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Kaiser Watch April 21, 2023: Chile makes case for Lithium Mania 2.0


Posted: Apr 21, 2023JK: Kaiser Watch April 21, 2023 with Jim Goddard and John Kaiser
Published: Apr 21, 2023KRO: Kaiser Watch April 21, 2023: Chile makes the case for Lithium Mania 2.0
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

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Kaiser Watch April 21, 2023: Chile makes case for Lithium Mania 2.0
Jim (0:00:00): What does President Boric's plan for greater government involvement in Chile's lithium resources mean for Lithium Mania 2.0?

On April 21 Chile's president Gabriel Boric gave a televised speech in which he proposed a plan to give the government a dominant role in the future development of its lithium brine potential. This knocked 20% off the price of SQM and 10% off Albemarle which has the benefit of lithium supply from Australian hardrock mines. Boric's proposal requires a majority approval from Chile's congress in which Boric's party does not have a majority. The left wing extremists are calling for a full nationalization as Bolivia has done with its giant lithium salar which not surprisingly is going nowhere. Chile already controls the lithium resource and leases development rights, which is why Chile has been so slow ramping up output compared to Australia. Mexico nationalized its undeveloped lithium resources and these are now stuck in the mud. Boric's proposal is not as extreme as the lefties want. In the case of existing operations he proposes that Codelco, the national copper company, will negotiate a greater share of Chile's participation in existing contracts. Botswana is currently grinding De Beers for a greater government share of the diamond output. None of this affects existing supply, just lower profits for the producers like Albemarle and SQM.

The biggest threat is for the undeveloped salars whose mineral rights are now all owned by private parties. Boric proposes that Chile will have a majority stake in all such developments, but it is not clear if Chile will fund its share of CapEx while the private party operates the development and mine. Zimbabwe's autocrat Robert Mugabe introduced a rule that the state owned a majority carried interest with the private sector at 49% or less footing all costs and absorbing all risks. Needless to say Zimbabwe sat out the multi-decade global exploration and development boom after the collapse of the Soviet Union in 1991. Boric may have to avoid the Mugabe approach if he is to get congressional approval. Some juniors with Chilean brine projects have hailed this development which could unjam the process by which Chile grants production leases. Much will depend on how heavy a state share Boric secures. Chile's slowness in expanding lithium supply compared to Australia testifies to this problem which is hurting juniors.

Boric is hitting the right notes in his play to swing a majority to his vision. There is general opposition to the evaporation method because of the way it makes water disappear permanently in a worsening climate change trend that is not channeling atmospheric rivers at the Lithium Triangle and gradually diminishing the Andes snow-pack that sustains community water needs. The push will be for DLE processes which shorten the production timeline but increase the extraction cost. While Boric does not have a party majority, the way he has presented the plan could secure a majority vote because it would give Chile more effective control over lithium production, especially with regard to the goal of developing downstream processing capacity while putting the brakes on environmental opposition. All of this is good news for pegmatite hardrock miners and developers because we know that when the government has a majority stake in everything, especially if it turns out to be a carried interest, NOTHING WILL HAPPEN!

Bolivia already owns its giant lithium salar and so far its negotiations with the Chinese and Russians have not mobilized lithium supply. Argentina is letting a laissez-faire process develop its salars, which is why work on Argentine brine projects is humming right now, though Argentina can still adopt wonky policies like when Mendoza decided to ban cyanide from mineral extraction processes. Lithium Mania 2.0 benefits hugely if Boric gets his way in the manner his extreme left flank demands because end-users will embrace hardrock lithium supply in places like Australia and Canada where nationalization is unlikely. Lithium Mania 2.0 is premised on supplying from pegmatite in safe jurisdictions beyond Australia the second half of the 600% expansion of lithium supply the IEA projects is needed to meet 2030 transition energy policy goals. Hamstringing brine sourced lithium supply will boost the urgency of Lithium Mania 2.0. This development may also nudge Albemarle into getting serious about acquiring Liontown and its Kathleen Valley pegmatite project before somebody else does.

Albemarle Corp (ALB-N)






Unrated Spec Value
Salar de Atacama Chile - Other 9-Production Li
Liontown Resources Ltd (LTR-ASX)






Unrated Spec Value
Kathleen Valley Australia - Western Australia 8-Construction Li Ta

Comparison of Australia and Chile Supply Response
Jim (0:07:37): Why did the market react negatively to Brunswick's Anatacau West update?

