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Cleantech Lithium PLC

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The plan is to be the greenest lithium supplier to the EV market say Cleantech Lithium

 

“…There’s no doubt CTL is an exciting prospect seemingly in the right place at the right time, increasingly well positioned to take advantage of the irresistible economic forces driving demand for a key battery metal component….”

 

One of this year’s rare popular small cap trades CleanTech Lithium (AIM:CTL) has recorded steady progress since going public in March, developing a set of prospective mines on northern Chile’s spectacular salt flats that promise to help meet the urgent global demand for lithium, the ‘white gold’ essential for battery metals.

CTL is aiming to slash production costs and minimise the company’s environmental footprint by using Direct Lithium Extraction (DLE), an emerging technology through which the mineral is extracted direct from the brine in which it is habitually found, thereby overcoming the aquifer depletion issues that plague traditional lithium operations.

Founded five years ago, and led by Chief Executive Officer and co-founder Aldo Boitano, a veteran of Chile’s solar industry, and Non-Executive Chairman Steve Kesler, CEO of European Lithium, CTL has three prospects with collective resources of more than two million tonnes lithium carbonate equivalent (LCE).

Lagunda Verde

 

The company is aiming to bring the Laguna Verde Project, which encompasses a hypersaline lake with a large sub-surface, into production by 2025. A four-well drilling programme completed in the spring facilitated the autumn publication of an upgraded JORC resource estimate of 1.51 million tonnes of LCE at a grade of 206mg/L lithium, with the majority of the resource upgraded from Inferred to the higher confidence categories of Measured and Indicated. The deepest hole explored recorded lithium grades up to 409mg/L, indicating drilling to depth offers further upside. The estimate provided the basis for the commissioning of a Pre-feasibility Study (PFS) to evaluate a base case production rate of 20,000 tonnes per annum of battery grade lithium, sustained through 30 years of operation.

CTL is confident further sampling from the drilling programme will allow a further increase in the Project’s resource size and grade, with an updated JORC estimate is ‘expected in early Q1 2023’. Two new resource wells are being planned, paving the way for a fresh update in Q2 2023. A Scoping Study is also being prepared to further define the Project’s potential.

Francisco Basin

 

Drilling also got underway earlier this year at CTL’s second flagship project, at Francisco Basin, a 110km2 licence 100m to the south of Laguna Verde. Exploration of the first in the four well programme encountered a thick brine aquifer rising from relatively shallow depths, analysis of which facilitated the publication of a maiden JORC Inferred resource estimate of 0.53 million tonnes LCE at a grade of 305mg/L. A further three wells are currently being drilled, opening the way for a further expansion and upgrade of the JORC estimate, ‘expected in Q2 2023’. A Scoping Study is being prepared for an expected base case production rate of 20,000 tonnes of LCE per annum.

Llamara

 

CTL also has a greenfield prospect at Llamara, some 600km to the south of the two primary projects, comprising 119 exploration licences covering a total area of more than 344km2 within a large basin. Two historical geophysics lines indicate an extensive deep brine aquifer in the project area with a thickness of several hundred metres. Highly elevated lithium concentrations have been recorded in surface salt crusts of up to 3,100ppm lithium, and within hectorite clay deposits of up to 2,400ppm lithium, supporting the exploration potential of the sub-surface brine aquifer. A limited initial work programme is planned involving surface sampling, a geophysics programme and an initial exploration drill hole, with fieldwork to be concentrated in the winter months.

Direct Lithium Extraction

 

CTL makes much play of the company’s commitment to DLE, ‘a proven technology, with established producing projects in China and South America’. The technique offers the prospect of higher recoveries and purities than other forms of lithium extraction, and promises to be significantly greener. Traditional brine mining process requires the diversion of water and can have a long-term environmental impact on the surrounding area and local communities. With DLE spent brine is re-injected into the basin aquifers, minimising the environmental impact of operations.

