Lithium expert Jack Lifton advises lithium investors to invest in well-established lithium producers like Chemical and Mining Co of Chile (NYSE: SQM, Stock Forum), FMC Corp (NSYE: FMC, Stock Forum) or Rockwell Holdings. Lomiko Resources (TSX: V.LMR, Stock Forum) is a company that owns several projects adjacent to these major producers. The company has projects in Nevada, Chile and British Columbia and is focused on exploring in the same place as the majors. We spoke with Lomiko’s President and CEO Paul Gill about the opportunities Lomiko could have with its projects and about the recently announced partnership with a first interested party.
Paul, Lomiko Metals is searching for lithium and gold in Nevada, British Columbia and Chile. Why Lithium and why in these parts of the world?
We have lithium projects in Nevada and Chile and we are looking for additional ones in South America. Our focus is lithium brine material and its contained minerals. Simply because on an economic basis those brines contain potash, lithium and other types of material which could generate revenue for the company. We specifically picked out areas in which we will be adjacent to producing mines. In Nevada we are adjacent to Silver Peak. [Silver Peak is the major supplier of lithium in the U.S. – ed.] In Chile we are nearby Salar de Atacama. We share the salar in Chile with SQM, which is one of the largest lithium producers within the Atacama Desert and in the whole world. Chemetall [the specialty chemical company subsidiary of Rockwell Holdings (NYSE: ROC, Stock Forum)] has facilities there as well. It is our focus to be near producers. If you have material that has to be extracted it is important to have a production location nearby with the same material specifications. Other areas of interest for us are Argentina, around the FMC plant. Worldwide there are three or four major producers of lithium. There is Silver Peak owned by Chemetall, Salar de Atacama, which is partially owned by SQM and Chemetall, and FMC in Argentina. These are all multi-billion-dollar companies and they are all located in areas where there is the possibility for brine extraction, where the drying and evaporating of water out of the lithium brine is easy to accomplish due to dry climate.
Your main project is the Alkali Lake Lithium Property in Nevada/USA. Would you please give us some basic information about this project?!
At this point in time it is the newest project that we picked up. The reason why we picked it up is that it lies adjacent and shares a similar geology to the Silver Peak location which has been a producer of lithium brine for over 10 years. That property was purchased by Rockwell Holdings and Chemetall for $300 Million USD. It has an interesting history and valuation. It is being supported by the US-government which granted 28.4 million USD for an upgrade of the facilities there. We are very encouraged if we can find a lithium brine resource sub-surface and we may also apply for grants for production development from the government and/or consider transactions with Chemetall.
You recently announced that you have entered into a Memorandum of Agreement with Japan Oil, Gas and Metals National Corporation which wants to acquire 51% of Lomiko’s Alkali Lake Project after completing 2.5 million USD in exploration work no later than March 31, 2013. Would you also get grants from the government if you would have only 49% of the project left?
We will, because whatever money is spent on the property will be spent on US soil and for the development of assets in the United States. That is a purpose of the US government giving grants to develop US assets. Japanese companies also have manufacturing facilities in the US, so their focus is to invest money into US lithium properties, close to their factories. The US government wants to keep those factories in United States. Both sides share the same interest. If we have a complete earn-in of 2.5 million USD that would have been spent on this property and we would have discovered a surface brine location with suitable concentrations of lithium, we would be able to raise money by selling the remaining 49% for a significant gain from what is reflected in the current price of the stock. We purchased the entire project for only 200,000 USD. So we feel very confident of optioning 51% to another company that would do all the work to prove up the value. At some point in time we may be bought out by the Japanese company or they may put up 200 or 300 million USD to build a plant.
We have also been speaking with other organizations as well. We have also madejourneys to China to have discussions with lithium battery producers, for example with BYD, an electric car manufacturer. We have been to Chile to discuss joint-ventures with SQM, which is the large lithium producer in Chile. We have been very active and our purpose is to build value in our company and to continue to acquire assets. My personal motivation is to increase the shareholder value significantly by developing plans for exponential growth.
You have also a gold project in British Columbia...
...yes, the gold project is something we had at the beginning before we acquired our lithium projects. It was our IPO-project that we brought in to have a project to work with, when we restructured the company. To have a gold project in your lithium portfolio is a very good hedge. Our neighbor Hawthorne will develop a mine in this location in the next couple of years with a Chinese partner. We are looking to benefit from some of their work. They already have a resource and a mill at their Table Mountain project and we are also looking for some gold resources on our project which could be associated with their vein-system. We have seen some interesting mineral-showings and we think that we could also have a significant gold resource there.
Would you please give us some basic information about your project in Chile?!
The Salar de Aguas Caliente Project has been picked up because it has historic concentrations of lithium brine located in it. It also has potash there as well. We knew that SQM also holds a mineral concession there. They have a plant to develop this area. We want to be part of this development which was the reason for us to acquire all the land surrounding their property. The project has about 2,300 hectares of surface area. There has been flowing water in the lake for several thousands of years, which is responsible for a significant concentration of lithium, potash and other kinds of metals there.
Could there be any synergies between your projects and the projects of your major neighbors in Nevada and in Chile?
Absolutely! In Chile we are surrounding one of SQM’s claims. That means that they have to work with us to develop this area. We had some meetings with SQM where we discussed joint-venture possibilities. We are talking about production in about 6 or 7 years when we expect the demand for lithium will skyrocket. At that point you have to get your production on line. We think that Salar de Aguas Caliente is a very prime location for a high-grade lithium resource.
There is always the possibility to use some of their plant capacity in the area if we should decide to produce on our own. If you want to use another facility you have to have a very similar chemical make-up of the lithium brine. If there is a different mix of chemicals in the particular brine the recovery rates that you get at another plant may be very poor. It is very important to test the chemistry before you ship your material to another location.
What are your plans for 2010?
We plan to start exploration in Nevada. First of all we have to do some surface sampling and we have to look for the depth of the water flux. When we have found these underground-pools we will be able to start a very significant drilling program.
Do you have plans to acquire more possible lithium properties?
We are looking for projects in Argentina and in Chile. It is very competitive to get free properties in Nevada, but we think to be well prepared with our existing one there.
Why should potential investors invest in Lomiko Metals right now?
At this time the Lomiko share is very much undervalued compared to many other lithium companies that have the same assets. Furthermore we now have an additional valuation of a joint venture with a major corporation and major country looking for lithium to secure their production. That would continue to add more valuation to all the projects we have, because other companies in other countries would look for us as a source for lithium in the future. We think that this could create an ongoing relationship with such companies and an ongoing valuation for our company.
Lomiko Metals