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LITM Stock IPO: 7 Things to Know as Snow Lake Resources Starts Trading

This year has been an incredible one for initial public offerings. The IPO market remains red-hot, with a number of new high-profile debuts taking place…

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This article was originally published by Investor Place

This year has been an incredible one for initial public offerings. The IPO market remains red-hot, with a number of new high-profile debuts taking place in recent months. Following that trend, the Snow Lake Resources (NASDAQ:LITM) IPO has investors giddy. Shares of LITM stock more than doubled in earlier trading, now up approximately 90% from open.

rows of lithium ion batteriesSource: Lightboxx/ShutterStock.com

What’s interesting about Snow Lake’s rapid rise is that this company is far from what most investors would think of as a hypergrowth stock. It’s a lithium miner, not a software or electric vehicle startup. However, it seems there are a few reasons investors are still jumping on board.

As a miner of battery-grade lithium, Snow Lake’s business model is intriguing to investors. Given the amount of growth expected via the electrification trend, lithium miners have become viewed as picks-and-shovels plays (perhaps literally) on this catalyst.

Beyond that, the world will need a lot more lithium to reach its electrification goals. Accordingly, investors appear to be seeking out high-grade lithium producers such as Snow Lake.

So what else do you need to know? Let’s dive into a few fast facts as Snow Lake starts trading today.

What to Know about Snow Lake and LITM Stock

  • Snow Lake is a lithium exploration company based out of Manitoba, Canada.
  • The lithium produced from its prospective mines will be used to power the growing EV consumer market.
  • Accordingly, investors appear to be jumping on this stock on its first day of trading. As of this writing, more than 21 million shares have traded hands.
  • Shares opened nearly 70% higher, and have trade as high as 145% above the offering price.
  • The company raised gross proceeds of $24 million from its offering.
  • This offering was done at $7.50 per share, in which 3.2 million shares of common stock were sold.
  • Additionally, an over-allotment option was provided to underwriters of up to 480,000 commons shares.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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Author: Chris MacDonald

Energy & Critical Metals

First Cobalt (Renamed Electra Battery Materials) – SIX ways to win!

First Cobalt Corp. [Electra] (TSX-V: FCC) / (OTCQX: FTSSF) has a number of compelling investment catalysts coming in the next 15 months…

First_cobalt_ElectraBatteryMaterials

This article was originally published by Epstein Research.

All $ figures US$ unless indicated otherwise. Co = cobalt, Ni = nickel, Cu = copper, Li = lithium. Note: {First Cobalt Corp. is changing its name to Electra Battery Materials Corp. Going forward I will use “Electra” to refer to the Company.} 

First Cobalt Corp. [Electra] (TSX-V: FCC) / (OTCQX: FTSSF) has a number of compelling investment catalysts coming in the next 15 months. Most important is the ongoing de-risking of its fully-funded Phase 1 expansion of an emerging 100%-owned Battery Materials Park (“BMP”) in northern Ontario. 

The analysis of recycling opportunities to recover/refine cobalt, nickel, lithium, copper (and possibly 1 or 2 other materials) is moving forward as well. In recognition of this notable progress in other areas, FCC is changing its name to Electra Battery Materials Corp. 

Name change to Electra Battery Materials Corp. to reflect multiple metal cash flow streams

In Sunday’s press release management commented,

“The Company has been assessing black mass feed from recycled Li-ion batteries and will be announcing results from test work & engineering studies in coming weeks. 

By month-end, investors should have enough information to begin making rough estimates for Electra’s recycling segment. Li-Cycle, a C$2.8 billion company, stated that it expects EBITDA of ~C$136M in 2023, a margin of 41%, and a 56% EBITDA margin in 2025. Li-Cycle’s Enterprise Value ~20 times its forecast 2023 EBITDA — its [EV/2023e EBITDA = ~20x] 

If Electra could achieve an EBITDA margin of 40% or more by 2023-24, it wouldn’t take that much throughput to generate meaningful EBITDA relative to its pro forma Enterprise Value {market cap + debt – cash} of ~C$286M. Note: {The Company will have ~C$62M in net debt after completion of Phase 1}.

