NEO Lithium 1: World-Class Project

Mining exploration (and development) is a challenging enterprise. Simply finding significant mineralization for a particular metal or mineral requires considerable skill and diligence. Finding a metal/mineral deposit that is economically viable for commercial mining is even more difficult – and thus accompanied by even lower odds of success.

If a mining executive is fortunate, perhaps once in a career he or she may uncover a mining discovery that is not merely commercially viable but world class. And “world class” is clearly the only way to describe the unique-and-exciting 3Q Lithium Project, located in Argentina and currently under development by NEO Lithium Corp. (TSX: V.NLC, OTCQB: NTTHF, Forum).

Argentina is a part of the world-famous Lithium Triangle in South America, along with Chile and Bolivia. This region contains roughly 90% of the planet’s lithium brine resources. The 3Q Project is an 8,183 hectare property, part of a 350 square kilometer land package controlled by the Company.



It hosts a lithium salar and lake complex, in arid climate, at an elevation of roughly 4,000 meters. The land package boasts easy road access, as well as being proximate and accessible to ports.

3Q has it all.

• Enormous scale (the 5th largest lithium brine resource in the world)
• Exceptional grades for a brine operation (4th highest for reserves, 6th highest for resources)
• A “high-grade core” that represents the world’s 2nd highest grades for a lithium brine project
• Extremely robust economics (contained in a brand-new PFS from March 21, 2019)
• Strong leadership

Additionally, what is perhaps the most important quality of this world-class Project isn’t even included in the list above. More on this later in Part 1.

Strong leadership? This is a veteran management team with a track record of success. Indeed, this team has taken 3Q from initial discovery through to two resource estimates, a Preliminary Economic Assessment (PEA), and now a Pre-Feasibility Study (PFS) – all in roughly two years.

Stockhouse will take a closer look at NEO Lithium’s management, break down the economics from the new PFS, and delve into current exploration/project development activities in the second and concluding installment of this multi-part series. Investors who are too eager to wait for Part 2 can examine the numbers from the Pre-Feasibility Study directly themselves.

World-class Project, world-class value

In this initial installment, Stockhouse will shine a spotlight on the Project itself, provide general insights on lithium brine operations, and alert readers to the extraordinary value proposition here.


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While the Company’s share price has tracked higher in recent weeks, the market cap for NEO Lithium (and it’s 3Q Project) is still an extremely compact $112 million. Immediately prior to this, NLC had traded down to, at one point, a market cap of under $70 million.

With $45 million in cash (and no debt), this means the market was valuing this world-class lithium Project at less than $25 million. Even with the depressed mining company valuations that have been common in recent years, that ranks as especially ridiculous. Frustrating for existing shareholders but extremely appetizing to new investors.


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Longer term, the Company is trading at little more than one-third of its all-time high. A three-year chart practically shouts “bargain”. And the closer that investors look, the more of a bargain NEO lithium appears to be.

The robust economics of the new PFS that include a 35-year mine life are derived from less than one-third of the existing resource. Current drilling on the northern, high-grade zone of the 3Q property (more on this in Part 2) is expected to translate into even higher overall grades for this Project.

Going forward, 3Q will get bigger and it will get better. Here, CFO Carlos Vicens wanted to clarify an important nuance in lithium brine mining, when speaking to Stockhouse Editorial via conference call. Generally, grade is king in the mining world. It’s not that simple with respect to a lithium brine operation.

“Independently of the grade the higher the impurities the higher the potential OPEX and it will also affect CAPEX considerations. You need both!”

Not just world-class, best in the world

So impurities are a critical factor in the equation for lithium brine mining. How does 3Q look in this respect? Simply: the lowest combined critical impurity content in the world. 3Q is in a class all its own.


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Impurities ratchet-up production costs or, in high enough concentrations, make the lithium brine uneconomical – no matter how high the grades. Conversely, with the lowest levels of impurities and exceptional grades, this makes the economics of 3Q especially robust, which the PFS translates into an internal rate of return (IRR) of 50%.

This leads to a closer look at the 3Q resource itself. Once again, the closer that investors look, the better that NEO Lithium looks as an investment candidate.


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Referring first to the lower cut-off number, what is a “cut-off grade” at 3Q would represent the higher-grade mineralization of many existing lithium brine deposits. Even at this conservative cut-off level, the Project yields an estimated 7,000,000 tonnes of lithium carbonate (Li2CO3), spread across both the Measured & Indicated and Inferred resource categories.

The higher grade cut-off represents the “high-grade core” of mineralization at 3Q mentioned above. Close to 1 million tonnes of Li2CO3, at eye-popping grades above 1,000 mg/L. Also notable is that in this area of mineralization, impurity levels are even lower. With this part of the 3Q deposit currently only drilled to a depth of 100 meters, management is confident that they can uncover more such mineralization.

More recently, accompanying NEO Lithium’s just-released PFS is the Company’s first reserves estimate for 3Q: Proven & Probable Reserves of 1.3 Mt of LCE, with an average grade of 790 mg/L lithium.

Those resources and reserves are one measurement of the quality and strong economics of this resource. Then there is resource depth. As shown in the graphic below, over 50% of this monster resource is hosted near surface, in the upper 100 meters. Also noted in that graphic is the “porosity” of 3Q mineralization.


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Porosity?

CFO Vicens came to the rescue of Stockhouse Editorial and dumbed down this concept with a simple analogy.
“Think of low porosity as equating to sticking a straw into a rock in order to suck out the liquid contained. Not easy. Now think of high porosity as sticking a straw into a sponge and then sucking out the liquid. Much easier.”

Porosity not only translates into better recoveries of lithium mineralization, it allows improved pumping rates. This allows for a higher production rate and at a lower opex.

To go along with 3Q’s exceptional grades and lowest impurities levels, mineralization here features generally high porosity (more on this as well, in Part 2). Also notable is the additional blue sky potential at depth. While drilling at 3Q has only gone to a depth of (roughly) 600 meters to date, more than 22% of the known resources are found below 500 meters, in what is highly porous geology at that depth.

Once upon a time in the world of mining, if a project (or company) looked “too good to be true” in relation to the share price it was trading at, it probably was. Examine the company close enough and some cracks in the business model would appear.

Not so in today’s depressed conditions. Even world-class Projects (like NEO Lithium’s “3Q”) can sometimes be found at bargain-basement prices.



In Part 2, we’ll delve even deeper into this stellar opportunity, including a full look at the new PFS, an update on current exploration/development, and an examination of near-term value drivers that could quickly lead to a more rational repricing of this world-class asset.


www.neolithium.ca





FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.