Patriot Battery Metals was halted around noon west coast time January 18, 2023 pending a news release. Since the company at $8 with 132 million fully diluted already has a $1 billion plus valuation and has drilled 100 holes into the CV5 pegmatite of its Corvette project in Quebec's James Bay region, I wasn't expecting assay results. I also wasn't expecting a bought deal financing because the company had raised $20 million at $13 in September and another $4 million with its ASX listing IPO. The next important milestone is a resource estimate for the CV5 pegmatite which sets the stage for economic studies but that won't happen until Q2 at the earliest.
A more plausible reason for a mid market halt in the current circumstances is that the company had received a takeover bid or perhaps a major financing offer at a premium to market from a strategic investor. For example, Rio Tinto has made no secret about being interested in the future of lithium supply, and the James Bay region is shaping up as a world class region. I don't think Patriot would consider a farmout offer as happened in the early days of the 1990s diamond boom in the Northwest Territories because the capital markets for major discovery plays are so much more evolved these days.
A negative reason for such a halt would be the arrival of a lawsuit challenging Patriot's title to the Corvette project. There is an adage that no world class discovery is real until a lawsuit has been filed. Another reason could be that a First Nations group has secured an injunction against further exploration work, something that is a risk factor in Canada, though not so much in Quebec where First Nations groups are much more involved in commercial activity than in northern Ontario.
As it turns out, none of these explanations apply because the news was that the best hole yet had been received for the Corvette project. The CV5 cluster which includes CV1 and CV6 has been traced over a 2.2 km strike length. Over 100 hundred holes have been drilled into the CV5 cluster, but on January 18 Patriot reported results for holes 67-83 which included several holes at the northeastern end of what technically is the CV1 pegmatite of which #83 yielded 156.9 m of 2.12% Li2O, including a sub-interval of 25 m of 5.04%. At $30/lb lithium carbonate that 5% interval has a rock value of $8,178 per tonne, while the broader interval at 2% has a rock value of $3,271 per tonne. If you want to use $10/lb as a long term price, dividing those rock values by 3 still leaves impressive figures.
The latest results represent a substantial thickening and enrichment of the spodumene zone at the northeast end. Between hole 17 and 83 there is a 250 m segment of high grade, wide pegmatite. A lake which tracks the linear trend of the CV5 cluster obscures at least another 2 km of potential strike extension at the end of which is the CV4 outcrop on the north shore that has not been drilled. A 100 m stepout in hole 93 is described as containing 52.2 m of spodumene.
If we do a back of the napkin tonnage footprint calculation where we assume 2 km of 50 m width and 200 m downdip extension with a 2.6 specific gravity, we end up with 52 million tonnes of open-pittable rock generally grading at least 1% Li2O which is $1,636 rock. With the strike doubling potential the market can dream of a 50-100 million tonne target. By Q3 of 2023 we could have a resource estimate which defines real numbers, an example of how quickly a world class near surface pegmatite can be delineated. I'm not sure the stock needed to be halted with an hour of trading left, but nothing grabs the market's attention better than being halted for an intersection that is the best yet and not an infill hole. |
