April 2024
Opportunity with lithium in Nevada
The lithium developer in Nevada with major near-term catalysts, Century Lithium.
There are five development-stage lithium companies in Nevada. Century Lithium Corp. (CYDVF:OTCQX; LCE:TSX.V) is developing the third most advanced project in Nevada.
Their Clayton Valley Project holds one of the largest lithium resources in North America, has water rights, proven processing tech, and has repeatedly produced lithium carbonate with battery-grade purity of 99.94%.
Century Lithium has a low market cap and share price, and has not accepted a deal with an EV or battery company.
The company's feasibility study is targeted to be announced later this year. Prefeasibility was updated in March 2021, and is highly positive. It assumed a price of lithium carbonate of $9,500/tonne. Today's long-term price, the contracted price, for lithium carbonate is between $24,000 and $30,000.
Century Lithium is generating tremendous economic potential in Nevada.
Here is the context for this report.
China produces 80% of the world's lithium carbonate and lithium hydroxide. One of the two chemicals is required to make every lithium-ion battery. Lithium-ion batteries fuel all EVs, most energy storage systems and all cell phones, laptops and other portable electronic devices.
China uses 85% of the lithium they produce to power their own EVs and the other items.
The rest of the world needs to either generate their own lithium carbonate and lithium hydroxide – or accept China's pricing and delivery conditions.
This situation is simply not acceptable for North America and the EU.
And particularly while enduring Russia's weaponizing of oil and gas. EVs are of course in high demand. And greatly reduce carbon emissions, a priority for all nations.
The US, Canadian and EU governments – plus 20 – 30 large car and battery manufacturers – are incentivizing this industry in every way they can afford so to speed up the mining and processing of lithium.
GM is paying $650 million in advance to Lithium Americas to receive all of their lithium production for its first ten years. Production there is targeted to start before the end of 2026, in 3 years. This is lithium in Nevada.
In addition, the US government has offered $700 mm in loans and/or grants to Ioneer Ltd., also for lithium production in Nevada, subject to permitting approvals.
Large incentives to mining companies are truly rare. But not unprecedented. Earlier examples include uranium exploration in the US during the '50s Cold War with the USSR. And tax credits for oil exploration during the mid-70s when the Middle East cut off oil supplies and cars were lined up for blocks to get gas.
The opportunity
This adds up to a tremendous opportunity for investors to smartly invest in the right lithium developers, that is, those companies approaching first production. They are on the front line. As stated by Elon Musk in July 2022:
"It is basically like minting money right now... I would really like to encourage, once again, entrepreneurs to enter the lithium refining business."
Why Nevada?
This report ignores the rest of the world and focuses on one clear-cut opportunity in this sector – the five lithium developers in Nevada. As stated by Musk in April 2022:
"Theoretically it would be possible to convert the entire US vehicle fleet to electric using only the lithium in Nevada."
As he noted, Nevada is loaded with lithium, mostly in claystone. The citizens of Nevada know mining, and welcome miners. The state and local governments there understand the permitting process and have regulators who understand minerals, geology, environment and extraction.
It's not that they are easy – they know what they are doing. This can save years in the permitting and start-up stages.
Development-stage actions
We are using the term 'developer' in the mining definition. A mining company at the development stage has already demonstrated it has a large and potentially economic lithium resource as calculated and confirmed by outside consultants applying industry standards.
The developer then:
1) gets the engineering work performed by outside professionals to demonstrate precisely how it will mine and process the lithium, and all costs. This is called a Feasibility Study. When positive, it sets the company up for
2) permitting,
3) financing for construction,
4) construction,
5) testing of all processes, staff know-how, flow lines, and quality of final product, known as commissioning,
6) production and
7) sales and first revenues.
This path to production is expensive and time-consuming, and is all performed before the project can generate revenues.
Exploration-stage potential
So, five companies have made it to the development stage in Nevada. There are several exploration companies coming up the line, but they have a few years of work, expenses and good luck before they can become developers.
Nevada, and the entire US, have one producing lithium mine, run by Albemarle Corp., the world's second-largest lithium company, called the Silver Peak Mine. It has been in continuous lithium-in-brine production since 1966, and was acquired by Albemarle in 1983. It is producing in the range of 5,000 tonnes LCE, or lithium carbonate equivalent, each year, and is targeting to double production by the end of this year.
These are very small numbers given the needs of US EV makers.
Century Lithium lies directly adjacent to Albemarle's mine on the southeast.