Work so far at Laguna Verde has indicated a geothermal heat source with brine temperatures of 20C to 30C close to the surface, which the company says is ‘the optimal temperature range for the DLE adsorption process’. Laboratory DLE processes have produced a sample kilogram of battery grade lithium from the Project. CTL has entered a Memorandum of Understanding with SunResin, a global leader in commercial scale DLE plants, which includes the operational commencement of a pilot plant early next year designed to provide sufficient volumes of product for testing by potential customers, and foreshadow the scope of a full-scale commercial lithium production facility. Bulk samples of brine collected from the sub-surface aquifers of Laguna Verde and Francisco Basin are being processed at SunResin’s facilities in China. CTL’s green credentials are further augmented by the proximity of its projects to Chile’s national grid, one of the greenest in the world, drawing on the country’s access to solar, wind, geothermal and hydroelectric power.

Fundraising

 

CTL secured funds for its near term ambitions through an oversubscribed October placing that raised £12.3m at a price of 47p. The funds will allow the company to progress its evaluation programmes across all three projects, including additional drilling activities at Llamara contingent on the success of the scheduled exploration well. The raise also secured funding for environmental impact assessments at Laguna Verde and Francisco Basin. The company had raised £5.6m on joining AIM earlier this year. CTL’s half-year report stated a total capital spend of £1.9m on drilling programmes at the two flagship projects, and cash in hand going into H2 of £4.67m. The company had no loans outstanding.

The lithium supply crunch

 

As CTL is not slow to point out, the structural shift towards electric vehicles has generated a severe lithium supply crunch. The company quotes estimates from Benchmark Minerals forecasting an increase in lithium demand from 350,000 tonnes in 2020 to 2.5 million tonnes in 2030 and more than seven million tonnes in 2040, with a positive long-term price trend estimate of $15,000/tonne for battery-grade Lithium Carbonate and Lithium Hydroxide through 2025 to 2040. Europe is expected to be the key growth market for lithium, with demand forecast to increase more than 20 times over the course of the current decade. The continent is largely reliant on China for its lithium, which processes 60pc of the world’s supply. Lithium prices have hit record highs of $70,000 a tonne this year, eight times their level at the start of 2021. CTL’s commitment to low carbon lithium may give it a significant competitive advantage in a European market regulated by strict EU limits on permitted CO2 production in the Li-ion battery supply chain.

Chile is one of three countries, along with Argentina and Bolivia, forming South America’s ‘lithium triangle’, which produces about a third of the world’s lithium. It hasn’t been straightforward for the three nations to unlock the full potential of their considerable reserves, in part due to the ambitions of socialist governments to take a big share of the profits generated by private mining companies. The issue has been particularly acute in Bolivia, which has the world’s largest lithium salt flat and the biggest proven reserves. Proposals by Chile’s new left-wing administration to create a state lithium company have raised similar concerns, acknowledged by CTL. But a proposed revamp of the country’s constitution, which might have led to a tougher regulatory environment for overseas miners, and even nationalisation, was decisively rejected by voters. Following the referendum the environmentally conscious government took a new approach, publishing a new pro-investment strategy offering benefits such as fast track permitting to private investors – like CTL – committed to low carbon lithium production.

Outlook

 

There’s no doubt CTL is an exciting prospect seemingly in the right place at the right time, increasingly well positioned to take advantage of the irresistible economic forces driving demand for a key battery metal component. The market thinks so: the company’s shares have bucked this year’s depressing trend, up 15p since IPO to just over 45p at the time of writing, taking its market cap to £33m. Indeed CTL’s shares have soared 90pc in the past few weeks on the back of the strong results from its two primary projects. More good news seems to be on the horizon including Scoping Studies at Laguna Verde and Francisco Basin, forthcoming drilling campaigns through H1 2023 likely to upgrade the company’s resource base, and ‘planned discussions with potential strategic partners, interested off takers and other parties’.

It is important to sound a couple of cautionary notes. Clearly CTL has a long way to go, and a lot of money to raise, before it can turn its prospects into production. And investors should be aware that DLE technology, for all its seeming potential, is still viewed with some scepticism within the industry. There are only five cases of DLE being used at commercial scale, one in Argentina and four in China. There is no guarantee the process can be applied to every lithium resource. Joe Lowry of the Global Lithium consultancy told the Financial Times that ‘DLE is not going to be an easy fix’, and Alex Grant, principal at Jade Cove Partners, a company tracking DLE technologies around the world, called it something of a ‘black box’ process, pioneered by Chinese companies about which limited information is available.

That said, CTL is certainly one company that beleaguered small cap natural resources investors might want to watch closely over the next few months.

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