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Arena Minerals Inc (CVE:AN) CEO on Antofalla Project’s Battery-Grade Lithium Carbonate

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Arena Minerals Inc (CVE:AN) (OTCMKTS:AMRZF) (FRA:23R) is a lithium company operating in Argentina. CEO Will Randall provides an introduction to the company and explains its unique extraction process. Arena Minerals extracts lithium from salt water brines and there are only 4 active brine producing projects in the world. Arena’s process lowers operating expenses by 30 to 70 percent and results in battery-grade carbonate with higher margins. Arena has developed its own reagent from high calcium brine. The company’s Antofalla Project has the potentially to be Argentina’s largest lithium resource.

Transcript:

James West:   Will Randall joins me now. He’s the CEO of Arena Minerals, trading on the TSX Venture under the symbol AN. Will, welcome back.

Will Randall: Thanks for having me.

James West:   Will, this company, this project, Arena Minerals, is in the lithium space, but it has quite a different approach to what most lithium companies take, and why don’t you start with an overview of what that difference in approach is?

Will Randall: Yeah, I mean, I guess we can sort of lead into that with a little bit of the history. Argentina over the last, say, 10 years, has been really good at establishing a world-class resource; the numbers have increased dramatically sort of in the first lithium boom and now in the second one. But it hasn’t been all that great at transferring those resources into actual production facilities – producing mines, lithium carbonate, etcetera.

And I believe a large part of that is because these brines are a little bit complicated to process correctly, and that’s showing up in the feasibilities in the space. So when we sold LithiumX, the previous company, to a Chinese group, I said Okay, where is, where are we going to be able to add value in Argentina over the next sort of five to ten years, as we transform all these resources into active mines?

So I assembled a team and we came up with a process that is based on a conventional evaporation process, but that does two main things: one, well, number one, it works, and it works well, but it lowers our OpEx quite dramatically, so around 30 to 70 percent, and at the same time produces a very high quality brine concentrate that can fleet a carbonate plant producing battery-grade materials consistently – which in turn sells for a much higher selling price.

So that’s kind of what we’ve based Arena on, and we’ve got the technology, and we acquired a project that allows us to create this free agent that in term allows us to reduce the OpEx.

James West:   Okay. So you were part of the team that sold the LithiumX project on to the Chinese?

Will Randall: Correct.

James West:   So you’ve been here and you’ve done this before.

Will Randall: Yeah, I started in the lithium business 2008, 2009, so early on, and at that time we acquired the project and developed it that eventually got vended into LithiumX and was the flagship project that was sold to a Chinese group for, I think it was 265 million we sold it for.

James West:   Okay. And then you mentioned that a lot of the projects that get to a feasibility stage don’t go beyond it, because the execution turns out to be different from what was arrived at in feasibility in some cases. The reality is, I think, that the lithium brines have such unique characteristics from brine to brine that they all require a certain excess of attention to chemical engineering.

Will Randall: Correct, yeah. So every brine is somewhat different, and unlike in other mining sectors, where there are a whole bunch of examples, there are only four right now active producing brine projects.

James West:   In the world?

Will Randall: In the world.

James West:   Really?

Will Randall: Four. Two in Atacama, which are dominate the world scene, as it were, and use one type of process, and then there are two in Argentina right now, Orocobre and FMC; FMC has a proprietary process which is not based on conventional evaporation ponds, and Orocobre, who’s using a liming process which is similar to Atacama but different in what re-agents they use and what compounds they decide to attack early on to allow the brine to concentrate.

So yes, and then all the brines in Argentina will have varying degrees of magnesium sulfate, calcium, boron in it, and of course, various lithium grades as well. So that adds one layer of complexity. The lack of expertise out there, because there are only three other, four other producing mines, so not that many people that have done this before, which is another one of the good selling points of Arena. We have on our Board and is one of our major shareholders, Eduardo Morales, who started working in the lithium industry I think 40 years ago, 35 years ago, and was in charge of designing, building and then operating the Atacama project, which is the world’s largest producer.

He ran Rockwood up until about, I think it was 2014 that it got sold to ALV for somewhere around 6 billion.

James West:   Right.

Will Randall: It was a huge transaction, and at that point, shortly after his lockup period, he decided to join LithiumX and now Arena with us. So we’re very fortunate to have him leading the processing and the technological side of this company.

James West:   Yeah, okay. So, tell us about the project itself: how you came to acquire it, and how closely it’s going to emulate the development of a project like the one that was sold to ALV. Is that the ultimate goal?

Will Randall: Yeah, that is the ultimate goal. While we’re looking at Argentina coming in at much higher costs and these feasibilities at higher costs than Atacama, and we sat down and says, that shouldn’t be. I mean, these brines, yes they’re a little dirtier, less they’re a little lower grade, but there’s no reason for it to suffer such a punishment in the process. And what we did is, we said, Okay: we used an Atacama-based approach, and they do, instead of buying lime as a re-agent and treating it that way, they developed their own re-agent from high-calcium brines, and then treated and advanced it to around 5 to 6 percent lithium, where it concentrates into a very pure feed for their carbonate plant.

