As lithium product prices keep rising, and recently reached not-too-long-ago unimaginable heights of US$34,000/t lithium carbonate at battery grade, Argentina Lithium and Energy Corp. (LIT:TSX; PNXLF:OTC; OAY3:FSE), who hasn’t been sitting on their hands, raised almost C$6M in an oversubscribed financing last month, and announced further acquisitions of lithium projects in Argentina, in the heart of the Lithium Triangle, hotspot of brine deposits and operations in Latin America.
The company already owns four early-stage lithium projects in Argentina, one of them called Rincon West.
This is of interest, as Rincon Mining, a private company constructing an adjacent brine project at the same salar, and owned by Sentient Equity Partners, was recently acquired for C$825M by Rio Tinto.
Salar de Rincon; Salta province, Argentina
It was good to see Argentina Lithium raising decent cash, utilizing current positive lithium sentiment, as it announced the non-brokered private placement for up to C$4.95M @ C$0.45 with a full C$0.70 3 year warrant on November 1, 2021. A first tranche of C$2.75M was closed on November 10, 2021; a second tranche was closed on November 26, 2021 for another C$2.25M; and a third and last tranche was closed on December 10, 2021 for another C$970k, so gross proceeds came in at C$5,97M.
Total finder’s fees for the three tranches of C$253.8k and 564k warrants were paid to arm’s length parties of the company after closing.
The C$0.45 PP price is a decent one, as the share price side-ranged at C$0.48-0.55 and has been side-ranging around this price since the last month, after enjoying a huge spike up on October 18 and 19 on massive volumes, going as high as C$0.96:
Share price 1 year timeframe (Source: tmxmoney.com)
Although lithium product prices keep printing all-time highs on a weekly basis, which in my view could use a healthy correction anytime now, share prices of many stocks were under a bit of pressure as the Fed announced a more hawkish policy regarding interest rates than expected by the markets, which don’t particularly like surprises. As most lithium stocks enjoyed substantial runs the last months, a consolidation was inevitable, although Argentina Lithium seems to weather the storm nicely around the 40c levels.
Back to the deal now. Argentina Lithium signed option agreements to acquire 3 properties which are all part of the Pocitos Basin, one of the largest salars of the Lithium Triangle. The three properties are called El Pidio GIII, Aquamarga 11 and 16, and Ramos. The terms are as follows, according to the January 10, 2022 news release.
1) Argentina Lithium can acquire a 100% interest in the 1,602 hectare “El Pidio GIII” property in the southeast of the Pocitos Basin pursuant to an option agreement dated January 3, 2022. The option terms include US$165,000 in cash payments over three years, including a mandatory total of US$30,000 over the first 18 months. In addition, 25,000 shares of the Company are to be issued to the vendor on signing, with additional share issuances valued at CAD$70,000 over the subsequent three years, including mandatory issuances valued at CAD$25,000 over the first 18 months.
2) Argentina Lithium can acquire a 100% interest in the Aguamarga 11 and Aguamarga 16 properties, totaling 7000 hectares in the east flank of the Pocitos Basin pursuant to an option agreement dated January 3, 2022. The option terms include US$1,890,000 in cash payments over three years, including a mandatory total of US$105,000 over the first 12 months. In addition, 168,000 shares of the Company are to be issued to the vendor on signing, with additional share issuances valued at CAD$651,000 over the subsequent three years, including a mandatory issuance valued at CAD$126,000 after 12 months.
3) The third agreement dated January 6, 2022, gives Argentina Lithium the option to earn a 100% interest in five properties totaling approximately 1,762 hectares at the Pocitos Salar (“the Ramos Properties” see Figure 1). The option terms include mandatory payments totalling US$150,000 in the first year, followed by US$550,000 2 years after signing.
This would cost the company US$285k in mandatory payments for the first year. Argentina Lithium already owned 15,857ha of properties on the west side of the Pocitos Salar, and acquired 10,364ha of new properties. Infrastructure around the salar is sufficient, with a Provincial Route at 17km, local roads nearby and a rail line crossing the Pocitos West property.
The new properties have seen little exploration and no drilling, and exploration plans will be planned in the next few weeks. The newly acquired properties and the existing property (ALE) can be seen below (ALE in green, the others in various other colors):
According to CEO Cacos, the new properties have/haven’t been permitted for exploration yet, so this will be priority work for management. Comparing this to the permitting timelines of other projects, Cacos expects to have the new properties at Pocitos permitted around Q2, 2022. As a reminder, Rincon West and Pocitos were acquired in October 2021.
The terms for the two properties, with a combined footprint of 18,227 hectares, weren’t cheap, as the company already issued 750,000 shares to the local vendor on signing plus C$500,000 worth of shares over a 12-month period; and cash payments totaling US$4,200,000 over 36 months, but limited to only US$1,050,000 in the first 18 months, US$800,000 of which are firm commitments over the first year. Therefore, total commitments for the first year for Rincon West and Pocitos increase to US1.085M.
Argentina Lithium is planning on completing 40 line kilometers at Rincon West of deep seeing Transient Electromagnetics (TEM) soundings on the Rincon West property, followed by 5 diamond drill holes after targeting.
The neighboring project of Argosy has an average grade of 321mg/L Li, and the grade of the part of the salar de Rincon from also neighboring and recently sold Rincon Mining is 397Mg/L Li, which means both are already economic at lithium carbonate prices over US$10,000/t, so I expect the potentially encountered grades at Rincon West to be over 300mg/L Li here.
The project is already permitted for exploration. Exploration plans for Pocitos involve 50 line kilometers of TEM soundings in H2, 2022, and as such is a second priority target for Argentina Lithium. According to CEO Cacos, these exploration plans will be adjusted after the new acquisition, and the definitive plans will be announced over the coming weeks.
Another first priority target is the Antofalla project. The current exploration plan involves 35 line kilometers of TEM soundings, followed by an estimated 3 diamond drill holes. The exploration permitting process is almost finalized, as the company expects to receive them around Q2, 2022.
Finally, the company is planning on doing 50 line kilometers of TEM soundings on their Incahuasi Project in the second half of next year, making this a second priority target like Pocitos.
It seems Argentina Lithium has acquired all the lithium properties they can possibly need, and they are ready to start exploration with the first TEM soundings at the Rincon West project in 3 to 4 weeks from now. Results are expected by the end of February.
Argentina Lithium expanded their portfolio of lithium projects further, by acquiring more Pocitos properties. After raising C$5.97M, the company is able to come up with the annual payments, and have sufficient money for exploration programs on all projects, with the focus on Rincon West and Antofalla.
The company starts out with TEM soundings at Rincon West for target definition, and hopes to start drilling there at the end of the first quarter. Any results over 300Mg/L Li are comparable to the 2 neighboring projects, so when Argentina Lithium manages to come up with such grades at solid lengths (50-100m), a fifth discovery might be in the cards for the Grosso Group, and with strong lithium sentiment and COVID-19 and the Fed not interfering too much, investors could be looking at multiples from current levels.
I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter on www.criticalinvestor.eu in order to get an email notice of my new articles soon after they are published.
The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high-quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value.
Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.
The author is not a registered investment advisor, and currently has a position in these stocks: Argentina Lithium and Energy Corp.
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