{"id":101558,"date":"2017-01-31T15:00:45","date_gmt":"2017-01-31T20:00:45","guid":{"rendered":"http:\/\/countingpips.com\/?p=101558"},"modified":"2017-01-31T15:00:45","modified_gmt":"2017-01-31T20:00:45","slug":"wealth-minerals-ltd-lithium-brines-in-chile-white-hot","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/01\/wealth-minerals-ltd-lithium-brines-in-chile-white-hot\/","title":{"rendered":"Wealth Minerals Ltd, Lithium Brines in Chile, White Hot"},"content":{"rendered":"
January 31, 2017<\/div>
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By<\/strong>\u00a0Peter Epstein, CFA, MBA \u00a0\u00a0epstein.peter4@gmail.com<\/a>\u00a0\u00a0http:\/\/EpsteinResearch.com<\/a>\u00a0<\/b><\/p>\n

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It\u2019s January 2017, President Trump has taken up official residence in the White House and the lithium market remains White hot.\u00a0 Is there a connection?\u00a0 No.\u00a0 There\u2019s no natural reason to trot out the insatiable lithium demand narrative yet again, is there?\u00a0 Well, no, but I will anyway. \u00a02016 was a remarkable year for natural resource investors, almost everyone had a thrilling ride.\u00a0 Lithium stocks were very strong until July, then cooled off through October.\u00a0 Even coal stocks flourished!\u00a0 Gold & silver had huge runs, but ran out of steam in August.\u00a0 Uranium was a complete dud, until all of a sudden, in November, it wasn\u2019t.<\/p>\n

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What sectors will be hot in 2017?\u00a0 I have no idea, but if you think Cannabis \/ Marijuana is the play, then you\u2019re reading the wrong article.\u00a0 This piece is on lithium, where there\u2019s rapidly growing interest in brine projects in Chile.\u00a0 This is a new development in the sector because Chile had been a no-go zone for juniors until about 6-9 months ago.\u00a0 Now it\u2019s a, must-go-make-a-deal-immediately zone, and the stampede is just beginning.\u00a0 First movers like\u00a0Wealth Minerals (TSX-V: WML) \/ (OTC: WMLLF), Lithium Power Intl., LiCo Energy\u00a0and\u00a0Bearing Resources\u00a0have a notable head start, but the number of players will likely double or triple before long.<\/p>\n

Ok, slow down now, let me catch my breath\u2026. There\u2019s a good reason why Chile hasn\u2019t been overrun by lithium company wannabes, yet\u2026. Like Argentina, Chile is still a place where long-standing relationships, boots on the ground, are not just important, they\u2019re a\u00a0pre-requisite for doing business.\u00a0 Newcomers to Chile are about a year behind Argentina\u2019s bumper crop, but things are moving even faster this time around.\u00a0 Will the lithium boom outlast Trump\u2019s Presidency?<\/p>\n

To find out more, I tapped\u00a0CEO Henk van Alphen\u00a0of\u00a0Wealth Minerals.\u00a0 At the end of the interview, I was fortunate to be able to sneak in questions for Executive Director (Chile),\u00a0Marcelo Awad\u00a0and President\u00a0Tim McCutcheon.<\/p>\n

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Epstein Research [ER]:\u00a0 Lithium junior management teams with assets across the globe, ALL say they have great,\u00a0\u201cconnections<\/em>\u201d with the powers that be.\u00a0 How can readers be confident Wealth Minerals\u2019 team truly has strong relationships in Chile?<\/p>\n

CEO Alphen:\u00a0\u00a0That\u2019s a fair question, a clear distinction between us and other juniors is that myself, Directors\u00a0Marcelo\u00a0Awad\u00a0and\u00a0Leonard Harris, President\u00a0Tim McCutcheon\u00a0and COO\/Director\u00a0Juan Tang\u00a0have very significant mineral resources experience in South America, (Peru\/Chile\/Argentina).\u00a0 Management teams retain lawyers, consultants & deal makers, but if key executives have limited or no in-country relationships, that\u2019s a big problem.<\/p>\n

I\u2019ve been investing, working and operating in South America for 26 years, South America is my backyard.\u00a0 Marcelo\u2019s reputation speaks for itself, he\u2019s one of the best known and most respected mining executives on the continent.\u00a0 He opens doors for us that other teams don\u2019t know exist.\u00a0 Our COO Juan Tang has an ideal background for Wealth Minerals, he\u2019s a world-class environmental engineer and has tremendous relationships in China, combined with substantial mining experience in Peru, and he\u2019s fluent in Mandarin, Spanish & English.<\/p>\n

\"\"<\/p>\n

[ER]:\u00a0 Is the endgame for Wealth Minerals simply to sell the company to the highest bidder later this year or next? \u00a0\u200b<\/p>\n

