the important infrastructure category, it ranked eleventh.
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Nevada is a jurisdiction that combines geological attractiveness (ranked 5th in the Best Practices Mineral
Potential Index) with investment-friendly policies (ranked 6th based on policy alone). Only 5% of
respondents to the Fraser survey indicated that trade barriers deter investment and just 7% claimed
that the state’s infrastructure and political stability discouraged investment. The average negative
response by survey respondents for the state was only 14%.
Nevada in 2021 was rated the third most attractive jurisdiction globally for mining investment. Policy
factors driving this attractiveness include permitting systems that provide legal and regulatory stability.
There is no corporate or personal income tax, no inventory tax, no franchise tax, no unitary tax, and no
special intangible tax.
Board & Management
Cassandra Joseph, Esq., non-executive chairperson, is a U.S. attorney with more than 20 years of legal
experience with a focus on mining and metals, environmental and corporate law. She has diverse
experience delivering practical legal advice in both the public and private sectors. She previously served
as a Senior Deputy Attorney General for the Nevada Attorney Generals' Office, representing the Nevada
Division of Environmental Protection, Division of Water Resources and other agencies within the
Department of Natural Resources. She joined Nevada Copper Corp. as Senior Vice President, General
Counsel and Corporate Secretary in 2019 and previously served as VP Associate General Counsel,
Corporate Secretary and Chief Compliance Officer for Tahoe Resources Inc. Ms. Joseph holds a J.D. from
Santa Clara University School of law and a B.A. from U.C. Berkeley.
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William Willoughby, PhD, President, Chief Executive Officer & Director, is a mining engineer with over
40 years of experience in all aspects of natural resources development. Since 2014, he has been
principal and owner of consulting firm Willoughby & Associates, PLLC. Prior to that, he was President
and COO of International Enexco Ltd., which was acquired by Denison Mines in 2014. He previously held
various positions with Teck (Cominco). Dr. Willoughby has been a Professional Engineer since 1985 and
received his Doctorate in Mining Engineering & Metallurgy from the University of Idaho in 1989.
Ken Owen, non-executive director, has over 40 years of experience in the mining industry, holding
management positions at De Beers, and Anglo American, including Senior Vice President of Anglo
American South Africa. He also held positions as associate consultant with SRK Consulting, Technical
Director of Mwana Africa PLC and non-executive director of Firestone Diamonds Plc. He holds a M.Sc. in
Minerals Production Management from Imperial College, London.
Bryan Disher, non-executive director, is a retired partner from PwC Canada and has 37 years of
experience with the firm's practices in Canada, Australia, and Ukraine. He has assisted companies with
public offerings in Canada and the United States, acquisitions, financial reporting, regulatory
compliance, and governance. He served on the Board of Directors of PwC Canada for eight years,
including a term as Chair. He has previously served as non-executive Director for Rubicon Organics Inc.,
Minds + Machines Group Limited and Balmoral Resources Ltd. He is a CPA, CA and holds a Bachelor of
Business Administration from the University of New Brunswick.
James G. Pettit, a non-executive Director, is currently on the board of directors of six publicly traded
companies and offers over 30 years of experience within the industry specializing in finance, corporate
governance, executive management, and compliance. He was previously Chairman and C.E.O. of
Bayfield Ventures Corp. which was bought by New Gold Inc. in 2015.
Donald G. Myers, a non-executive director, has over 35 years of experience in public company
management and has provided corporate communications and investor relations for resource and
technology companies listed on the TSX Venture, NASDAQ and Toronto Stock Exchanges.
Lithium – Chronicle of a Shortage Foretold
Far be it for us to reprise the current state of Lithium as it is arguably the most written about mineral of
current times, and that includes gold.
