How long does it take to build a business into a billion dollar asset? Typically, it takes a whole generation -- or longer. (For instance, it took the world’s largest retail company, Walmart, nearly 30 years to reach $1 billion in sales.)
But in the mining business, stratospheric success can happen in just a matter of weeks. That’s assuming an exploration company is smart enough, as well as fortunate enough, to drill in the right places.
In which case, there still exists the opportunity to unearth multi-billion mineral assets that are ripe for the picking. And for the right kinds of minerals, such as lithium and diamonds, even Canada still offers untapped opportunities.
92 Resources Corp. (TSX.V: NTY) (Frankfurt: R9G2) is among the many intrepid exploration juniors that hope to become virtually overnight rags-to-riches stories. It’s pinning its hopes on a revitalized lithium project, which is situated only 40 kilometres from Yellowknife, the capital city of the
Northwest Territories (NWT).
Whereas most of Canada has already been picked clean for new gold discoveries, the hunt for rich lithium deposits has only become a popular quest within the last several years.
And the rewards can be very lucrative indeed. For instance, one of 92 Resources’ peers in the exploration sector, Nemaska Lithium Inc., has already hit the geological jackpot. It went from the discovery stage just a few short years ago to an independently-assessed valuation (NPV) of almost $1.9 billion for its Whabouchi lithium project in James Bay, Quebec.
Why Lithium?
In fact, lithium is fast becoming more lustrous to investors than gold. So much so that it’s even been hailed “the new gasoline” by Wall Street’s most powerful and influential investment bank, Goldman Sachs.
This is all because of the electrification of the automobile industry, which is reliant on “green” lithium-ion batteries. Tesla Motors is leading the way in the U.S. with the building of its $5 billion “gigafactory” in Nevada, where it will manufacture lithium-ion batteries in partnership with Panasonic, its Japanese battery supplier.
Production is expected to start later this year. And by 2020, enough lithium battery-packs will be manufactured each year to power up to 500,000 electric vehicles.
Most notably, Tesla wants to source as much of its lithium supplies as possible from domestic or Canadian mines. And presently, that’s a tall order because only one North American lithium mine exists, which is also in Nevada.
All of this promises to be a boon to successful lithium explorers here in North America, especially since the U.S. currently has to import over 80% of its lithium supplies. Even the U.S. government is onside with Tesla’s bold mandate because it has declared lithium to be a strategic metal.
So the race is on to find the biggest and best deposits on this continent.
Hunting Northern Lithium Riches
And 92 Resources isn’t wasting any time in its efforts to probe the parameters of the hard-rock lithium potential at Hidden Lake. This is where historic work has outlined a near-surface lithium discovery that has the potential for large tonnage, as well as high grades.
The work was conducted as far back as the mid 1950s when lithium – the world’s lightest metal – was being hunted for industrial applications, as well as for nuclear power plants. However, a subsequent slump in lithium demand led to the abandonment of the project. And the project has languished ever since – until now.
That said, there has been some modest success at mining lithium in this remote part of Canada dating back to the 1940s and 1950s. However, company president Adrian Lamoureux says most historic exploration and development work in this region has only just scratched the surface.
For instance, he points to a 1977 geological assessment of the Hidden Lake property and adjacent prospects, which suggests their combined potential to host at least 49 million tons of high-grade lithium (averaging 1.40% Li
2O).
(It should be noted that this historic resource estimate has not completed in accordance with NI 43-101 guidelines, meaning a qualified geoscientist has not conducted sufficient work to classify this figure as a legitimate mineral resource, and the historical estimate is not to be treated as such).
Though his company will need to expand its land holdings and drill to see if this potential could be realized, Lamoureax says even a more modest-sized deposit could be of significant value.
“The general rule of thumb is to define a minimum of 10 million tonnes,” he says. “That is assuming that they have grades at around 1.0% lithium (Li
2O) or better, and are located in established mining districts with good infrastructure in-place.”
“So if we can demonstrate that we have the kind of tonnage and high grades that historic exploration works suggests exist at Hidden Lake, then we may be potentially be off to the races as they say” he adds.
The project’s appeal is sweetened by the fact that mineralization sits within 150 metres (500 feet) of the surface, which means it could be amenable to relatively low cost open-pit (quarry-like) ore extraction methods.
To date, surface trench samples have yielded grades as high as 3.01 % Li
2O, with an average grade of about 2% among the mineralized showings. Of equal significance, some small-scale historic drilling has also revealed mineralized grades to a depth of 150 metres that are comparable to ones encountered by near-surface sampling.
This prospect of consistently rich grades throughout this well-mineralized asset is what really excites Lamoureux. And that’s something that 92 Resources aims to find out in the coming months.
In the near-term, the company intends to conduct an extensive surface sampling program. This will provide a better understanding of the overall parameters of this under-developed lithium resource, as well its average grades near the surface. Subsequent to that, a drill program is expected to get underway this fall.
Recent exploration work at the expansive 1,000-hectare-plus property also suggests it may be significantly larger than it was originally believed to be. To this point, numerous geological anomalies have yet to be tested, all of which suggest the mineralization is “open” (continuous) along a linear axis.
Accordingly, 92 Resources’ management believes its Hidden Lake mineralization holds the potential for considerable expansion.
Additionally, the nearby proximity of Yellowknife means that the project benefits from accessibility to important regional infrastructure. The fact that a well-serviced gold mining camp is located a short distance to the west of Hidden Lake further benefits the project’s logistics significantly. And the NWT is well-known for being a mining-friendly jurisdiction.
A Pending Supply Crunch
An important discovery at Hidden Lake would be welcome news for the renewable energy business sector. In fact, the large-scale adoption of lithium-ion batteries is being aggressively presaged by various government initiatives. They include the Obama Administration’s commitment of $2 billion to helping finance clean energy initiatives, which include a broad-based adoption of lithium-ion powered batteries.
Other catalysts for the accelerated growth in the lithium-ion battery market include quickly falling battery prices, matched with the advent of more “green battery” mega- factories being built around the world.
All told, lithium demand is forecast to triple by 2020, according to the Californian technology research firm, Frost & Sullivan. This should translate into a $40 billion a year lithium-ion battery market by the same year, according to Citi Research, a division of the giant U.S. bank, Citibank.
The problem right now is a supply constraint. This is because lithium mining around the world is controlled by just four major chemical companies. And they’re not able to quickly scale-up production any time soon. Not surprisingly, lithium prices have been trending upwards, especially over the past couple of years.
This long-term ascendancy in lithium prices appears poised to gather steam, especially because there’s a supply crunch on the horizon. In fact, demand is anticipated to be as high as 125% of total production capacity, according to Credit Suisse Equity Research, part of the giant European investment bank Credit Suisse.
Besides being capacity-constrained, lithium mining is also subject to geopolitical risks and environmental issues among the world's major production areas, which include Latin America and China. So battery manufacturers are desperate for an uninterrupted long-term lithium supply that is mostly sourced here in North America.
This all explains why it is imperative for new producers to meet a projected future supply deficit. Certainly, 92 Resources hopes to be one of them.
In so doing, the company will have a chance to brandish its “green” credentials by helping to set society on a path toward a low-carbon energy future. And in the process, investors have an opportunity for a home-run win like the one that’s already being enjoyed by shareholders of Nemaska Lithium.
The principals of www.BNWnews.ca do not directly or indirectly own shares in any of the companies mentioned in this article.