Project Location
| 1 of 3 Advanced lithium projects in Nevada |
| Adjoining Silver Peak lithium brine operation of Albemarle |
| 100% owned |
| 5,585 Acres Federal BLM claims |
| 3% NSR |
| Option to buy-down to 1% for $2M |
| 640 acres Geothermal lease |
Century Lithium's Clayton Valley project adjoins Albemarle's lithium mine. Century has also leased the nearby geothermal project as shown.
The special status of completing Feasibility as a Nevada lithium developer
There is a special importance today for lithium developers that have a completed Feasibility Study (FS). This is unlike having completed Feasibility for producing minerals that are not in such overwhelming demand.
An FS is a public document. All outsiders can clearly see a company's factors of production including how much the mine is expected to cost, approx. how long it will take to start production, the environmental factors, the detailed process, the costs per unit of production and anticipated profitability.
On the one hand, this is when the lithium company needs to start raising $500 mm to $2 billion to get into production. Concurrently, this is when larger mining companies, EV manufacturers, battery manufacturers, and government officials can start to think and plan with the company and its project.
This is often the time when off-take agreements are made, when government can offer a grant or loan, when a joint venture is formed or when the company or project gets acquired.
Examples thus far
For example, in Nevada, Ioneer Ltd. has completed Feasibility, and has received an offer from the federal government to assist with a loan of $700 million if the company can complete permitting at its Rhyolite Ridge project.
Lithium Americas (NYSE; LAC; TSX: LAC), with its Thacker Pass project in Nevada, has recently completed feasibility. General Motors has offered $650 million in exchange for all of their lithium production for the first ten years, with an option on the next five years. GM is expected to become LAC's largest shareholder.
With this agreement, GM has paid $320 million and other conditions have to be met before the second half of the funds get paid, including LAC being able to fund its remaining capital costs of $1.7 billion.
All of these factors could come into play when Century Lithium announces the results of its Feasibility Study anticipated later this year.
The two other developers, Pure Energy and American Lithium are much earlier on. Both have completed a Preliminary Economic Assessment (PEA), but not prefeasibility, nor feasibility. So, both are 2 to 3 years, or more, from having FS in hand.
Five developers, just one has near-term catalysts
With the lithium market, unlike other minerals, companies are all rowing the same boat to the same destination of greater lithium production, greater lithium carbonate or lithium hydroxide production and more lithium-ion batteries. The five companies are not competitors, rather they are essentially on the same team. Each will probably do well.
However, viewed from the perspective of an astute speculative investor, there are glaring differences among the five that could likely cause great differences in performance of one's personal funds.
Let's consider the five developers from the perspective of near-term catalysts, and from the perspective of market value relative to near-term potential.
Lithium Americas' Thacker Pass
Lithium Americas' Thacker Pass lithium project is anticipated to be the first to achieve new production in Nevada, and in the US, to become the second US-producing lithium mine. The project is permitted, construction has started. General Motors is a major shareholder and investor in the company, as mentioned earlier.
The company's market capitalization, or market value, is $1.1 billion. That is, 160 million shares at ~$7/share.
While we have a lot of respect for management and their project, this would be an unlikely time for a big up move in share price. LAC has completed feasibility, has been permitted to start construction, has completed a major funding with GM and, at the same time, committed all their production for the first ten years. When these occurred, they were market-moving achievements.
But now, the company needs to raise another $1.7 billion and continue with construction. This usually involves some tough decisions regarding taking on debt and selling shares, and in pretty good quantity to generate well more than $1 billion. There is a chance that the US federal government will fund part or a good part – or possibly all – of the nut.
Regardless, the company needs to issue approximately 50 million shares to GM for its remaining $330 million of financing, assuming today's share price of $7. The company has filed a shelf registration with the SEC to raise an additional $750 mm through either debt or sale of shares, good for the next 2 years. Dilution is likely to become a factor near-term.
Catalysts for Century Lithium
For comparison's sake, let's consider the near-future for Century Lithium. The company's market value is $74 million, that is, 147 mm shares at $0.50/share. Market cap is 1/15th that of LAC.
Feasibility study is anticipated before the end of this year. With it, many prospective suitors and off-take potentials come into view, including possible government funding.
These kinds of results can move a company's share price, and particularly with a small market cap. Timing here favors Century, with all due respect to LAC.
It's important to note that the capital cost projected from Century's pre-feasibility study is $493 million – less than a quarter that of Lithium Americas. Century could well be funded for production before LAC.