The Battery Metal boom has reached a frenzy as the earlier unfulfilled dreams of Lithium developers
have morphed into the grim reality that government mandates, with strict timelines, have run into the
roadblock of a mining community not ready with producing mines. This was due to the Lithium
companies largely having run on empty (financially) until 2021-2. The Lithium, Cobalt and Graphite
spaces were largely unfunded from 2011 to 2017, and then had a brief renaissance before erroneous
Wall Street projections on “satisfied demand” pulled the rug again. In 2021 the OEMs (and
governments) received a massive wake-up call that there was a looming Lithium supply shock.
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HALLGARTEN & COMPANY Page 24
The traditional long lead time of 5-10 years on major projects across the mining space has had to be
jettisoned as majors (end-users/offtakers/processors/battery makers) have jockeyed to get positioned,
frequently having to take the reins to ensure timelines are compressed to match the voracious
unsatisfied demand for Lithium in particular.
Booms Aborted
Technically we have had three battery metal booms now in the space of twelve years. Late arrivals on
the scene do not seem to remember (or care to remember) the previous Messianic comings of the “EV
revolution”. Each boom has left a legacy and calculating what these legacies are is muddied, particularly
if one is/was a shareholder of now-departed Canada Lithium, Altura Mining, Nemaska Lithium or the
many fallen in Cobalt space.
The surge of 2009-2010 only brought Lithium to the fore. The previous burnout of Cobalt, before the
2008 Crash, was still too fresh in memories to levitate that metal. Graphite was not yet on the radar but
did manage to have a very brief day in the sun in 2013.
Then, in 2017, the market experienced Battery Metal Mark 2 with the conjuncture of Lithium and Cobalt
and a plethora of lesser battery metals (e.g. Vanadium and Manganese). Graphite scarcely managed a
murmur though. This boom also faded fast. Cobalt collapsed, under the sheer weight of non-serious
promotorial activities, while most of the Lithium newcomers scarcely raised enough money to sustain
(begin?) their exploration campaigns. That boom died the death but left (like the first one) a residue of
projects that had moved forward just enough to survive the three years until 2021 brought Battery
Metal Mark 3.
Firing Up Again?
The Great Pause (2017-20) was caused by a combination of a surfeit of non-serious parties (particularly
in Cobalt), a sheer lack of money in the mining equity markets and the poor uptake of EV/HEV/BEVs in
the Western consumer markets. No-one was going to gear up mega-battery plants (excepting Panasonic
disguised as Tesla) just because the Norwegians managed great EV penetration.
Nevertheless, as one can see from the data from Benchmark on the following page, there is a looming
deficit in the provision of key Lithium chemicals for the most used battery formulations.
As the fog has cleared the non-Chinese players have finally started to gear up with a massive putsch in
Europe and the US (not to mention Korea and Japan) towards creating a EV battery industry that was
not China dependent. Much has been achieved, but independence from China is not one of those things.
However, the pace of transactions gathered pace during 2022, very much a transition year, and a global
EV battery industry is finally appearing from the mist.
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Source: Benchmark Minerals Intelligence
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Western carmakers are gearing up, led by real demand whereas Chinese carmakers were gearing up
based upon subsidies and severe suasion from above.
Is the baton passing to the West (in that we include Japan & Korea)? The big Chinese players in Lithium
(and in EV/battery production) seem to be suffering a degree of indigestion from
overindulgence/overproduction. On the production side, Tanqi seemed to be suffering serious
heartburn. Meanwhile companies like CATL are revising their portfolio of exposures to Lithium plays and
either rationalizing or taking profits. This is maybe a sign that economic rationality instead of sheer
machismo is moving to the fore.
Does this mean that the Battery Boom Mark 3 will last? It will undoubtedly need to cool off (or is in the
process of doing so). The graphite space had a number of crazy valuations amongst the largest players.
The Lithium space still has maybe four times more companies than are needed. One should not confuse
the entire universe of supposed Lithium plays with the subset of serious developers (with serious
partners) that are moving towards the final goal of production. Century has shown itself to be within the
latter category.
Whither the EV Boom?
