Renforth ready for pegmatite prospecting amid major shakeup in lithium industry- Richard Mills

2023.04.29

The lithium nationalization bombshell dropped last week by Chile is good news for North American lithium miners that are likely to become more important as potential suppliers of the white metal needed for making lithium-ion batteries used in electric cars and trucks, as well as energy storage and an array of consumer electronics.

The development could also further pressure electric vehicle makers, who are scrambling to secure lithium supplies.

President Gabriel Boric announced last Thursday that his government would nationalize the country’s lithium industry, with the state planning to partner with companies to enable the development of a local industry. According to mining media, state-owned copper company Codelco will initially sign up partners for new contracts, after which a national lithium company will have that responsibility.

As well, Codelco and another state-owned miner, Enami, will be given exploration and extraction contracts in areas where there are now private projects. The two lithium miners already in Chile, SQM and US-based Albemarle, will continue to operate until their contracts expire.

Chile’s long-anticipated announcement comes on the heels of a similar nationalization in Mexico last year. The country also wants to create a regional lithium association with Argentina and Bolivia; the three countries make up the “lithium triangle” where 65% of the world’s known lithium resources are located, and where 29.5% of global production in 2020 was based.

Chile itself represents about 30% of the world’s supply.

The Chilean government projects global demand for lithium will quadruple by 2030 to 1.8 million tonnes, but supply is only expected to reach 1.5Mt, leaving a shortfall.

Nationalization will likely add pressure to electric vehicle carmakers who are hoping to lock in supply before the deficit takes hold and prices skyrocket.

“[T]here may be some hesitation investing in Chile’s lithium space until further details have been released and companies are confident on stability and in how the public-private partnerships will operate,” Jordan Roberts, battery raw materials analyst at Fastmarkets NewGen, told Mining.com in an email.

As share prices of Chilean lithium companies tumbled on Friday, mining magnate Robert Friedland said the announcement would be “quite challenging for international capital, and it makes it harder to invest in Chile.”

“Money is a coward — it runs away at the first sign of trouble,” he quipped.

The Ivanhoe Mines chairman also said Santiago’s move will undermine Chile’s reputation as one of the safer places for foreign investors in Latin America, telling Bloomberg:

It’s “likely to set the government back a long ways – denying companies like Rio Tinto and Teck and BHP to come in there and invest,” Friedland said. “That will not end well, in my estimation.”

Governments are inefficient miners, and it was “much more efficient” to encourage the private sector to invest, he said, adding that “ill-considered” nationalist policies risked derailing the clean energy transition.

Meanwhile, auto industry executives are warning of a supply chain crunch by the middle of the decade, due mostly to plans to spend nearly $1.2 trillion to produce millions of EVs.

According to Benchmark Mineral Intelligence (BMI), to meet demand, the global lithium industry needs to invest up to $42 billion by the end of the decade. This works out to $7 billion each year from now until 2028, helping it to meet a projected demand of 2-4 million tonnes per annum by 2030, which is four times higher than the 600,000 tonnes of lithium that was expected to be produced in 2022.

“Automakers may be more trepidatious around committing to lithium supply deals from Chile until it’s clear what nationalization will look like,” Reuters quotes Caspar Rawles, BMI’s chief data officer. “Most automakers will have been looking for a diversified portfolio of regional supply before this anyway, but perhaps this makes other regions more appealing.”

It only makes sense that if Chile is unable to provide the needed lithium, it could give fresh impetus to finding new sources of the metal.

Reuters notes major carmakers have already been looking for new lithium supplies in the United States, Europe and Africa, giving the example of General Motors investing in Nevada’s Thacker Pass lithium project being developed by Lithium Americas.

Volkswagen too is “looking at a lot of regions,” with the company’s Chief Technology Officer Markus Schaefer telling reporters on Monday that “there are alternatives [to Chile], such as Australia and Canada.”

Canada’s EV supply chain buildout

In fact, the German carmaker has already chosen Canada to build its first battery plant outside of Europe, with the site in St. Thomas, ON, to begin production in 2027. Last Friday, Prime Minister Justin Trudeau and Ontario Premier Doug Ford gathered at an old railway building turned museum to lay out plans for the CAD$7 billion plant. Ottawa is investing up to $13 billion in production subsidies once it’s operational, plus another $700 million to help cover capital costs. The Ontario government will kick in $500M.

In December 2022, the Canadian government and General Motors announced the opening of Canada’s first electric-vehicle manufacturing plant in Ingersoll, Ontario. The plant makes electrified delivery vans and is expected to manufacture 50,000 EVs by 2025.

The provincial and federal governments each invested $259 million towards GM’s $2 billion plan for the Ingersoll plant and to overhaul its Oshawa, ON plant to make it EV-ready, Global News reported.

