VIDEO: Wealth Minerals Ltd (CVE:WML) President Tim McCutcheon on Lithium
Wealth Minerals Ltd (CVE:WML) (OTCMKTS:WMLLF) (FRA:EJZN) President Tim McCutcheon provides updates on the various lithium projects in Chile. Wealth Minerals has an interest in many properties in Chile, the most notoriously fruitful being in the Atacama where its extensive salar exists along-side a proven resource owned by SQM – Sociedad Quimica y Minera de Chile (NYSE:SQM).
Benjamin Smith: Hello, everyone. Welcome to the Midas Letter Live. You’re with your host, Benjamin A. Smith, and we have an exciting guest today: we’re here with Mr. Tim McCutcheon from Wealth Minerals Limited. Wealth Minerals Limited trades under the TSX under the symbol WML. Welcome, Tim.
Tim McCutcheon: Thank you. Thanks for having me.
Benjamin Smith: Great. Now right off the bat, can you tell us about your property in Atacama? I understand it’s a very exciting property, and there’s a lot of things going on there, including other companies that are exploring in that region. Can you tell us a little bit more about that?
The production is in the southern part; we’re in the northern part. As a geological feature, it’s pretty much the same thing, so we’re very excited about being there, because in the south, where they are producing lithium right now, it is the lowest cost source of lithium in the world. Basically between $2,000 and $2,400 a tonne. So there’s nothing else like it in terms of cost, because the grade of lithium material there is the highest in the world, and also because the ability to get the lithium out of the salts is the fastest in the world, which in turn makes costs lower, because the way you get lithium out is, you suck up lithium salt-containing water and then you dry off the water under the sun. it’s called solar evaporation.
So things dry up faster in the Atacama than anywhere else, because it’s the driest place on the planet. The grade of lithium in the water, in the brines there, is the highest in the world, so you get a lot more lithium per litre of water you pump up. And it’s an enormous source of lithium, because it’s the world’s third-largest salar and the largest currently under production.
So we’re right there with a 46,000-hectare position, which is huge, and we have this land package. We’ve done geophysical work on it; geophysical work, we basically know exactly where the brines are, and now we need to drill, and we’re planning on drilling that this summer. It’s been a little challenging getting the drilling contractors all lined up because the drilling program that we have slated is really in total anywhere from, let’s call it 3,000 metres of drilling; most drilling contracts in Chile are for 50,000 to 100,000 metres of drilling, so basically people don’t want to get out of bed for the contract of our size, unfortunately.
So it’s been really hard just to pin down a contractor to get there, but nonetheless, that’s all taking place. We’ll drill our holes there and then we’ll go down to about 600 metres below surface, we’ll take out those samples, and what people will see is all of the analysis and interpretation we’ve done in the past, which is that we are convinced that we have a very large layer of lithium-bearing brine in our property.
At the end of the day, though, you’ve got to pull it up and actually show it to the world. That’s happening now, and that’ll be a huge catalyst event for the company. So that’s Atacama.
And then the other project we have is a little bit to the south of that, called Laguna Verde. And Laguna Verde, what makes that interesting is that it’s basically a salar that hasn’t quite dried out yet. So you have this aboveground pool of water, we know the topography of the pond, we know the grade of the lithium in the pond, so you can basically calculate a resource there.
Also, we took a whole bunch of material from that, sent it off to a company called Tenova, and Tenova is one of the world leaders in getting metals out of brine solutions.
Benjamin Smith: Okay.
Tim McCutcheon: So they developed an entire methodology for how you do that, a flow sheet, if you will. So they have a flow sheet and a cost estimate for a plant, going to have a resource, you put the two together and then we can actually have a scoping study, or a PEA, preliminary economic assessment. That will be a huge milestone for the company because finally you’ll have an actual number that you can say, okay, valuation of the Company X, valued to the financial performance of this PEA Y, and then you can compare us to our peer group.
Benjamin Smith: Of course.
Tim McCutcheon: So that’s the main thing, right? Because a lot of the professional investors, they need to have an actual number to have a comp against.
Benjamin Smith: Right.
Tim McCutcheon: And that’s what we’re lacking right now. We’re going to address that issue very soon.