The EV revolution was always predicated upon users paying more for their new vehicles than they had
paid for those ICEs being dispatched to the scrapheap. All this seemed rosy in 2019, but not in 2022, as
the world slid into a recession (or at least a serious slowdown). However, we still have government
mandates dictating that EVs are in by 2030, and ICEs are out, but the hard-pressed consumer is already
being ordered to surrender their higher-emission ICEs in major cities, like London, as a de facto
shakedown by politicians in search of funds. While drivers of Ferraris and Maseratis with infinite
disposable income can cruise their old-style vehicles around with impunity the middle and working
classes are facing an independent movement-free culture at a rapidly approaching drop-dead deadline.
For these economic categories to remain in the car-owning fraternity will require substantially lower
prices for EVs. That in turn will require lower EV battery prices, which cannot be achieved in an on-going
scenario of tight Lithium supplies and “premium pricing” of EV battery inputs (particularly Cobalt &
Lithium).
The recession, depending on its length, is bound to crimp (if not stall) EV sales across Western
economies while the price gap is destined to price many lower income consumers out of car-ownership.
But the challenge was always a long-term one, not a short-term story of soaring and plunging prices.
What we have seen in 2022-23 was essentially the acclimatization to the growth of an industry where
the long-term potential is a great unknown.
Pricing – Chinese Own-Goal?
After steep rises in prices for lithium in 2017 and 2018, prices fell back sharply in 2019. In 2020, prices
for lithium carbonate prices slipped by 40% and production remained low as a response to the drop in
prices. Indeed, lithium production fell 4.6%, driven mainly by lower Australian output.
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HALLGARTEN & COMPANY Page 27
Source: Trading Economics
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Hallgarten & Company Page 28
In 2022, lithium prices jumped to their highest levels ever due to an upsurge in electric vehicle sales and
depleting stocks of the battery material in the main consumer, China. Most Western companies
watched in bemusement as the price of Lithium for delivery in China soared over most of 2022 (as
shown on the chart on the preceding page).
The peak Lithium price in Yuan was equivalent to around US$87,000 per tonne, in an unrealistic and
thinly traded market. The real Lithium producers and developers were focusing on the short-term
contractual prices, which were US$45-50,000. Most Western companies were using prices that were a
mere fraction of this level in their models for PEAs and PFSs and longer-term prices are still around
US$24-26,000. In the case of Century, the price in its calculations was 80% lower. Even now, the much-
wilted price in China is still four times the level of Century’s PFS.
Initially, Western companies were pleased to see higher prices but, when prices went into an insane
overdrive, concerns were raised that the inevitable pullback would also pull a rug from under the
legitimate companies in the West trying to develop Lithium resources to a production phase.
And yet surely as night follows day, the cautious Western Lithium developers have seen their stock
prices caught up in the black hole created by feckless Chinese speculation.
Clearly there is further to go as the Lithium price, and moreover the Chinese speculators, have a true
Wile E. Coyote moment, finding there is no solid ground under their feet until much, much lower. Clearly
there are some very burnt fingers here, and at what point their misery ends remains an unknown. We
would expect the price to settle between $US15,000 -$30,000 during 2023. These are price levels at
which most of the serious developers are still looking to make substantial returns that exceed the
projections of their models.
Risks
The whole Lithium industry finds itself in a different world, with some constants from the previous
“boom”, but also quite a few things have changed. However, it is worth enumerating some of the risks
that may be faced:
A return to weak Lithium prices
The Lithium market is still dominated by a group of large players, the majority of which were
formerly components of the long-standing cartel in the Lithium space
Financing difficulties for mine builds facing smaller players
Failure of demand to match rising production (i.e. build it and no-one comes)
Excessive number of competing projects could crowd the scene and investors’ attention in the
event that Lithium prices remain robust
Prices retreated somewhat in late 2016 and then recovered in 2017 thru into 2018 despite several
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Hallgarten & Company Page 29
projects moving into production. Prices fell back sharply in 2019, then in 2020 prices for lithium
carbonate prices slipped by 40%, before the massive rally in 2022. Rising supply is unlikely to suppress
prices at this point as demand is expanding with significant vigour and, as in Lithium 1.0, many of the
“likely” projects will not be built as they are in the hands of pure promoters.