Compared to Li-Cycle’s EV/2023e EBITDA estimate of ~20x, Electra’s EV/2023e EBITDA multiple is much lower at ~5.0x, assuming C$10M of EBITDA from recycling in 2023. 

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CEO Trent Mell reports strong interest from automotive companies and cell makers in the Company’s four-phased growth plan encompassing battery recycling, cobalt, and then nickel refining, followed by Li-ion battery precursor material manufacturing (co-locating with third parties).

In addition to a potential company-making recycling business, developing a BMP around it could take Electra’s valuation to another level. BMPs are popping up all over Asia & Europe as the preferred way for OEMs & battery/cathode/precursor makers to operate in the most efficient & green manner possible. 

Phase 1 plans include transforming clean, ethically-sourced cobalt hydroxide into battery-quality cobalt sulfate at Electra’s 100%-owned refinery that’s being expanded to run at 55 tonnes per day. 

Many Lithium juniors have soared since their lows in July

In the following, > 120 lithium juniors listed in Canada, the U.S. & Australia, the top quartile (30 names) are up an average of 195% from their respective lows of the past four months. The top-10, +264%. By contrast, Electra is up far less, +65%. 

Readers might be wondering what Li juniors have to do with a cobalt/recycling company. It turns out, there’s a lot in common. Most notably, investors in Li juniors are demonstrating high conviction in the idea that Li-ion battery demand will be stronger for longer. 

In the chart below, Li carbonate spot prices in China are at 194,500 yuan, +397% above the low in August 2020, making it one of the best-performing commodities in the world.

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Strong lithium demand can only be good for cobalt. The title of this article says there are SIX ways to win… #1 is by supplying battery-quality cobalt sulfate starting in a little over a year, potentially reaching an annual run-rate of C$45 – $50M in 2023. 

There are dozens of high-flying battery materials, recycling, EV & EV charging companies that are several years from reaching positive EBITDA (if ever!). 

Way to win #2? As Co sulfate production ramps up in 2023, management plans to concurrently be recycling black mass (crushed end-of-life batteries stripped of plastics & casings) + battery scrap (scrap material / rejects from newly manufactured EVs). 

While it’s too soon to know how much EBITDA a recycling segment might deliver, recycling is very important for a number of reasons. It diversifies risk by branching out from just cobalt to generating cash flow from recovered/refined lithium, cobalt, nickel & copper, and possibly manganese + graphite. 

Recycling Li-ion Batteries + OEM/Battery makers’ scrap material could be game-changer 

Recycling contributes to a closed-loop supply chain which is critically important for OEMs & battery material companies. ESG mandates from industry players & institutional investors alike all but demand-supply chains cover these key areas, (minimizing emissions & waste, avoiding excess use of water & chemicals, co-locating facilities, conserving energy, recycling & reclamation). 

Electra has a lot of ESG bases covered, 100% hydroelectric power in Ontario, plans to attract one or more battery materials companies to co-locate next to the Company’s BMP, and (eventually) sourcing some cobalt feedstock from its own operations in Idaho. 

The icing on the ESG cake will be selling its products locally in Canada and regionally into the U.S. 

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In the chart above, ING Research estimates annual demand growth over the next 20 years. I’ve been watching estimates like these for years, ING’s latest work is neither overly conservative nor too aggressive. 

It captures the heart of the situation readers need to understand — demand growth for the key EV metals that Electra will be recycling/refining. Anything north of 10% over a 20-yr period is insanely bullish, for example, a 15% CAGR is a 16.4-fold increase over 20 years. 

NOTE: {this chart is only demanded growth tied to EVs, not for all metal uses}. 

Way to win #3? In addition to Co sulfate production, and end-of-life Li-ion battery + OEM/battery scrap recycling, the Company plans to source regional nickel feedstock for refining into Ni sulfate. I’ve already touched upon the bright prospects for Ni as one of the primary materials coming from recycling circuits. 

Way to win #4? Electra has promising copper & cobalt mineralization in Idaho. The current in-situ value of the Indicated & Inferred resource there is not that large, but management believes it can double the # of pounds from known areas, and possibly make new discoveries in untested or newly acquired zones. 