Alphen:\u00a0\u00a0We have every intention of advancing each of our projects as far and as fast as we can.\u00a0 Along the way we expect to partner on some or all of our projects.\u00a0 Interest in Chile, in lithium and in our concessions is increasing by the day.\u00a0 We are in talks to lock down\u00a0additional concessions, but we have nothing definitive to report at this time.\u00a0 While the rush into jurisdictions like Nevada, Quebec\/Ontario, even northern Argentina could be about to hit a brick wall, the opposite is true in Chile.\u00a0 We have a very significant first mover advantage.<\/p>\n

Recent transactions among newcomers and local companies are sending a clear message.\u00a0 The price of playing poker in Chile has gone way up\u2026..\u00a0 Recently, a junior signed an agreement to earn a 50% interest in an\u00a0exploitation\u00a0concession in the Atacama.\u00a0 The price of this poker hand?\u00a0 Cash plus shares in the company worth about US$ 9 M.\u00a0 To earn another 10%,\u00a0the ante goes up again\u2013 another US$ 10 M.\u00a0 This project is considerably more advanced then our green field Atacama project, but it\u2019s smaller.\u00a0 Ultimately, we feel this is good for first movers like us if it means followers get priced out of the market.<\/p>\n

\"\"<\/p>\n

[ER]:\u00a0\u00a0I think you are referring to LiCo Energy\u2019s announced LOI to acquire up to a 60% Interest in the\u00a0Purickutal lithium exploitation concession.\u00a0 Are there other comparable transactions of note?<\/p>\n

Alphen:\u00a0 Yes, LiCo Energy, an interesting company that also has a cobalt play. \u00a0Another transaction involved\u00a0Lithium Power Intl.\u00a0acquiring a 50% stake in the\u00a0Maricunga project\u00a0in the\u00a0Salar de Maricunga.\u00a0 I believe they\u2019re investing US$ 27 M = C$ 36 M in cash,\u00a0plus 16 M shares in LPI.ax (worth about C$6 M at issuance<\/em>), for 50% of the project.\u00a0 That\u2019s ~US$ 14,000\/hectare, net to Lithium Power.\u00a0 We\u2019re paying ~US$ 660\/hectare on our 46,200 hectare Atacama project.\u00a0 Having said that, the Maricunga project is well more advanced.<\/p>\n

[ER]:\u00a0\u00a0What are the biggest risks facing the Company?<\/p>\n

Alphen:\u00a0\u00a0Like most natural resource juniors, we\u00a0are a highly\u00a0speculative company, exposed to many significant risks.\u00a0 Obviously, a perceived big risk is our choice to build a lithium portfolio in Chile, but we feel we\u2019ve done our homework and have very experienced people who know what they\u2019re doing, so Chile is a risk that we\u2019ve embraced.\u00a0 If Chile was a no-brainer, we wouldn\u2019t have the opportunity we have today.\u00a0 Funding is the other key challenge we will be working hard on this year.<\/p>\n

That\u2019s why we\u2019re in continuous discussions with\u00a0multiple interested parties on a number of corporate initiatives.\u00a0 We expect to fund operations with a combination of cash payments from farm-out partners and equity capital.\u00a0 So for example, we might sell down our 100% ownership\u00a0in a project to say, 30% ownership, in exchange for being free-carried for a number of years.\u00a0 Doing that would de-risk Wealth Minerals\u2019s portfolio and it\u2019s\u00a0something we will start doing as soon as this quarter.<\/p>\n

[ER]:\u00a0 Are you\u00a0looking at\u00a0additional acquisitions?\u00a0 Or, do you have enough on your plate?<\/p>\n

Alphen:\u00a0 We currently have 5 projects about 55,000 hectares.\u00a0 As long as we continue to strike great deals, we will go for it.\u00a0 We don\u2019t see signs of a slowing of interest in lithium brines in Chile.\u00a0 We\u2019re looking for transactions that complement our existing\u00a0portfolio and increase our head start.\u00a0 Each concession we control is one that a competitor cannot, unless they come to us.\u00a0 This year will also be a lot about exploration and moving our projects forward.\u00a0 Shareholders can look forward to brine sampling, geophysics and most importantly drilling, initially focussed on the Atacama.<\/p>\n

Atacama is host to the best environment for harvesting lithium brines on the planet.\u00a0 We have both the highest grades and evaporation rates.\u00a0 That means desired lithium concentrations from solar evaporation can be obtained 25% to 50% faster, and that\u2019s why the Atacama has the\u00a0lowest cost production in the word at around US$ 2,500 \u2013 US$ 3,000\/metric tonne.<\/p>\n

[ER]:\u00a0\u00a0Marcelo, you are a well known and respected mining executive in South America, with 18 years at\u00a0Codelco\u00a0and 16 more at\u00a0Antofagasta Minerals.\u00a0 You\u00a0could be actively involved in any company or sector\u2026 Why did you choose lithium, and why Wealth Minerals?<\/p>\n