Other developers need to meet key milestones
The other three developers do not have major near-term catalysts. Any lithium developer will have catalysts because it's lithium. Anything can happen at any time, of course, however, all three companies' milestones are a good while away. American Lithium, with their Tonopah Lithium Claims (TLC), has recently announced a PEA. Next up is pre-feasibility, a crucial 9 – 12-month engineering action. Then a feasibility study will be planned, another 18 – 30 months.
Pure Energy, with its Clayton Valley project, in JV with Schlumberger, is in a water dispute at the state level with its neighbor Albemarle and this could take a while to settle. In the meanwhile, Pure Energy does not have adequate water rights to produce from their brine. The company has completed a PEA with a small resource but not a PFS nor FS.
Ioneer's Rhyolite Ridge, the 2nd-most advanced project in the state, has a sticky permitting issue. An endangered species, Theims buckwheat, only grows at Rhyolite Ridge, nowhere else in the world. It actually only grows directly above their lithium/boron deposit. Whatever the company does about this is likely to take a while. The share price is not responding.
In terms of near-term catalysts, Century Lithium is loaded. Let's take a closer look.
Strategic partner
Thus far, fourteen lithium development companies have made off-take agreements with EV manufacturers according to National Bank Financial, based in Toronto. This has become a major part of the financing for construction of lithium mines, and, more or less, part of the business model. It reduces dilution in the lithium company as compared to other mining development companies.
Century Lithium has made no off-take agreements. With completion of the Feasibility Study, there is likely to be strong interest from EV and battery manufacturers, and potentially major mining companies as well.
The lithium analyst with National Bank Financial in Toronto, Lola Aganga, issued an analysis in February this year that specifically speculates on the next four lithium companies to receive off-take agreements and she highlights Century Lithium.
Very positive Pre-Feasibility
A Pre-Feasibility Study is a serious document in which the engineers, metallurgists and outside specialty companies are expected to make estimates that are 70% to 80% accurate compared with the reality of what occurs during mining. The names of the consultants are shown on the document and they sign it.
A Feasibility Study is thousands of pages and is anticipated to be 80% to 90% accurate.
Schematic showing the planned layout for lithium production at Century's Clayton Valley project.
The factors of production are unusually good at LCE's Clayton Valley project for a lean, robust mine. As stated earlier, it lies directly adjacent to Albemarle's Silver Peak Mine, the only lithium-producing mine in the US. Lithium in claystone starts at surface and runs consistently to 150 meters depth. The deposit is mostly flat-lying.
The anticipated open pit is 300 meters wide by 3 km. long by 150 meters deep, a rectangle. Angle to the pit is shallow. The soft mineralized clay requires no drilling or blasting – excavator to conveyor belt to processing plant.
Century Lithium's updated pre-feasibility study, dated March 15, 2021, can be linked to here, https://centurylithium.com/_resources/technical-reports/cyp_pfs_amended_march_15th-2021.pdf?v=0.168
Highlights from the PFS include:
| Internal rate of return | 25.8% | Payback period | 4.4 years |
| Capital cost estimate | $493 mm | NPV(8%) | $1.03 billion |
| Price for lithium carb | $9,500/T | Avg annual prod | 27,400 tonnes LCE |
| Operating rate | 15,000TPD | Net lithium recovery | 83% |
| Life of mine | 40+ years | Operating cost | $3,387/T LCE |
Probable reserves, that is, the resources that will be produced from first – 1.28 mm tonnes LCE grading 1129 parts per million (ppm) – are just 20% of the indicated resource – 6.3 mm T LCE grading 905 ppm – because the reserves are constrained by the dimensions of the pit. The projected 40-year mine life is likely just the start of lithium production here.
As noted earlier, while the anticipated capital cost or capex, capital expenditure, might be expected to increase due to inflation, an investor can't help but notice that Lithium Americas' Thacker Pass feasibility anticipates a capex of $2.3 billion (phase one) to produce 40,000 tonnes LCE annually while Century's capex of approx. $500 million is targeted to produce 27,400 tonnes per year, a significantly more robust production model.
Here is a 4-minute video about Century and the Clayton Valley Project that quickly adds relevance to this report:
https://centurylithium.com/projects/clayton-valley-lithium-project/#id_cv_overview_video
Lithium-rich claystone at Century's Clayton Valley project is easy to work with, as shown after crushing and screening on site.
Direct Lithium Extraction, DLE
There is not a standardized process for extracting lithium from claystone and converting it to lithium carbonate. Accordingly, Century assembled a pilot plant in the Amargosa Valley, nearby to the planned mine site. Company geos, engineers and outside specialists have been testing and perfecting a chloride-based leaching process to extract lithium from claystone which commenced in October 2021.