A tripling or more of the resource size (subject to more drilling and new discoveries), plus increased Cu & Co prices, would make Idaho’s mineral endowment quite meaningful compared to the Company’s Enterprise Value. Readers can look to cobalt/copper peer Jervois Global Ltd. for an idea of what Idaho potentially brings to the table. 

Assuming that Jervois’ Idaho assets are worth 1/3 of the company’s total Enterprise Value, that’s ~C$226M for that company’s Idaho assets alone. Electra’s pro forma enterprise value is ~C$286M, with the vast majority of it tied to its BMP. Investors are ascribing very minimal (if any) value to Electra’s Idaho assets. 

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Way to win #5? A takeout of Electra by a metals commodity trader like Glencore, a diversified miner like Teck Resources, a cobalt player like Umicore, a lithium producer like Livent / Albemarle, or by a number of large battery/cathode/precursor makers. 

Earlier I mentioned there are dozens of companies with multi-billion dollar valuations, yet negative EBITDA for years and years to come. Jumpstarting positive cash flow by a year or two with C$45 – 50M of Electra EBITDA would be worth a lot.

Acquiring cash flow, not just revenue — especially long-term, high-quality cash flow — should be very compelling.

Way to win #6? Electra is in the process of rebranding its mission statement to add recycling & Ni sulphate production in the next 2-3 years and enticing third parties to co-locate battery/cathode/precursor plants next to their BMP. The proposed name change is one part of this effort. 

I’m especially excited about next year’s listing of Electra on the NYSE American or NASDAQ stock exchange. 

Having a full U.S. listing has proven to be incredibly valuable for lithium companies like Lithium Americas & Standard Lithium, uranium company Energy Fuels, copper/coking coal producer Teck Resources, and gold companies Barrick Gold & Pretium Resources. 

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For readers who believe that metals/mining sectors will be strong for most of the 2020s, First Cobalt Corp. [Electra Battery Materials Corp.] (TSX-V: FCC) / (OTCQX: FTSSF) warrants attention. No longer just a cobalt & copper play, now a company with exposure to lithium & nickel (and perhaps graphite & manganese). 

Not an exploration play that will live or die based on drill results, a company with tangible wholly-owned hard assets that will be in production and meaningfully EBITDA+ in 2023. 

Management is moving rapidly, yet prudently, to maximize its role in the paradigm shift to the electrification of transportation, while strictly adhering to increasingly important ESG mandates. 

Disclosures: The content of this article is for information only. Readers understand & agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about First Cobalt Corp. / Electra, incl. but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. are to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market-making activities. [ER] is not directly employed by any company, group, organization, party, or person. The shares of First Cobalt Corp. / Electra are highly speculative, not suitable for all investors. Readers understand and agree that investments in small-cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.

At the time this article was originally posted, Peter Epstein owned shares of First Cobalt Corp. / Electra and the Company was an advertiser on [ER]. 

Readers should consider me biased in my view of the Company. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reason, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is 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. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector, or investment topic.

Author: Peter Epstein

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Energy & Critical Metals

Emerging Supply Gap in 2nd Half of this Decade Necessitates New Slew of Copper Mine Projects

2021.11.29
Copper’s widespread use in building construction, power generation and transmission makes it a key metal for civil infrastructure renewal….

2021.11.29

Copper’s widespread use in building construction, power generation and transmission makes it a key metal for civil infrastructure renewal. Roskill forecasts that the world’s total copper consumption is set to exceed 43 million tonnes by 2035, driven by population and GDP growth, urbanization, and electricity demand.

This decade, with the global push towards vehicle electrification, demand for copper is about to take off, given that a typical EV uses about four times more of the metal as a regular internal combustion engine (ICE) vehicle.

Consulting firm AlixPartners estimates that EVs, which at the moment only represent 2% of the total global vehicle sales, will make up 24% of total sales by 2030. Investments in EVs by 2025 could total $330 billion, it predicts.

Seeking to make half of the new US auto fleet electric by 2030, President Joe Biden has already called for $174 billion in government spending to boost EVs, including $100 billion in consumer incentives.

Such measures are sure to put a strain on the global copper sector, which is already suffering from years of underinvestment dating back to the 2000s, translating to a lack of new mines being developed.