Mr. Marcelo Awad:\u00a0\u00a0That\u2019s true, I have had the chance since I left\u00a0Antofagasta Minerals\u00a0to join big Companies, but I decided to build up a portfolio of Boards and Advising Roles.\u00a0 Fortunately that decision went well.\u00a0 With Henk we\u2019ve known each other for years and last year he told me about his plan to acquire Lithium assets in Chile and asked me if would I assist him to do so.\u00a0 I immediately got interested because I knew his ability and reputation as head of Wealth Minerals and also because I was reading about the Lithium market and the big potential Chile had based on the size of its reserves.\u00a0 I told myself with my mining knowledge, this was a good opportunity to help both Chile and Wealth Minerals in the development of the Lithium business, which will certainly help the Chilean economy.<\/p>\n

[ER]:\u00a0\u00a0Tim<\/span>, can you describe the differences among global lithium brine operations \/ proposed projects?\u00a0 How does Wealth Minerals\u2019\u00a0Proyecto Atacama\u00a0project fit in?<\/p>\n

Mr.\u00a0Tim McCutcheon:\u00a0\u00a0There are several factors that determine the success of a lithium brine deposit.\u00a0 One is size of the overall salar, each has a balance of water coming in and going out.\u00a0 A challenge for extracting lithium is to ensure extracted brine is replenished.\u00a0 Water is the mechanism that conveys lithium to surface for processing \u2013 no water means no lithium.\u00a0 Larger salars have more water coming in, allowing more to go out, without harming a salar\u2019s equilibrium.\u00a0 Smaller salars face physical limits on how much processing capacity can be installed.\u00a0 As the 3rd largest salar in the world, Atacama has tremendous lithium production capacity.<\/p>\n

Grade is another critical factor.\u00a0 Larger salars are older, so there\u2019s been more time for lithium to be deposited, which translates to higher grade.\u00a0 SQM\u2019s grade is 2-3 times larger than many other global brine projects.\u00a0 It\u2019s no surprise that lithium brine extraction was pioneered in the Atacama.<\/p>\n

A last factor is aridness.\u00a0 There are many technologies, most unproven at commercial scale, to produce lithium from brine extracts, but by far the lowest-risk is open air evaporation.\u00a0 The Atacama salar sits at low altitude compared to most other lithium-bearing salars.\u00a0 And, it\u2019s possibly the direst place on the planet.\u00a0 Therefore, it has the highest evaporation rate, leading to the lowest production cost in the industry.<\/p>\n

Disclosures<\/u>: The content of this article is for informational and\u00a0illustrative purposes only. Readers fully understand and agree that\u00a0nothing\u00a0contained herein,\u00a0written\u00a0by Peter Epstein of\u00a0<\/em>Epstein Research<\/a>,\u00a0<\/em>[ER]\u00a0<\/em>including but not limited to, commentary, opinions, views, assumptions, reported facts, estimates, calculations, etc. is to be considered, in any way whatsoever, implicit or explicit investment advice. Further,\u00a0nothing\u00a0contained herein is a recommendation\u00a0or solicitation to buy or sell any security. The content contained herein is not directed at any\u00a0individual or group. Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not\u00a0responsible, under any circumstances whatsoever, for investment actions taken by the reader. Mr. Epstein and\u00a0<\/em>[ER]\u00a0have never been, and are not currently, a registered or licensed financial advisor or broker\/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and they\u00a0do not\u00a0perform market making activities. Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not\u00a0directly\u00a0employed by any company, group, organization, party or person. Shares of\u00a0<\/i>Wealth Minerals\u00a0are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks\u00a0can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they consult with their own licensed or registered financial advisors before making investment decisions.<\/em><\/p>\n

At the time this article was posted, Peter Epstein owned shares in\u00a0<\/em>Wealth Minerals\u00a0<\/em>and the Company was a sponsor of<\/em>Epstein Research<\/a>.\u00a0Readers understand and agree that they must conduct their own research, above and beyond reading this article. While the author believes he\u2019s diligent in screening out companies that are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful.\u00a0Mr. Epstein &\u00a0<\/em>[ER]\u00a0are not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. Mr. Epstein &\u00a0<\/em>[ER]\u00a0are\u00a0not expected or required to subsequently follow or cover events & news, or write about any particular company or topic.\u00a0Mr. Epstein and\u00a0<\/em>[ER]\u00a0are not experts in any company, industry sector or investment topic.\u00a0<\/em><\/p>\n<\/div>\n

\n","protected":false},"excerpt":{"rendered":"

By\u00a0Peter Epstein, CFA, MBA \u00a0\u00a0epstein.peter4@gmail.com\u00a0\u00a0http:\/\/EpsteinResearch.com\u00a0 It\u2019s January 2017, President Trump has taken up official residence in the White House and the lithium market remains White hot.\u00a0 Is there a connection?\u00a0 No.\u00a0 There\u2019s no natural reason to trot out the insatiable lithium demand narrative yet again, is there?\u00a0 Well, no, but I will anyway. \u00a02016 was […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-101558","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101558","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=101558"}],"version-history":[{"count":3,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101558\/revisions"}],"predecessor-version":[{"id":101569,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/101558\/revisions\/101569"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=101558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=101558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=101558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}