Arena Minerals Inc (CVE:AN) Hopes To Capitalize on Lithium’s Ongoing Demand Cycle

Benjamin A. Smith
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The price of lithium may have experienced a prolonged washout phase, but Arena Minerals Inc (TSE:AN) hopes investors will give it a second look as prices rebound. The Toronto-based company with properties in Argentina uses a unique brine mixing reagent process to produce high-grade lithium ions, which are in increasing demand globally.

President & CEO Will Randall—the former VP of Product Development at Lithium-X Energy Corp. fame—and his team developed a specialized process that is based on a conventional evaporation, but does 1 of 2 things: it lowers Arena Minerals OpEx quite dramatically—around 30 to 70 percent. The process also produces a quality brine concentrate that can fleet a carbonate plant producing battery-grade materials consistently—which in turn fetches higher market prices. Further details on how the process works can be found here.

The ultimate goal is to deliver its proprietary process in order to improve other lithium operations or projects in the country. This begins at the company’s flagship Antofalla Project in Argentina, where an “Atacama-based” approach will be deployed. Of course, this is in reference to The Salar de Atacama—the location of the world’s largest lithium brine mine to date operated by Sociedad Quimica y Minera de Chile S.A.

Arena Minerals Inc. is a lithium company operating in Argentina. CEO Will Randall provides an introduction to the company and explains its unique extraction process

Arena’s approach does something different. Instead of buying lime as a re-agent and treating it that way, they use 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.

The recent acquisition of Antofalla Minerals S.A. (AMSA) provides Arena with three potential lithium brine projects in the Catamarca and Salta provinces of Argentina. The key asset—the aforementioned Antofalla Project—consists of three claims covering a total of 4,000 hectares of the central portion of Salar de Antofalla, located immediately south of Albemarle Corporation’s own Antofalla project. AMSA also has a claim on an additional 2,000 hectares— currently disputed in the courts—which if successful would result in additional ownership.

No other producer is in a position to deliver such an integrated solution to the Argentine brine industry. Although Argentina has been really good at establishing a world-class resource over the past decade, it hasn’t been all that great at transferring those resources into actual production facilities. Surprisingly, there are only four active brine producing projects in the world, so there’s a huge demand Arena Minerals is attempting to fill.

Advising Arena Minerals quest for relevance is a veteran who has been there/done that before.

Board Member and key shareholder Eduardo Morales is a chemical engineer with nearly 40 years of experience in the lithium industry. Mr. Morales formerly built and operated one of the world’s largest lithium brine operations as president of Rockwood Lithium Latin America, later sold to Albemarle Corporation for US$6.2 billion in 2014. He was responsible for the development, commissioning and operation of Rockwood’s massive Salar de Atacama project.

More recently, Mr. Morales was the Chief Operating Officer of Lithium-X before it was acquired for $265 million by a Chinese consortium less than two years later. He was instrumental in guiding this once relatively obscure junior producer to an entity that could be sold at premium.

Will the same blueprint for success work for Arena Minerals in Argentina? We should gain more clarity in the coming months as the company is still in the beginning phases of its operations. Next up on the docket gaining a strategic partnership with a larger company with assets in Argentina. Simultaneously, the company will begin work their projects in the south of Argentina, gaining environmental permits for geophysics sampling, drilling, and building a larger-scale pilot plan.

Ultimately, demand for lithium isn’t gong away. Albemarle Corp. recently said during its Q4 2018 conference call that it expects global lithium demand to grow 21 percent annually, with the market remaining tight for years as manufacturing of electric cars and large-scale batteries soars. They should know better than most: North Carolina-based Albemarle produces about a third of the world’s lithium, and forecast stable-to-increasing lithium prices for 2019.

Should long-term demand remain brisk, non-Chilean lithium feed stock will eventually need to pick up the slack. Arena Minerals has taken up the challenge of of taming the chemically-unique grades of Argentina’s vast lithium composition.

It’s a story Midas Letter will be following in the months ahead.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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