So that was basic premise: we said, We can do this in Argentina. First thing we did is, we found the asset in Argentina that has a huge excess of calcium, what we think is the best one, but also decent lithium grades, and that’s the Antofalla project.

James West:   Okay. So the Antofalla project is in Catamarca Province, and looking at the map here, it’s pretty much the furthest south of all of the lithium projects in the lithium triangle?

Will Randall: There are a couple further south that unfortunately we didn’t put on that map. So there’s Neo Lithium is further south, but yes, we are, we are a little bit further south than most. We share that asset with ALB. They control most –

James West:   Albemarle is part owner of one of these assets?

Will Randall: Of the Antofalla Salar.

James West:   Oh, so does that make them the logical takeout candidate, or are you the logical takeout candidate for ALB just to keep their, you know, the supply down?

Will Randall: Well, we’ll see – we’ll see how it goes forward, but I mean, yeah, obviously we’re open to everything. They are in the same neighbourhood, and they clearly like the – actually, in their last conference call, they did mention the asset as potentially being the largest resource in Argentina. So it’s clearly a focus for them. And we’re going to be very active there, you know, not only developing the brine for this re-agent, the lithium-rich, calcium-rich re-agent, to partnership up with other companies that you can see on that map as well, but also developing the project as a standalone project.

James West:   Very interesting. Okay, so, now, the – let’s look at the brine concentrations in evaporation ponds slide that we’ve got here. And tell me how this sort of supports your approach.

Will Randall: Yeah. This here basically shows what we’ve been able to do, and this is not theoretical; this is actually proven on the ground, so we’ve done this in smaller evaporation ponds. Obviously, we’ll have a full facility; we call it a pilot plant. And the blue line that you can see there is lithium concentrating over time, so as it goes up, we get higher and higher concentrations of lithium in brine as it travels through the pond system. And the orange line is all the other stuff that you don’t want.

As you can see, there’s a big dip originally there in the deleterious elements, as we call them; that’s when we treat it, and we have a couple of more treatments along the way, but the important thing is, as we get to 6 percent lithium, you can see that all the unwanted elements – magnesium sulfate, etcetera – start dropping out at a very serious rate, and you end up with 6 percent lithium and 2 percent other salts. So that’s less elements that are eventually going to report to your lithium carbonate in the plant, and therefore producing a much higher lithium carbonate consistently over time, not just in plant start-up, where the plant is clean, but all the way through the year.

And the other line that we have there, that 1 percent lithium line, it shows the amount of unwanted salts there. And that’s typically how most feasibilities in Argentina have been run right now; they’re concentrating to about 0.6 to 1.2 percent. I put it at 1 percent just to sort of give it a rough average, there. So it means that in these feasibilities and in some of the producing assets right now, we’re sending a dirty brine to the plant, which as the plants start out is okay, it can handle it, but as these materials stay in the system, it starts producing lower-grade carbonate, which in turn then starts becoming industrial carbonate and sells for a substantially lower price.

James West:   Okay, then, so then, what is the timeline for all of this development? Like, is this going to take 10 years, is it going to take 5 years, is it going to take two years?

Will Randall: So our company’s just starting out, and I think we’re well positioned, because as I said, a lot of these resources are now getting to feasibility and looking at different options, looking at how they’re going to finance it, etcetera. So we are in a good position to, as I said, develop our asset, but at the same time combine with a more advanced project to offer our expertise and this calcium-rich brine feed to develop our process in conjunction with them.

So I would say that those are the next steps for Arena over the next time frame, say, over the next six months: a strategic partnership with a larger company, obviously with assets in Argentina. And you’ll also see us start work on our project in the south, so we’ll get environmental permits for geophysics sampling, drilling, and actually building a larger-scale pilot plant.

James West:   Will, how does this approach affect the economics of the company and differentiate it from the normal approach to other salars?

Will Randall: Yeah, so for a project that will be potentially partnering up with us, sort of a typical brine Argentine brine, the numbers are actually very significant. If we implement our process, you’ll have somewhere around $1,500 of savings on the OpEx side, which on a 20,000 tonne operation is $30 million worth of savings in operational costs a year; and if you couple that with the assurance of a battery grade carbonate at the end, you’re also getting a nice big bump in sale price, which overall can mean up to somewhere around 100 million in savings, or delta, a year, which is very, very significant over life of mine.

James West:   Okay, so I guess with lower CapEx required for the plant, you actually end up with a lower cost per unit of input, of output?

Will Randall: Yeah, that’s correct as well, because what’s happening a lot is, and you’ll see it in the feasibility studies, there is another section added on to the end. So as the carbonate site is coming down in grade, we’re putting it through a purification circuit; and that purification circuit, in our process, would not have to be built. We come out just of the carbonate plant with battery-grade material, so you save that money.

And then there’s a product flexibility. The brine, the concentrated brine, is a salable product as itself, and it’s actively traded in the market. It was developed in Chile by SQM and Rockwood, and sold across to China, much like the spodumene guys do right now.

James West:   All right, Will, that’s a great intro to the company. We’ll leave it there for now and come back to you soon. Thanks for joining me today.

Will Randall: All right, thank you very much.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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