The next-door province of Quebec has also attracted EV investment. In March, 2021, Lion Electric announced it will build a battery pack manufacturing plant in its home province. The $185 million factory, funded by the Quebec and federal governments who each committed $50 million, will build lithium-ion battery packs capable of electrifying 14,000 medium and heavy-duty vehicles annually.

Canada doesn’t currently produce lithium, but hosts about 2.5% of the world’s lithium deposits. According to Natural Resources Canada, the country has an estimated 2.9 million tonnes of lithium resources, in the measured and indicated category.

Similarly, the US mines and processes only 1% of the world’s lithium, according to the US Geological Survey. However, within its borders are 1 million tons of lithium reserves, ranking it among the top five countries in the world, according to the USGS. In the less certain resources category, the US has 12 million tons, including continental, geothermal and oilfield brines, claystones and pegmatites.

While there is just one lithium mine in operation, Albemarle’s Silver Peak, a lithium brine operation located outside Tonopah, Nevada, many lithium juniors are exploring for the white metal in the Silver State.

In fact last year’s record-high prices have spurred a boom in lithium exploration, which has persisted despite prices retreating.

CBC News quoted a mining executive saying that even though a tonne of battery-grade lithium currently sells for about $30,000, compared to a November peak of $85,000, production costs are only in the neighborhood of $9-10,000 per tonne, meaning lithium mining is still very profitable for producers — certainly high enough to motivate industry players, big and small, to move forward with new projects.

According to Mining Intelligence data, via Mining.com, there are 409 active lithium projects in Canada, 35% of which are early-stage.

The publication also says Quebec, which hosts some historical production, has by far the most active lithium projects, and accounts for almost half of all lithium exploration projects in the Mining Intelligence database.

Worth noting is that Sayona Mining and partner Piedmont Lithium last month restarted commercial spodumene production at their North American Lithium (NAL) project in Quebec.

Renforth Resources

Amidst the growing international attention on the Canadian province, Quebec-focused critical minerals junior Renforth Resources Inc. (CSE: RFR) (OTCQB: RFHRF) (FSE: 9RR) has been stepping up its efforts in lithium exploration at its flagship Surimeau project.

Surimeau is a district-scale property hosting several areas prospective for gold/silver and battery/ industrial metals (nickel, copper, zinc, lead, cobalt, lithium and manganese). It is located south of the Cadillac Break, a major regional gold structure

For the better part of two years, Renforth’s exploration focus has been on the more advanced Victoria mineralized battery metals horizon and parts of the longer Lalonde horizon lying parallel to the north (see below).

Victoria is a ~20km long “ground truth” magnetic structure bearing nickel, copper, zinc and cobalt mineralization at surface. It stretches between the Victoria West mineralization, which has been drilled over 2.2 km, by Renforth as well as historically, in the west, and the Colonie mineralization, historically drilled and surface sampled by Renforth, in the east.

The next area of interest is the Lalonde mineralization, located ~3km north of Victoria West, recently drilled by Renforth. This surface mineralized system, similar to Victoria, currently stretches over ~9km of ground-truthed strike.

Beginning in 2023, the Renforth has started to pay more attention to the potential presence of lithium separate to Victoria and Lalonde through the sampling of pegmatites — coarse-grained intrusive igneous rocks formed from crystallized magma below the Earth’s crust.

These rocks can contain extractable amounts of lithium, most commonly found in the mineral spodumene. This is why pegmatite lithium deposits are also known as hard-rock lithium deposits.

Last year, the company only devoted a handful of field days to prospecting for lithium in a limited area; this work was focused only on the pegmatites mapped by Metals Tech Lithium and noted in the SIGEOM database in the southwest portion of the property.

In addition to sampling pegmatites, Renforth has concluded, through sampling, that the Decelles Batholith, which forms the southern portion of Surimeau, is a “fertile batholith”, which can have an area of influence of up to 10km, a good portion of Surimeau to the north of the batholith.

As a result, Renforth considers most of the property prospective for pegmatites. Previously, pegmatites have been noted as far north as Victoria and Lalonde.

Grab samples from the area west of the Rapid 7 road and south of the Victoria mineralization, the only area prospected for pegmatites so far, resulted in elevated lithium (along with cesium, rubidium, and tantalum) at various locations. Lithium assays returned values up to 800 ppm (a re-assay of a sample which originally assayed 410 ppm).

Lithium Exploration Progress

As mentioned in its January 24 release, the company will shift the focus of its summer 2023 prospecting to pegmatites. This will include searching for more “new” pegmatites, along with mapping and sampling of known pegmatites and the sediments in proximity.

Renforth has commissioned a lithium targeting report to be generated by spectral analysis of available satellite data, which can be done during winter conditions. In addition, it is consulting with experts in exploration techniques for lithium pegmatites in order to develop a comprehensive exploration plan for Surimeau, the company said.