Brunswick Exploration Inc provided an update on April 20 which confirmed that the Galaxy-Cyr system of northeast striking en echelon lithium enriched pegmatite dykes continues at least 300 metres onto the Anatacau West project at the eastern end of Allkem's Galaxy project. Brunswick drilled 18 holes for 3,712 m of which 17 intersected spodumene bearing pegmatite within 200 m of the surface. Two of the pegmatite dykes have a strike of 250 m. The dykes dip steeply to the west and were tested with 45° angled holes so the true width will be about 45% of reported intervals of which the best was 32.9 m or about 23 m true width. Most of the holes yielded 5-32.9 m intervals of 10%-15% visible spodumene which would be 71% of true width. Some holes had multiple pegmatite intervals as they passed through several of the NNE oriented dykes.

To quantify what Brunswick has outlined let's assume two sets of pegmatite dykes striking over 250 m and persisting to a vertical depth of 200. Let's assume the near vertical dip is correct and assume an average intersected thickness of 15 m which we adjust to a true width of 10 m. Using a 2.6 specific gravity we can ballpark a tonnage footprint of 250 m x 10 m x 200 m x 2.6 at 1.3 million tonne per dyke or 2.6 million tonnes. Assays are pending but because this is an extension of the Galaxy-Cyr system it is reasonable to expect grades of 1.3%-1.4% Li2O. This is not a huge amount, but the Anatacau West claim block has an east-west extent of 4-5 km, somewhat smaller than the 6 km east-west extent of Allkem's James Bay claim block. Brunswick has stated that it will not do any further drilling but will investigate the eastern untested 90% of the Anatacau West claim block. However, Google Earth shows that this area is bog covered with no apparent outcrop compared to the main Galaxy-Cyr deposit Allkem is developing. So is the eastern extent of Allkem's own claim block which is not included in the mining reserve and which it has been delineating this winter. I've mocked up the approximate claim locations on a Google Earth screenshot so that it is easier to see the big picture context. Allkem and Brunswick have both been very penurious about providing graphics that are not just closeups within their claim boundaries.

So what does Allkem already have relative to what Brunswick has started to show on its side of the claim boundary? On December 21, 2021 Allkem published a feasibility study for a 2 million tpa (5,500 tpd) operation that would mine a probable reserve of 37,207,000 tonnes of 1.3% Li2O over a 19 year mine life. Open pit mining would involve a 3.5:1 stripping ratio. Although the plant will be designed to produce a 6% Li2O spodumene concentrate Allkem settled on a flowsheet to produce a 5.6% concentrate for which it used a USD $1,001/t base case price that yielded an after-tax NPV of USD $823 million at 8% discount rate with an IRR of 35.2%. Given the CapEx of $286 million the feasibility study outcome handily cleared all development hurdles, more so given that in 2022 the price of spodumene concentrate exceeded $5,000/t.

Assuming Brunswick's assays are similar to the Allkem reserve, Brunswick has indicated potential that is less than 10% of what Allkem already has and currently plans to spend 19 years mining though obviously, if lithium demand does grow as projected by the IEA and prices remain somewhere between Allkem's base case price and the peak achieved in 2022, the James Bay facility's capacity will be expanded. What is this potentially worth to Allkem? What is it worth to Brunswick. To some degree the market yawned at the results because by itself what Brunswick has intersected is not worth anything. Perhaps the system continues another 4 km to the east under the swamp cover, but Brunswick has stated that chasing this potential is not a priority given all the other LCT style pegmatite prospects it has generated in Canada.

The real value of the Anatacau West drilling is that it shows Allkem its Galaxy-Cyr pegmatite system does continue sufficiently onto Brunswick's ground to make it worthwhile acquiring. But since Allkem might not need to mine Brunswick's resource, why might it not just wait and acquire the claims many years down the road when they come open or the juniors has been rolled back severely and is pivoting to chase a future ambulance like will be the case with most of the juniors staking or acquiring land in the James Bay region? Allkem might prefer not to wait because Brunswick's strategy gives it a serious shot at becoming a multi-billion dollar lithium company, and when that happens selling Anatacau West will not be a Brunswick priority. But if Allkem makes a multi-million dollar offer soon, this would be a non-dilutionary financing for Brunswick while it is just getting started with its drill to kill exploration strategy. With an initial $500,000 drilling expense investment, any multiple of that amount would be good news for Brunswick. Both sides have incentive to do a deal sooner than later on terms that are beneficial for both. But we do need to wait for assays which probably won't arrive until June.