Benjamin Smith: Okay. How far away do you think you’ll have that number in place before everything comes together. Is there a timeline on that?
Tim McCutcheon: Yes, obviously, because you know, at the end of the day, you need news flow, you need to know what’s going on, and that’s what sort of drives interest in the stock. So in terms of the PEA on Laguna Verde, we’re talking about two months or so to get that done. There are various things that have to happen, it’s just the result of being a public company; we need to have the specialists actually go to the site, because they have to sign that they actually saw the thing, even though the reality is that the engineers, part of the engineers that go to the site, they’re not going to learn anything by going there because it has nothing to do with what they’re doing inside the plant, which they could care less sort of if it’s outside, inside, hot, cold, doesn’t matter.
Benjamin Smith: Right.
Tim McCutcheon: But they still need to be on site. So you’ve got to organize them, give them a plane ticket, make sure their schedule is freed up…it takes, it’s just annoying, but it’s a fact of life. So that’s all happening now in terms of that report coming out, and then of course, the drilling results from Atacama, coming out with those at the end of the summer, that’s another major catalyst event as well. All the time in the background, I think, your viewers probably know, who followed the Wealth story, is you have all of this various news flow coming out in terms of corporate activity as well. So, a pretty good stacked deck for news coming out.
Benjamin Smith: Okay. What is the ultimate plan for Atacama? You know, assuming that the drill results go well and everything you have to do comes in place, and you get this amazing resource number, what is the ultimate plan? Do you plan on producing the lithium itself, or do you plan on, you know, royaltying it out, or are you undecided at this point?
Tim McCutcheon: At the end of the day, you have to develop an asset under the assumption that you’re going to end up running it. There’s only one way to develop an asset; it’s the right way.
Benjamin Smith: So that’s the mindset, that you’re going to run it –
Tim McCutcheon: You have to have that way –
Benjamin Smith: -and you’ll see what happens?
Tim McCutcheon: Because a lot of guys get in trouble where they kind of like dress it up and they try to, you know, beautify it prematurely, and then they get stuck because, you know, a strategist comes by and says ‘well, this all looks great, but, you know, there’s, it’s basically, you know, you have the foam, but you don’t have any meat below the foam’ kind of thing. So you’ve got to do it right.
So we are doing it right, but at the end of the day, you know, of course, bringing in strategic investors would make our job a hell of a lot easier. So that’s first and foremost going on. I think the last time I was here, I talked about that a little bit. It’s still going on. I mean, I think what people tend to forget is that just because we’re not coming out with a press release every day doesn’t mean things aren’t happening. There’s a lot of things happening, there’s a lot of discussions going on.
Frankly, with the strategic investors, the biggest problem has been educating them on what’s available. They all know what they want, but what they want doesn’t exist.
Benjamin Smith: Right.
Tim McCutcheon: So you have to say, you know, you have to either change your parameters or, you know, go someplace else. Because they all want lithium supply now, but it’s not just us, it’s everyone doesn’t have lithium supply available for you now, and people who do have already been bought out.
Benjamin Smith: Exactly. Okay, well speaking of lithium supply, as you know, your stock experienced a pretty nice run in 2016 and 2017 on the back of lithium prices going through the roof. Now, I believe earlier this year or late last year or early this year, Morgan Stanley came out with a report basically saying that they expected lithium prices would crash, essentially. They projected the price would be 45 percent lower by 2021, citing an over-glut in supply. Can you address that? And any holes in that thesis?
Tim McCutcheon: Well, the whole thesis has got holes like Swiss cheese in it. So the problem with the thesis that he has is that he is taking at face value the things that people are saying in the industry and not really doing his due diligence in terms of, is that actually possible.
Benjamin Smith: Okay.
Tim McCutcheon: So let’s take a good look at this. If you’re doing – the easiest way to ramp up production of lithium in the world, theoretically, is particularly in the Atacama, is to just pump out more brine and dry out more of it under the sun. Well, to get that permitted, just because people can pump it out doesn’t mean that all of the regulatory bodies are going to let you pump it out. And it’s not just one, right? So there are various regulatory bodies: environmental, labour things, construction codes, everything that needs to be adhered to, which are not under the purview of one person who sort of waves their magic wand and it all happens.