In preparation for the summer prospecting, Renforth’s geologists spent one day in February 2023 on a prospecting effort in the powerline cut corridor at Surimeau, approximately 4km south of the Victoria polymetallic battery metals mineralized system, within the Decelles batholith margin.

However, the snow cover was more significant than anticipated and mixed with ice layers. As a result, only two samples were obtained by the team, one consisting entirely of pegmatite, one of a mix of pegmatite and granite. These samples have been sent to the laboratory for analysis.

While conclusions should only be drawn from the assays, which are pending, it’s worth noting that the samples had elevated rare earth element (REE) readings after undergoing XRF testing. This is another interesting development since REEs, like lithium, are also a priority under the Canadian government’s critical minerals strategy.

Still, a lot more work remains to be done to confirm the project’s lithium (and REE) potential. As far as we know, Renforth is planning to start its prospecting program in May 2023, with the help of consultants specializing in pegmatite exploration.

The second half of 2023 should reveal more details about the prospectivity of lithium on what is already considered a multi-commodity play at the Surimeau property.

Conclusion

The consensus within the mining community is that Chile’s lithium nationalization is leading to a complete reconfiguration of the industry. Established players like SQM and Albemarle, facing the prospects of relinquishing control over their projects, will have to consider moving their operations base — a “backup plan” if you will.

Look no further than Québec, which regularly ranks amongst the top 10 mining jurisdictions as determined by the Fraser Institute for its highly favorable policies and successful history. Not only does it contain rich deposits of about 30 different commodities — the most diverse in all of Canada — but it is also host to a vast amount of unexplored land.

The nationalization of lithium deposits in Chile (and Mexico) will “hasten a shift in future investments in lithium projects to other countries that are recognized as safe havens, such as Canada”, a Quebec-focused junior said this week.

And as the global energy transition moves along, the importance of Québec and its immense resource base has never been greater. The province already contributes to the supply of several critical minerals such as nickel and graphite, and mining projects are also underway for lithium, vanadium, rare earth elements and tantalum.

Earlier this year, the federal government gave the go-ahead for Australia’s Allkem Ltd. to build its James Bay project in northern Québec, which is estimated to produce 321 kilotonnes per annum of 5.6% Li2O spodumene concentrate over a 19-year mine life.

Such approval further cements Québec as an emerging lithium mining hub and an important player in the clean energy supply chain, and also paves the way for other projects to come through. Although still at the very early stages, the progress of Renforth’s project is certainly worth monitoring.

Renforth Resources
CSE:RFR, OTCQB:RFHRF, FSE:9RR
Cdn$0.025; 2023.04.26
Shares Outstanding 326m
Market cap Cdn$8.2m
RFR website

Richard (Rick) Mills
aheadoftheherd.com
subscribe to my free newsletter

Legal Notice / Disclaimer

Ahead of the Herd newsletter, aheadoftheherd.com, hereafter known as AOTH.

Please read the entire Disclaimer carefully before you use this website or read the newsletter. If you do not agree to all the AOTH/Richard Mills Disclaimer, do not access/read this website/newsletter/article, or any of its pages. By reading/using this AOTH/Richard Mills website/newsletter/article, and whether you actually read this Disclaimer, you are deemed to have accepted it.

Any AOTH/Richard Mills document is not, and should not be, construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

AOTH/Richard Mills has based this document on information obtained from sources he believes to be reliable, but which has not been independently verified.

AOTH/Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness.

Expressions of opinion are those of AOTH/Richard Mills only and are subject to change without notice.

AOTH/Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, AOTH/Richard Mills assumes no liability for any direct or indirect loss or damage for lost profit, which you may incur as a result of the use and existence of the information provided within this AOTH/Richard Mills Report.

You agree that by reading AOTH/Richard Mills articles, you are acting at your OWN RISK. In no event should AOTH/Richard Mills liable for any direct or indirect trading losses caused by any information contained in AOTH/Richard Mills articles. Information in AOTH/Richard Mills articles is not an offer to sell or a solicitation of an offer to buy any security. AOTH/Richard Mills is not suggesting the transacting of any financial instruments.

Our publications are not a recommendation to buy or sell a security – no information posted on this site is to be considered investment advice or a recommendation to do anything involving finance or money aside from performing your own due diligence and consulting with your personal registered broker/financial advisor.

AOTH/Richard Mills recommends that before investing in any securities, you consult with a professional financial planner or advisor, and that you should conduct a complete and independent investigation before investing in any security after prudent consideration of all pertinent risks.  Ahead of the Herd is not a registered broker, dealer, analyst, or advisor. We hold no investment licenses and may not sell, offer to sell, or offer to buy any security.

Richard owns shares of Renforth Resources (CSE:RFR). RFR is a paid advertiser on his site aheadoftheherd.com

cse
otcqb
gold
silver
lithium
cobalt
vanadium
manganese
ree
nickel
copper
zinc
tantalum
cse-rfr
renforth-resources-inc