This analysis may explain why the Anatacau West news did not make the stock price take off, but it does not explain why it went down that day. The simplest answer is what was missing from the Anatacau West news release, namely an update on what Brunswick's team has discovered in the Plex core shack where the core from Virginia's 2005-2010 drilling of the Orfee gold zone is stored. The drill logs indicate broad intervals of pegmatite which have minimal visual descriptions and were not assayed because at the time lithium was a $200 million annual market which was supplied by Greenbushes and the Chilean brines. All Canadian pegmatites that didn't look like Greenbushes were worthless and just a curiousity to document for the academic geological community.

Brunswick has had a team at the core shock relogging the core, shooting it with an XRF gun to see if any of the LCT pathfinders like rubidium are present, and looking for visual evidence of spodumene crystals as was done with the Anatacau West core. By now Brunswick will know if the Plex core represents evidence of a major Corvette style discovery made nearly two decades ago. If the answer is yes the company would be in a position to mobilize a drill program in June to properly delineate the pegmatite portion of the Orfee area. Given that management knew Anatacau West was nothing more than low hanging fruit it could perhaps convert into a $5 million cash windfall with a $500,000 drill program, it would make sense that it would bundle good news about Plex with this week's news release. The stock went down because there was no mention of the Plex core shack investigation and the market concluded that the potential for Plex to deliver a Corvette equivalent will require a summer field season of boots on the ground.

Brunswick is planning to mobilize a drill program for the Hearst project in Ontario this weekend where it plans a 1,000 m drill program. That is not much but the pegmatite outcrop that sports visual spodumene has a strike of only 65 m with the rest covered by overburden and bush. A program of this scale is enough to make or break the Hearst pegmatite as a discovery with sufficient scale to justify delineation drilling. If the drilling gets underway this weekend we will get a press release next week which hopefully includes an official update about the Plex core shack investigation so that we can get any further disappointment driven market reaction out of the way. When I talked with Brunswick's Killian Charles he was brimming with excitement about the upcoming Hanson Lake drill program. Brunswick will be on the property in early May and has lined up a drill program to test the outcropping pegmatite bodies which archival research indicates have visual spodumene but have never been systematically sampled, let alone drilled. At the moment Saskatchewan is perceived as a LCT pegmatite also-ran relative to Quebec, Ontario and Manitoba, but Brunswick's drilling could put Saskatchewan on everybody's Lithium Mania 2.0 radar. Goose hunting season began in the James Bay area on April 20 and will run until late May, which is also the nasty spring thaw period. Brunswick and all the serious juniors are now making plans to put boots on the ground on June 1 for what may be the most intensive prospecting season the James Bay region has ever experienced.

Brunswick Exploration Inc (BRW-V)





Favorite
Fair Spec Value
Anatacau Canada - Quebec 2-Target Drilling Li

Brunswick's Anatacau West Project

Mockup showing relative locations of the pegmatite trend on the claism of Allkem and Brunswick

Drill to Kill Hearst, Drill to Make Hanson
Jim (0:15:23): What did NioBay's initial results for Crevier reveal?

NioBay Metals Inc saw its stock price collapse back into the $0.10-$0.12 range when it released results for 3 holes from the Crevier niobium project in Quebec. The first hole was in the vicinity of the Main Zone and yielded similar niobium grades below 0.2% Nb2O5. The big disappointment was the results for hole #6 and partial results for #9, both drilled under Lac Touladi to the west of the Main Zone. The Main Zone is a late stage nepheline syenite dyke that has about 40 million tonnes of low grade niobium and tantalum that has been the focus of exploration since 1975. CEO JS David undertook a drill program in 2022 to see if there was more to this intrusive complex than the Main Zone dyke. Clearcut logging had exposed the area to the west, so the NioBay team headed west. The Main Zone's host rock is resistive so it outcrops along much of its linear strike.

Hole #6 was a surprise because it encountered a large body of carbonatite beneath Lac Touladi. Carbonatite is the host for the Niobec Mine to the southeast of Crevier, and because it is a softer rock tends to weather recessively unlike harder pegmatite and syenite bodies. The former develops a gouged out hollow lake or swamp fills, while the latter emerge as prominent bush and mosquito free ridges. The first is a horror for geologists to prospect, the latter a joy. The large volume of carbonatite rock intersected by #6 had never been observed at Crevier and this got JS David sufficiently excited to conduct a thin section study which confirmed that some of the samples had pyrochlore present, the key niobium mineral. NioBay drilled holes #8-10 under Lac Touladi, establishing a 500 million tonne plus carbonatite footprint.