In 20 years, BloombergNEF says copper miners need to double the amount of global copper production just to meet the demand for a 30% penetration rate of electric vehicles — from the current 20Mt a year to 40Mt.

Keep in mind that electrification does not just include cars, but also trucks, trains, delivery vans, construction equipment, and two-wheeled vehicles like e-bikes, motorcycles and scooters; so copper usage is bound to go higher than projected.

Copper, too, is needed for charging stations and renewable energy, particularly in photovoltaic cells used for solar power, and wind turbines.

Data from CRU Group shows copper consumption by green energy sectors globally is set to jump five-fold in the 10 years to 2030.

Overall, to electrify societies’ infrastructure and to achieve a 1.5˚C global warming trajectory, approximately $50 trillion of investment will be needed over the next two decades, according to global energy consultancy Wood Mackenzie.

Source: Wood Mackenzie
Source: Wood Mackenzie

Under WoodMac’s more lenient Accelerated Energy Transition-2 (AET-2) scenario, which is consistent with limiting the rise in global temperatures since pre-industrial times to 2°C, roughly 19Mt of copper will be needed to feed the energy transition over the next 20 years — representing an additional supply increase of 85% (see above).

This is an obvious challenge that today’s producers must overcome, not just now but for the next two decades and beyond.

Supply Lagging Demand

S&P Global Market Intelligence predicts that due to a shortage of projects, supply will lag demand starting in the long term.

While the New York-based analytics firm expects mined copper production to rise to 21.87Mt and 26.14Mt in 2021 and 2025, respectively, from 21.16 Mt in 2020, that would not prevent a supply gap in the post-2025 years.

Production from existing copper mines, including concentrate and solvent extraction-electrowinning, is expected to increase at a CAGR of 1.0% in 2021-25 but fall at a CAGR of 4.7% in 2026-30, driven by declining ore grades and mine closures.

These mines include Glencore’s 33.75%-owned Antamina (BHP 33.75%, Teck Resources 22.5%, Mitsubishi 10%), Codelco‘s Radomiro Tomic and Teck’s Highland Valley.

As a result, production from existing operating mines — not considering those assets that are starting up, project expansions or mine restarts — is projected to fall to 15.90Mt in 2030 from 20.53Mt in 2021.

Diminishing supply from currently operating mines, combined with the projected increase in demand for copper concentrate over 2021-2030, would result in a 3.85Mt production shortfall in 2025, according to S&P Global estimates.

Source: S&P Global Market Intelligence
Source: S&P Global Market Intelligence

The refined copper market will also move into a 279,000-tonne deficit by 2025, from a 142,000-tonne surplus in 2020, S&P Global adds.

From 2026 to 2030, the copper industry will be unable to meet a growing demand for concentrate, even when including uncommitted development-stage projects that could potentially move forward and start up during this period, S&P Global says.

Dwindling copper reserves and lower ore grades at some of the world’s largest mines also mean that a new deposit would just be replacing the existing output, thus not contributing to supply growth at all.

CRU estimates that over 200 copper mines are expected to run out of ore before 2035, with not enough new mines in the pipeline to take their place.

The solution, as simple as it sounds, is to have more copper projects that can be developed into producing mines. S&P Global has identified 14 probable and 26 possible projects in the copper pipeline, though the firm admits it’s unlikely that all will come to fruition.

Therefore, given the copper‘s increasing demand from the EV and the renewable energy revolution, more action from the mining industry is imperative to close the supply gap.

S&P Global estimates that new copper discoveries have fallen by 80% since 2010.

As of now, the global copper cupboard is quite bare. Remember, to even have a chance at net-zero emissions, at least 19Mt of additional metal must be delivered by 2040, the equivalent of one new Escondida mine (1Mt annual production) every year.

While such a feat is difficult to achieve, finding the right investments in projects leading to copper discoveries would help to close the supply gap.

According to CRU, the copper industry needs to spend upwards of $100 billion to erase what it estimates to be a 4.7Mt deficit by 2030.

Prospective Copper Projects

At AOTH, we are paying close attention to several companies that are holding onto highly prospective copper projects.

In Chile, notorious for its world-leading copper production, Pampa Metals Corp. (CSE: PM) (FSE: FIRA) is advancing as many as eight projects right in the heart of northern Chile’s proven copper belts.