Financing is not coming from markets but from end-users or processors. In the case of Century Lithium
we would see the offtaker being most likely a player in the battery/Gigafactory space allied, or not, with
an automaker. Over and beyond that, with the close relations with Koch, a grand consolidation driven by
technology partnerships could be the next pivot for the industry.
Conclusion
As we noted at the beginning the Biden Administration’s Inflation Reduction Act as a vehicle to kickstart
the Green Revolution in the US, has tipped the playing field to advantage US-based projects in a radical
alteration to the status quo in the global Lithium space.
Over the last decade, since the fading of the first Lithium boom in 2010, the complications of
spodumene extraction and processing have created a major pivot towards producers from non-hard
rock sources whether they be brine from salares, from unconventional sources or from clays.
Lithium developers in Nevada, like Century Lithium, are having their day in sun, pardon the pun, with US
investors in particularly seeing an inherent advantage arising from being a Lithium mining operation
based not just in North America, but also in the United States. If the Lithium conversion and end-use
industries (i.e. batteries) should be the beneficiary of Washington’s largesse then it would be illogical to
not also officially sponsor the evolution of a greater US sourcing of the raw inputs of the battery value
chain. Under the Defense Production Act, the US Federal Government is providing grants and loans for
US critical mineral projects e.g. Ioneer received US$700mn for its Rhyolite Ridge project and Lithium
America received US$600mn for its Thacker Pass project. Both of these projects are in Nevada.
Century has its water, potential for geothermal energy and solar energy, and has its processing needs
licensed and coming together as planned. It has more than enough resources to get going (particularly
with the fortuitous addition of the Enertopia asset). Permitting and funding of the mine are the next
items on the agenda.... That is, if it isn’t taken out first, with Koch being an obvious friendly predator
prowling the neighbourhood. One might even conjure with the idea of a consolidation with Compass.
A Koch entry onto the share register would be a pivotal moment, but our price target for the time being
should be predicated on the known unknowns (i.e. the progress on development). The unknown
unknowns are icing on the cake that could see Century being taken out or a strategic stake being taken
that propels Century to $3 or more.
Thus, we are initiating Century Lithium with a LONG rating and propose a 12-month target price of
CAD$2.38.
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Wednesday, May 10, 2023
Hallgarten & Company (44) 795 08 53 621
Important disclosures
I, Christopher Ecclestone, hereby certify that the views expressed in this research report accurately reflect my
personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will
be, directly or indirectly, related to the specific recommendations or view expressed in this research report.
Hallgarten’s Equity Research rating system consists of LONG, SHORT and NEUTRAL recommendations. LONG
suggests capital appreciation to our target price during the next twelve months, while SHORT suggests capital
depreciation to our target price during the next twelve months. NEUTRAL denotes a stock that is not likely to provide
outstanding performance in either direction during the next twelve months, or it is a stock that we do not wish to place
a rating on at the present time. Information contained herein is based on sources that we believe to be reliable, but
we do not guarantee their accuracy. Prices and opinions concerning the composition of market sectors included in
this report reflect the judgments of this date and are subject to change without notice. This report is for information
purposes only and is not intended as an offer to sell or as a solicitation to buy securities.
Hallgarten & Company or persons associated do not own securities of the securities described herein and may not
make purchases or sales within one month, before or after, the publication of this report. Hallgarten policy does not
permit any analyst to own shares in any company that he/she covers. Additional information is available upon
request.
Hallgarten & Company acts as a strategic consultant to Century Lithium and as such is/was compensated for those
services but does not hold any stock in the company nor does it have the right to hold any stock in the future.
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