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. |