The mid-Tertiary porphyry copper belt of northern Chile is currently host to three of the world’s top five copper mining districts: Collahuasi, Chuquicamata and Escondida. The adjacent Paleocene mineral belt also hosts a series of important porphyry copper deposits such as Cerro Colorado, Spence and Sierra Gorda.

Together, the company’s properties cover a total area of 59,000 hectares, making it one of only a few juniors with significant landholdings in the Atacama region that is mostly dominated by major miners.

Still, a large part of the region remains underexplored to this day as roughly half of northern Chile is covered by gravel that was deposited after the formation of the porphyries, which means more mineral deposits are likely concealed underneath.

On the other side of the Andean copper belt in Colombia, Max Resource Corp. (TSXV: MXR) (OTC: MXROF) (Frankfurt: M1D2) may be holding onto what could potentially be a massive sediment-hosted system comparable to some of the world’s best.

Max interprets the sediment-hosted stratabound copper-silver mineralization in the Cesar basin to be analogous to both the Central African Copper Belt, which contains nearly 50% of the copper known to exist in sediment-hosted deposits, and the Polish Kupferschiefer, Europe’s largest copper source.

For over a year, the company has not only been finding high-grade copper zones at its flagship CESAR property but expanding these areas to confirm this hypothesis. To date, five copper discoveries have been made along an 80 km belt, demonstrating its significant regional potential.

Max’s goal is to partner up with a major to begin drilling at CESAR. Interest so far has been strong, with multiple non-disclosure agreements in place to advance the project, including a collaboration agreement with an industry-leading copper producer.

Just this week, the company was granted three key mining concession contracts, for a total of four, for the URU copper zone, one of the discoveries from earlier this year along the 90 km long copper-silver belt.

Europe, too, has an abundance of porphyry copper deposits that can be traced back to the Paleozoic and Late Cretaceous to Miocene ages. The Baltic Shield, in particular, has often drawn comparisons to the Canadian Shield and cratons in South Africa, and is currently one of the most active mining areas on the continent.

Part of the Shield covers most of Scandinavia, where Norden Crown Metals Corp. (TSXV: NOCR) (OTC: NOCRF) (Frankfurt: 03E) is looking to bring back its gloried copper past.

The company recently began exploration drilling at its Burfjord project in northern Norway. The property is located in the Kåfjord copper belt, which is highly prospective for iron oxide-copper-gold (IOCG) and sediment-hosted copper mineral deposits.

Mineralization at Burfjord belongs to the same deposit clan of the northern Fennoscandia region, a key IOCG province globally. Copper mineralization was mined in the Burfjord area during the 19th Century, with over 30 historic mines and prospects developed along the flanks of a prominent 4 km x 6 km anticlinal structure.

The 2021 drill program is designed to continue testing copper-gold grades and continuity of new targets, historical mines and prospects at the Burfjord property.

In Finland, months of drilling success by Palladium One Mining (TSXV:PDM) (FRA:7N11) (OTC:NKORF) on its Läntinen Koillismaa (LK) PGE-Cu-Ni property have culminated in a much-increased resource endowment, further confirming the project’s potential to host a large bulk-tonnage deposit.

At the Haukiaho zone there are significant base metals, with two-thirds of the zone’s value in nickel and copper.

The latest resource estimate of 1.2 million ounces palladium equivalent (PdEq) grading 1.15 g/t, comprises only 3 km of strike length; 2 km of strike extent, immediately east of the Haukiaho resource estimate, contains two significant IP chargeability anomalies with sufficient historical drilling to potentially be upgraded to inferred resources with modest additional drilling.

The remaining 12 km of the Haukiaho trend has not been drill tested, though widely spaced historical drilling provides a high level of confidence for potential additional nickel-copper resources to be delineated, says Palladium One.

Palladium One also continues to outline a high-grade nickel-copper system at its Tyko Ni-Cu-PGE project in Ontario, where a second-phase drill program started in April and a recently announced expansion increases the size of the property by over a fifth.

