The James Bay Lithium Index is still weakening as the price of lithium carbonate approaches $10/lb on the downside. As of September 26, 2023 it was down 14.1% from the August 1, 2023 initialization date. The optics of a declining metal price never makes the market happy, but as I argued in the MIF overview portion of this KW Episode the long term price range will be $5-$10/lb within which pegmatite deposits grading 1% Li2O or better still have rock values that allow profitable underground mining and where open pit mining is possible that brings tears of envy to gold explorer. There is also the index downward bias created by my decision to include all companies which have land in the James Bay region on the premise that the novelty of the pegmatite hunt makes it possible for even the dumbest, most horrible lifestyle juniors to get lucky so long as they mobilize a prospecting program run by a competent exploration team. JBLI is now colliding with the reality that the loss of three months of critical boots on the ground prospecting will limit the number of juniors that have drill ready targets for Q1 of 2024. This causes the penny dreadful members who were added to the index with the same value weighting as all the rest to register big percentage drops. But there is some discovery joy trickling through despite the curtailed season that will focus new money coming into the James Bay Great Canadian Area Play. The value of the JBLI is that it creates a monitoring framework and will reveal a rising tide when that begins to happen, possibly late 2023 but definitely in 2024.
The most important development during the past week was news from Midland Exploration Ltd that Rio Tinto has discovered spodumene bearing pegmatite outcrop on the Galinee project optioned 70% from Midland. In KW Episode September 15, 2023 I made the case that Midland is so far the best way to bet on Rio Tinto's exploration efforts in the James Bay region and is also the best way for nervous speculators to have exposure to James Bay lithium discovery upside without the downside risk. This is due to the fact that Midland is a Quebec focused prospect-generator-farmout junior with numerous projects, some farmed out to majors, in other parts of Quebec such as the Abitibi and northern Quebec. In addition not all its James Bay projects have been farmed out to Brunswick or Rio Tinto and the junior is now reviewing them for their LCT-type pegmatite potential. Gino Roger may have let a good number of Midland's James Bay boats slip out to sea, but he is taking a hard look at those still moored at the dock. Needless to say, because Midland's net 30% stake in Galinee already implies a valuation of about $161 million, the market did not reward the stock with upside. That will happen when drilling reveals the scale and geometry of the Galinee discovery, and it is noteworthy that operator Rio Tinto is planning a 2023 fall drilling program.
Midland only revealed that outcropping spodumene bearing pegmatite had been identified along several hundred metres, with no indication of the lateral distribution of these outcrops. In contrast consider that Brunswick has now identified pegmatite outcrops within a corridor of 2,700 m by 850 m, and a solo outcrop 6 km to the northeast from the southwestern end of the outcrop corridor where a 3 km boulder train begins. Brunswick started a 5,000 m drill program on September 7 and will be in a position to tell us by mid October to what extent the Mirage outcrops hang together beneath the surface.
So, given the so far relatively puny outcrop area at Galinee, why is Rio Tinto already planning a drill program? The Galinee area is emerging as a focal district within James Bay created by the Adina discovery in late 2022 by Winsome Resources Ltd. The Adina LCT-type pegmatites are associated with the contact zone between the easterly trending amphibolite Trieste Formation and felsic intrusives to the north. Winsome has now traced LCT-type pegmatite along a 3.1 km trend with the best drill results at the Jamar showing whose pegmatite body dips to the southeast onto the Galinee 50:50 JV between Azimut Exploration Inc and SOQUEM.
Azimut recently reported that its boots on the ground had found spodumene bearing boulders on its side of the boundary from Winsome's Jamar Zone, but so far failed to find any outcrop on the rest of the property. The ice direction indicates that these boulders came from the Jamar Zone and Azimut's hope is that there is a meaningful downdip extension onto its property and possibly blind parallel bodies as it has hypothesized in a diagram. However, the combination of the lake bottom sediment lithium map and geology on Azimut's Galinee project suggests that if anything outcropping is present it will be in the southern part of the property where a narrower amphibolite trend is present.
The forest fire access closure has been particularly harmful for Winsome which planned a major discovery delineation drilling program this summer to stitch together the pegmatite zones at Adina, but this program was only recently able to get underway. Winsome's Adina project is carrying an implied value of AUD $223 million, another example of an emerging discovery in the James Bay region that could deliver 5-10 fold gains from current levels if drilling can deliver a deposit resembling PMET's CV5. Rio Tinto is being aggressive about Midland's Galinee because it sits between Winsome's Adina and the Trieste project of Loyal Lithium Inc which has discovered LCT-type pegmatite on the southern flank of the amphibolite trend. Loyal has an option to acquire most of its Trieste project from Osisko Development Corp whose Sean Roosen is apparently planning to spin out the remaining James Bay holdings into a new vehicle. Comet Lithium Corp's Liberty property to the north has a small segment of this trend between Adina and Galinee, but this junior has so far demonstrated itself as management challeneged.
I've patched together several maps to try and make it easier to understand who has what land where; the various companies tend not to outline and identify their neighbors unless they have a discovery worth pointing out, so we are stuck with a fragmented perspective of relative land positions. The reason I think Rio Tinto is being aggressive about Galinee is that it sees the potential to consolidate this district which doesn't really have a name so I will call it the Trieste Trend.
Not every junior is reporting spodumene-bearing pegmatite outcrop news. Champion Electric Metals Inc has assembled a large 53,000 ha land package it calls Champion Electric that parallels to the north the amphibolite trend of PMET's Corvette trend. This belt of rocks has seen less historical exploration from the likes of Virginia so will lack archival references to pegmatites observed while exploring for precious and base metal deposits. But because there is no genetic relationship between LCT-type pegmatite emplacement and the formation of precious and base metal deposits, Champion's land position has the potential to deliver first order surprises when prospected on a detailed grid.
During 2022 Champion completed a LIDAR survey over those portions mapped as "mafic volcanic rocks" (hard to tell what Champion means because its map assigns the same color to the amphibolite rocks of the Corvette Trend to the south while the dark green color it calls amphibolite are patches to the north of its land package). LIDAR surveys reveal topographical variation which is useful for homing in on ridges that may represent pegmatites whose harder rock than the country rock causes them to resist weathering and grinding away by ice sheets to a higher degree than the surrounding rock. (Geologists are now scratching their heads why the CV5 deposit of PMET recessively tracks a long lake.) Andre Gaumond during the Virginia exploration era famously forbade his field crews from sampling light colored bush and mosquito free ridges because those were worthless pegmatites with zero precious and base metal potential.
Champion announced on August 3 that it had sent boots onto the ground to prospect the areas of the 2022 LIDAR survey. The next update came on September 19 when CEO John Buick revealed that Champion had completed a LIDAR survey on the rest of the property and would soon be sending prospecting crews into the field. Given that a 7 week prospecting window had just passed, it was shocking not to hear an update about what was or wasn't found. Given the company spent $324,000 on investor relations during H1 of 2023, you would think that if there was anything positive to report, Champion would have done so. The glum conclusion is that the first boots on the ground pass turned up nothing interesting and the race is now on to prospect the rest of the property before snow blankets the region. Champion should still have about $5 million working capital left, so if it can generate targets worth drilling in Q1 of 2024 it will not have to go to the market. The main obstacle to upside is that Champion has an overhang of 54,536,266 warrants exercisable at $0.10-$0.25 which boost its fully diluted to 323 million shares and which implies a lofty valuation of $45 million for a project which so far has no evidence of LCT-type pegmatites. |