Although NioBay was a bottom-fish junior whose missing piece was a social license for its James Bay niobium deposit near Moosonee, the tantalizing Lac Touladi intersections prompted me to make NioBay a Fair Spec Value rated 2023 Favorite. Had Lac Touladi been hiding a giant niobium enriched carbonatite while companies focused on the outcropping Main Zone with the mediocre niobium grade? In mid February NioBay got assays but they were all over the place, including some very high niobium values which made no sense in terms of sample visuals, so JS David concluded that something had gone wrong at the lab which was instructed to redo assays with new splits from the sample bags.

Well this time around the results came back as expected for hole #1, but for the Lac Touladi holes they were an all out bust as far as niobium is concerned. For hole #6 there were only a few 1 m intervals with niobium values and they were only 0.1% Nb2O5. The assays did yield rare earth values, which you might expect for a carbonatite, but they were between 0.1%-0.2%, well below the commercial threshold. Only a third of hole #9 was reported. Since it is reasonable to assume that the best looking holes were prioritized for assaying, there isn't much reason to hold one's breath for holes #8 and 10, also drilled under Lac Touladi. This is a huge disappointment given how enthusiastic the CEO was about Crevier which sucked up over $2 million in expenses in 2022. The press release was short on geological context but mumbled about tantalum, which was the reason NioBay's predecessor thought it could make a go of Crevier more than a decade ago.

The reality of tantalum is that this critical ingredient for capacitors in cell phones has an annual supply of 2,000 tonnes worth less than $500 million and 68% of which comes from artisanal workings in conflict mineral places like Congo, Rwanda, Nigeria and Burundi, while 21.4% comes from hardrock mines in Brazil and Australia. The rest comes from other environmental shit-holes or geopolitical nightmare countries. But that doesn't matter because when anti-mining lobbyists descend upon the poor town of Moosonee in the James Bay Lowlands to coordinate MCFN opposition to development of the James Bay niobium deposit with the help of their cell phones, they couldn't give a damn about the misery created to make available the tantalum inputs. Why not? Because they probably realize that when all these LCT enriched pegmatites come on stream to feed the EV deployment goals of the energy transition, so much by-product tantalum will result that the conflict zone supply will vanish because it will no longer be profitable for the warlords to feed the cell phone market. Only NioBay's CEO doesn't seem to understand that tantalum is a non-starter.

The odd thing about NioBay was that since mid February the CEO has been buying stock in the open market all the way up to $0.20. Even after the stock crapped out he was still buying stock. He is either a genius or a fool and the market has concluded the latter. Where to from here? The CEO had said he wanted to drill more holes under Lac Touladi in the summer and even did a benefits agreement with the local First Nations group, but with only $4.5 million working capital left I suspect NioBay's board may not approve further work at Crevier in light of the dismal results. There may be high grade zones within the Lac Toulad carbonatite that detailed drilling may coax into view, but for now the future of NioBay hinges on the outcome of the MCFN General Election in Moosonee which will establish the chief and 12 tribal councillors for the next 4 years. The James Bay niobium project is ready to go to the PFS stage, but because Chief Marven Cheechoo let an informal survey be done which resulted in more participants saying no than yes to advancing James Bay, NioBay suspended work in early 2022. The Cree people in the James Bay Lowlands area of Ontario appear to be different from the Cree in Quebec who appear eager to benefit from Quebec's James Bay lithium boom. Unless JS David can reveal a story about Crevier's carbonatite potential that s not eveident in the disclosures so far, NioBay will be hard for investors to get excited about.

NioBay Metals Inc (NBY-V)





Favorite
Fair Spec Value
Crevier Canada - Quebec 7-Permitting & Feasibility Ta Nb

Tantalum Supply Evolution Chart

Tanatum Supply in 2022
Jim (0:22:14): What caused Tower's stock price to plunge two-thirds this week?

The market reacted very negatively to news from Tower Resources Ltd that hole #42 had completely missed the orogenic gold Thunder Zone. The market had already cooled after they published the results for hole #41 on April 5, and dropped into the $0.30-$0.35 range after I posted the April 6 Kaiser Watch episode in which I highlighted that the original story we heard on March 1 was no longer so straightforward. What I provided was a geological context to make sense of what we might expect from the steeper hole #42 drilled beneath hole #41 whose gold intervals were somewhat less than what the market was expecting. The initial market excitement was based on Stu Averill's enthusiasm about the sulphide content of the holes into the Thunder Zone, the hitherto unexplained Central gold-in-till train, and the presence of a shear structure that would serve as a good sponge for soaking gold from orogenic fluid flow. A key part of the story was a 130 m interval of promising mineralization and the observation that the system was blossoming at depth, that the Thunder Zone appeared sub-vertical, and that hole #42 would deliver a juicy gold interval.