All 13 holes drilled at the Smoke Lake target intersected magmatic sulfides, with widths ranging from 1 to 15 meters. A second-phase, 2,000m drill program started in April, following up on high-grade hits of 9.9% nickel equivalent (Ni­Eq) over 3.8m. A number of high-grade intersections were reported, all near surface.

Excited as Palladium One is about its nickel results, there are also notable copper and nickel occurrences, in particular the RJ and Tyko zones located about 18 km west of Smoke Lake. Drilling in 2015 returned several intercepts over 1% nickel + copper with a high of about 1.5% Ni + Cu.

The 7,000-hectare mafic-ultramafic Bulldozer intrusion, which has seen virtually no geological mapping nor exploration, also has significant historical copper showings.

Another place well-known for its copper minerals is British Columbia, Canada, home to big copper-gold and copper-molybdenum porphyries, such as Red Chris and Highland Valley. Here, GSP Resource Corp. (TSXV: GSPR) (FRA: 0YD) is currently looking to bring back the past-producing Alwin mine located 18 km from the town of Logan Lake.

The property lies in the vicinity of several large-scale mine operations. It is southwest of the New Afton and Ajax mines, and right next to Teck Resources’ Highland Valley copper operation.

A drilling campaign is set to begin soon at the Alwin project, aimed at testing the bulk tonnage copper potential of unmined mineralization within and surrounding the historical mine.

In the province of Quebec, Renforth Resources’ (CSE: RFR) (OTCQB: RFHRF) (FSE: 9RR) 260-square-kilometer Surimeau property hosts several target areas for gold and industrial metals (nickel, copper, zinc, cobalt, silver) located south of the Cadillac Break, a major regional gold structure.

Summer prospecting on the southwestern part of the Huston target returned 1.9% nickel, 1.3% copper, 1,170 parts per million (ppm) cobalt and 4 grams per tonne silver, from a grab sample taken from strongly foliated diorite.

The little-explored Huston area is located about 18 km northwest of the Victoria West target, where recent drilling, trenching and surface sampling reveal an area of interest that includes about 5 km of strike on the western end of a 20 km magnetic anomaly.

The company interprets this anomaly to be a nickel-bearing ultramafic sequence unit, which occurs alongside, and is intermingled with, VMS-style copper-zinc mineralization.

Renforth management says the spectacular result from Huston (grades above 1% nickel and copper are today considered high grade) is the first documented nickel occurrence in the area.

At its Malartic West property, Renforth plans to follow up channel and grab samples that revealed a copper and silver mineralized system known as the Beaupré copper discovery.

In the northern part of the property this system has been traced over 175 m and remains open. The 53 sqkm project is contiguous to Victoria West and adjacent to the western border of Canadian Malartic, Canada’s largest open-pit gold mine.

Conclusion

“The energy transition starts and ends with metals.” This is a direct quote and call-to-action from WoodMac’s latest energy outlook report. 

Julian Kettle, senior vice president of the firm’s metals and mining division, says “delivering the base metals to meet [net zero 2050] pathways strains project delivery beyond breaking point from people and plant to financing and permitting.”

All in all, base metals capex needs to quadruple to about $2 trillion to achieve an accelerated energy transition.

Copper, which WoodMac emphasizes “sits at the nexus of the energy transition”, stands out particularly. At least 20Mt of additional metal must be mined over the next two decades to place us on track to reach net zero by 2050.

A goal like that is not insurmountable, but it will take major investments in copper exploration, at a scale that has never before been attempted.

Any copper junior with a deposit of significant size and grades will have no problem attracting a major or mid-tier acquirer that can help finance a future copper mine and bring it to commercial production.

Richard (Rick) Mills
aheadoftheherd.com
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Author: Gail Mills

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Energy & Critical Metals

2 Years in Operation Alpha Lithium Secures Huge Backing From Uranium One at Tolillar Salar, Argentina

Pathway created to an implied project value of US$529 million and provides capital for commercial production facilityVANCOUVER, British Columbia, Nov….

Pathway created to an implied project value of US$529 million and provides capital for commercial production facility

VANCOUVER, British Columbia, Nov. 29, 2021 (GLOBE NEWSWIRE) — Alpha Lithium Corporation (TSX.V: ALLI) (OTC: APHLF) (Frankfurt: 2P62) (“Alpha” or the “Company”) is very pleased to announce a significant asset transaction with international, multi-billion-dollar, chemical processing conglomerate, Uranium One Group (“Uranium One”).