Benjamin Smith: Are they still stringent, those environmental codes?
Tim McCutcheon: Well, they’re in place.
Benjamin Smith: They’re in place.
Tim McCutcheon: They’re in place, and you need to get the piece of paper with the stamp on it. You just can’t sort of do what you want to do. That’s number one – so that takes time.
Number two, solar evaporation, by definition, takes months to do. At the Atacama, you’re talking about nine months or so; your working capital is lying under the sun.
Benjamin Smith: Right, right.
Tim McCutcheon: Then you’ve got to build out all of those ponds to put the brine in, in the first place, so that it dries.
Benjamin Smith: Okay, so it doesn’t just sit there?
Tim McCutcheon: If they pump out more and more brine from the Atacama, they still have to put it somewhere so it dries under the sun. So you’ve got to build that too. So you’ve got to get it permitted, then you’ve got to build it, then you’ve got to pump the brine in it and let it sit there for nine to twelve months. So this guy is talking about basically going from over 200,000 tonnes of LCE per year to over 600,000 tonnes in the next three years.
Benjamin Smith: Which is impossible.
Tim McCutcheon: It’s impossible. I mean, any kindergartner who would look at this would say ‘this isn’t going to work’. Now, I was an equity analyst myself. He made a good name for himself. The key to being a good equity analyst is to have an opinion. You don’t have to be right, you just have to have an opinion, because people like the idea. No one wants to talk to a wet noodle, right? You want to talk to an analyst who has an opinion, who’s sort of an interesting fellow, who has interesting ideas. This guy has clearly done that, he’s made a name for himself, so you know, hats off to him.
But the reality is that the industry, on the long term, there’s plenty of lithium for everyone; on the short term, there are serious supply constraints, and it’s just clear talking – I’m talking to strategic investors all the time, and it’s dawning on them that their $5 billion Gigafactory is going to sit still if they don’t figure out how to get the lithium supply to it in the next three to five years.
Benjamin Smith: Okay. So you’re very bullish on prices going forward, at least, you know, on a steady rising basis?
Tim McCutcheon: Yeah. Frankly, if prices stay where they are right now, that’s okay too. I mean, what’s happened right now is, you had a whole lot of liquidity going into the lithium junior mining space in 2016 and ’17; it’s come off, the liquidity’s come off, therefore the prices have come down. It’s the entire sector that’s come down, it’s not just us.
Benjamin Smith: Of course.
Tim McCutcheon: But it’s liquidity driven. I mean, nothing has really changed, it’s just, you know, people got a little money in their pocket and they buy the next marginal idea. So the fundamentals are totally in place right now. If anything, they’re only getting stronger in terms of the urgency of meeting lithium supply. And we have one of the best potential sources of lithium in the future. So we’re sitting really pretty.
Benjamin Smith: Terrific. Are there any other big multinationals that Atacama is sitting towards in the region?
Tim McCutcheon: Yeah, so SQM and Albemarle are producing lithium in the southern part of the Atacama. Certainly, just as a collegial sort of thing, we talk to them from time to time. We have NDAs signed with strategic investors who are poking around and kicking tires. Getting them from conceptual to an actual number on a piece of paper that’s a deal, that takes time. It’s frustrating, but again, you’ve got to understand that you’re dealing with multi-billion-dollar multinational companies, so whoever it is you’re talking to, they’re not going to sign off on the cheque, right? It’s got to be their boss, and then their Board, and everything else.
So the Board is saying ‘we need lithium supply’ and then the guy says ‘okay, get lithium supply’. Then you get to tell that guy ‘well, what you want doesn’t exist’ and he’s got to go back to them and say ‘what you want doesn’t exist, but this could be that, but we have to spend some time on it’. Then they go back, and that takes a lot of time for people to figure out what it is they need to do.
Benjamin Smith: Terrific. Well, looks like you’re in position to use that time to your advantage, and you’re in a position to capitalize on that.
Tim McCutcheon: That’s right.
Benjamin Smith: So we’re going to leave it here right now.
Tim McCutcheon: Thank you.
Benjamin Smith: Thanks, Tim, for joining us at Midas Letter Live. Stay tuned for another Midas Live presentation coming soon.
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