On April 20 Tower released the results for hole #42 which had no meaningful gold interval. The press release included a new section which explained the absence of an orogenic gold interval through a reinterpretation of the Thunder Zone from being sub-vertical to having a 70° eastward dip. This meant that the 480 m 65° angled hole #42 had no chance of reaching the Thunder Zone. Whether this new interpretation is correct or not will have to be tested with holes drilled on the eastern side of the Thunder Zone in a westward direction. But the consequence of this new interpretation which the new section provided by Tower makes clear is that the Thunder Zone is not very wide. What hole #42 did intersect where we expected the Thunder Zone to be present as a series of short low grade copper-molybdenum-gold intervals which represented mineralization from the older 210 million year old porphyry system. There was lots of sulphide, but it was in the form of pyrite and unrelated to the sulphides associated with the orogenic system that exploited structures 60 million years after the porphyry system developed. Averill has come to the conclusion that when copper sulphides are present the drill is not intersecting the younger orogenic gold system. The market punished the stock because the Thunder Zone gold discovery had shrunk into a long shot requiring further drilling, in effect a repeat of last year's Lightning experience.

What the market has overlooked is that hole #42 provided further evidence that Tower may be on the eastern edge of a major new copper-gold system. The surprise in hole #41 was the the 36 m interval of 0.19% copper and 0.34 g/t gold with a trace of molybdenum which Tower calls the Rainbow Zone. It begins at a vertical depth of about 50 m, and much to Averill's surprise was covered by a thin veneer of the much younger Chilcotin basalt lava which is barren and consequently obscures the older rocks with porphyry or orogenic potential. Hole #42 encountered the Rainbow Zone at the same vertical depth and yielded 72.4 m of 0.27% copper and 0.4 g/t gold, both higher grade than the #41 interval. Even the molybdenum grade increased. When I talked to Stu Averill in March he was generally dismissive about the older copper porphyry potential, but when the #41 results came out with the Rainbow surprise and we discussed it, his attitude had changed.

Five decades of porphyry exploration has focused on the Durand Stock and its northern flank. The western flank has been ignored because soil sampling yielded no geochemical joy and neither did sparse outcrops. The area was mapped as volcanics, but the latest map from Tower shows basalt as the cover rock. The Rainbow Zone may be the edge of a copper-gold porphyry system within open-pittable reach of the surface that has eluded past discovery because it is blind. The amount of sulphide with anomalous copper and gold in the vicinity of the Durand stock indicates a powerful system. Perhaps an Afton style heart with similar scale is present on the western flank of the Durand Stock. The scale of the orogenic Thunder Zone story has shrunk, but its pursuit may have revealed a substantially bigger scale emerging copper-gold discovery in a very good location for future development. Why the harsh market reaction? Speculators do not like it when a story on which they had pinned high hopes vanishes. But their violent departure creates an opportunity for bottom-fishers. Joe Dhami and Stu Averill have their work cut out rebuilding the support of a retail audience that orbits inside social media forums. Ironically, the majors, who in 2020 told Joe Dhami to gather up some additional geochemical data if Tower wants them to seriously consider a Rabbit North farm-in deal, are probably now knocking on Tower's door. And while Stu Averill is probably right now dodging flying tomatoes which were originally aimed at John Kaiser, the decision to bring him and his till sampling method to bear at Rabbit North may have revealed an extraordinary upside potential that Stu did not anticipate, but because he is the type of geologist who follows the data, he will suck up the Thunder Zone fizzle and embrace the Rainbow Zone. Enough of thunder and lightning; bring on the rainbow and damn the tomatoes!

Tower Resources Ltd (TWR-V)






Bottom-Fish Spec Value
Rabbit North Canada - British Columbia 3-Discovery Delineation Au Cu

Section for Holes #41 & #42 at Rabbit North

Illustrating the part of Rabbit North with little exploration that may hst a major Cu-Au deposit
Disclosure: JK owns shares of Brunswick and NioBay; Brunswick and NioBay are Fair Spec Value rated Favorites; Tower is Bottom-Fish Spec Value rated
 
 

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