Uranium One’s wholly owned subsidiary, Uranium One Holding N.V. (“U1”), has agreed to invest US$30 million in exchange for a 15% ownership stake in Alpha’s 100% owned, 27,500-hectare Tolillar Salar in Argentina (“Tolillar”) and by doing so will earn an option to acquire another 35% of Tolillar for US$185 million (the “Option” or the “Earn-in Right”). If the Option is exercised, Alpha would retain a 50% interest in Tolillar, which would be fully funded up to the point of commercial production.

The transaction is limited only to Tolillar and when closed, is expected to leave Alpha with approximately $45 million of cash, free to focus expansion and developmental efforts on the Company’s nearby assets in the Salar del Hombre Muerto, one of the world’s most significant sources of lithium.

Alpha has formed a wholly owned subsidiary, Alpha One Lithium B.V. (“Alpha One”), which will be the sole owner of Alpha Lithium Argentina S.A., which in turn, will own only the Tolillar assets. On closing of the transaction, expected January 31, 2022 (the “Closing Date”), U1 will invest US$30 million into Alpha One and earn a non-operated 15% equity stake. Alpha will retain full control of Tolillar, management, and the board, and will be responsible for deploying the invested capital. The primary use of proceeds will be:

  • Additional developmental drilling and geophysical data gathering;
  • Construction of a permanent on-site camp to house up to 400 personnel;
  • Securing of natural gas, electrical energy, and water supply in sufficient quantities for commercial production;
  • Construction of a 5 Tonne per Annum (“tpa”) LCE pilot plant to provide proof of concept of the Tolillar’s flow sheet; and,
  • Completion of a Feasibility Study.

Upon completion of the Feasibility Study, U1 will have the option to acquire an additional 35% of Alpha One for US$185 million. Depending on the Net Present Value (“NPV”) of Tolillar, as determined by the Feasibility Study, the Company may receive a bonus payment (“Additional Consideration”) up to a maximum amount of US$75 million. The Additional Consideration would be payable directly to the Company, which would imply a total value of US$743 million for the Tolillar asset.

Should U1 exercise its Earn-in Right, the proceeds of the US$185 million equity injection are to be focused on the construction of an initial 10,000 tpa LCE commercial production facility. This initial production facility is intended to be the first module of several, allowing production to be expanded if and when it is desired. U1’s exercise of the Earn-in Right would provide them with the following:

  • Operatorship of the Tolillar project;
  • Control of the Board of Directors of Alpha One;
  • Marketing rights for 100% of the market-rate offtake from the 10,000 tpa production facility, whereby through its ownership percentage of Alpha One, Alpha would retain 50% of the economics of the offtake;

Brad Nichol, Alpha’s President and CEO commented, “This early-stage asset has attained a truly game-changing breakthrough for our shareholders. This sort of milestone is rarely achieved by a company with less than two years of operations and with a valuation at this level. Exercising the Earn-in Right implies a value at Tolillar of US$529 million, not including any Additional Consideration. Including the maximum Additional Consideration, the implied project value would be US$604 million, which is over CDN$750 million for the Tolillar asset alone. Uranium One has the ability to earn a 50% interest in Tolillar and Alpha will retain a 50% working interest in a salar that is funded up to the point of commercial production.” Nichol added, “Having gotten to know Mr. Shutov and his team over the past few months, I am truly pleased to be partnering with Uranium One, an internationally recognized, large-scale project developer. I have no doubt they will match our hunger for fast and full development of the Tolillar Salar, in addition to offering large project execution experience and significant downstream contacts in Europe.”

Andrey Shutov, President of Uranium One stated, “In alignment with our stated strategy of securing non-uranium mineral resources, Uranium One is very excited to work with the famous Alpha Lithium team to advance the Tolillar Project, located within the renowned Lithium Triangle, the world’s most prolific lithium region. This partnership agreement represents a scaled approach to expanding Uranium One’s lithium production, while allowing Uranium One and Alpha Lithium to collaborate on the development of Tolillar and implement efficient extraction technologies.”