Continuous 24-hour per day operations have been achieved, extracting 85% of the lithium through leaching, and converting to 99.5% lithium in the DLE section of the plant.
Off-site, Century has been producing 99.94% lithium carbonate, higher than battery-grade and useable for all battery-grade applications, since September 2022. The company with outside consultants have brought this methodology into the pilot plant for further refining of the process.
In February this year, the company announced a collaboration agreement with Koch Technology Solutions, a division of Koch Industries, to apply the trademarked Li-Pro process for DLE at the company's pilot plant.
This followed an agreement last October with thyssenkrupp nucera, the German engineering company, for design of the chlor-alkali plant. Koch and thyssenkrupp are two of the largest and most respected engineering companies in the world. Koch, based in Wichita, Kansas, is one of the largest private companies in the US.
Environmental, social and governance factors
Environmental, social and governance, ESG, is an area of defined focus by the company. Century has high ESG competitiveness compared with its peers.
A portion of the FS deals with sources of energy. The company controls a nearby geothermal lease, 50 miles to the northeast. Solar energy – the terrain is an arid basin – and energy storage are being thoroughly tested as part of the Feasibility Study.
The project design is engineered to minimize environmental and cultural impact including using mostly recycled water in the processing actions.
Permitting
With Feasibility in hand, Century is anticipated to prepare a Plan of Operation, which will initiate environmental and permitting applications. These have been under preparation for three years with initial baseline studies complete.
Century's Clayton Valley project lies directly adjacent to Albemarle's producing Silver Peak mine, so some of the permitting work may be done already.
Please note that during the years of permitting preparations, the Chair of the company was Cassandra Joseph. Ms. Joseph earlier served for four years as the Senior Deputy Attorney General of Nevada, responsible for environment and mining law. She is an attorney with 20+ years of legal experience in mining and metals, environmental and corporate law, mostly in Nevada.
Management – Long-term committed mining pros
William Willoughby, PhD, PE, President, CEO & Director – Dr. Willoughby is a mining engineer with over 40 years of experience in all aspects of natural resources development. Since 2014, he has been principal and owner of consulting firm Willoughby & Associates, PLLC. Prior to that, he was President and COO of International Enexco Ltd., which was acquired by Denison Mines in 2014. He earlier held various engineering positions with Teck (Cominco).
Todd S. Fayram, Senior Vice President Metallurgy – Mr. Fayram is an NI 43-101 Qualified Engineer with a designation in Metallurgical Engineering. He holds a Bachelor of Science in Mineral Processing Engineering and a Masters of Science in Metallurgical Engineering from Montana College of Mines and Technology. Mr. Fayram has over thirty-five years of experience focused on metallurgy, pyrometallurgy and extractive operations for multinational mining and metals producers, including projects in the United States, Canada, Mexico, Argentina, and Australia. He has extensive industrial experience in mining, crushing, mineral processing, hydrometallurgy, electrometallurgy, pyrometallurgy, environmental affairs and mineral economics.
Adam Knight, PE, Project Manager – Mr. Knight is a professional mining engineer, active in the mining industry since 1994. Before joining Century Lithium, he worked as a consultant and project manager for Practical Mining LLC of Elko, Nevada. He was Vice President Operations for EMC Metals Corp. until 2015. Prior to that, Mr. Knight worked in various operational capacities for Teranga Gold, Premier Magnesia, and AngloGold.
Century Lithium Corp.
| Exchange/symbol | OTCQX: CYDVF; TSXV: LCE |
| Recent share price range | US$0.50 |
| Shares outstanding | 147.4 million |
| Market capitalization | US$74 million |
| Shares outstdg, fully diluted | 176.8 mm |
| Cash position, 6/30/23 | US$15 million |
| Investor Relations | Spiros Cacos |
| info@centurylithium.com | |
| Website | www.centurylithium.com |
Nevada's lithium developer with an exciting near-future
We have laid out here the serious opportunity and the big future for Century Lithium Corp. After many years of quiet labor, the company is ready for a coming-out and it is in the right place at the right time with the right metal.
We have looked at the company as a stand-alone proposition with strongly increasing economic potential near-term. And we have looked at the company relative to the other lithium development companies in Nevada. Both views demonstrate an exceptional opportunity.
As of today, the company is emerging from under the radar. It is gearing up to produce significantly more lithium than the entire US is now producing, directly in the best location for mining in the country, loaded with lithium.
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© 2023, All Rights Reserved. Natural Resource Investor is a client-sponsored publication. Century Lithium Corp. pays monthly fees to an associated company. Safe harbor provisions apply as per the company's website.