The terms of the definitive agreements provide safeguards that prevent U1 from forcing a capital call or other dilutive event upon Alpha without recourse, in addition to typical rights of first refusal, tag-along and drag-along rights. Additionally, Alpha has an option to sell its equity stake in Alpha One if U1 were to issue a large capital call associated with a plant expansion in which Alpha may choose not to participate in. In this event, Alpha would receive fair market value plus a premium of 25% for its ownership in Alpha One and have a right of first offer to solicit higher offers.

Additionally, there are no restrictions that prevent a change of control within Alpha, should Alpha and its remaining non-Tolillar assets be subject to a corporate acquisition or similar event.

The Company has entered into definitive agreements with U1 in respect of the transactions set out herein, which are subject standard closing conditions including approval of the transactions contemplated herein by the TSX Venture Exchange.

It is expected that a finder’s fee equal to 4% of the initial US$30 million investment will be paid on the Closing Date to an arms-length third party and is to be settled in common shares of the Company at the most recent closing price of $1.23 per share. The shares will be subject to a hold period of four months plus one day from the date of issuance.

Miller Thomson LLP and Fox Williams LLP acted as legal counsel to the Company and Fort Capital Partners and Lionsgate West Capital acted as financial advisors to Alpha with respect to the transaction.

Michael Rosko, MS, PG, of Montgomery and Associates (M&A) of Santiago, Chile, is a registered geologist (CPG) in Arizona, California and Texas, a registered member of the Society for Mining, Metallurgy and Exploration (SME No. 4064687), and a qualified person as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects. Mr. Rosko has extensive experience in salar environments and has been a qualified person on many lithium brine projects. Mr. Rosko and M&A are completely independent of Alpha Lithium. Mr. Rosko has reviewed and approved the scientific and technical content of this news release.

ON BEHALF OF THE BOARD OF ALPHA LITHIUM CORPORATION

“Brad Nichol”

Brad Nichol
President, CEO and Director

For more information:
Alpha Lithium Investor Relations
Tel: +1 844 592 6337
[email protected]

About Uranium One

Uranium One is one of an international group of companies, all wholly owned subsidiaries of the Russian State Atomic Energy Corporation (“Rosatom”), as part of the management circuit of the TENEX group of companies of the Rosatom State Corporation. The company manages one of the world’s largest uranium mining holdings with a diversified portfolio of assets, and develops projects in Kazakhstan, Tanzania, Namibia and in South America. Rosatom recently assembled a team of lithium industry experts within Uranium One to focus on constructing one of the world’s largest lithium portfolios and to become a very significant provider of battery grade lithium to key international manufacturers.

About Alpha Lithium (TSX.V: ALLI) (OTC: APHLF) (Frankfurt: 2P62)

Alpha Lithium is a team of industry professionals and experienced stakeholders focused on the development of the Tolillar and Hombre Muerto Salars. In Tolillar, we have assembled 100% ownership of what may be one of Argentina’s last undeveloped lithium salars, encompassing 27,500 hectares (67,954 acres), neighboring multi-billion-dollar lithium players in the heart of the renowned “Lithium Triangle”. In Hombre Muerto, we continue to expand our 5,000+ hectare (12,570 acres) foothold in one of the world’s highest quality and longest producing lithium salars. Other companies in the area exploring for lithium brines or currently in production include Orocobre Limited, Galaxy Lithium, Livent Corporation, and POSCO in Salar del Hombre Muerto; Orocobre in Salar Olaroz; Eramine SudAmerica S.A. in Salar de Centenario; and Gangfeng and Lithium Americas in Salar de Cauchari.

Forward-Looking Statements

This news release contains forward-looking statements and other statements that are not historical facts. Forward-looking statements are often identified by terms such as “will”, “may”, “should”, “anticipate”, “expects” and similar expressions. All statements other than statements of historical fact, included in this news release are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company’s expectations include the results of further brine process testing and exploration and other risks detailed from time to time in the filings made by the Company with securities regulators. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and the Company will update or revise publicly any of the included forward-looking statements as expressly required by applicable law.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. No securities regulatory authority has reviewed nor accepts responsibility for the adequacy or accuracy of the content of this news release.

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