Lithium Australia Brings New Tech to Materials Market

Last week management of Lithium Australia (LIT:  ASX) traversed the streets of New York City, stopping by for a presentation before investors at the 121 Mining Investment Conference.  The company has developed a technology for processing lithium silicates into battery-grade materials.  Called SiLeach, the technology holds promise for the metals mining industry to extract more value from ores that would otherwise end up as waste in a tailings pile.  The process is expected to deliver savings in time and cost compared to conventional methods. 

SiLeach is a hydrometallurical process that can be carried out in standard vessels and conduits at relatively low temperatures.  The process relies on sulphuric acid and halides to break up chemical bonds along with simple mechanical processing to separate impurities.  The particular beauty of the process is that it can be used with lithium micas that are otherwise overlooked by lithium miners who focus only on spodumene ores. 

Lithium Australia is using a series of joint ventures to take its technology to market.  A partnership with Infinite Lithium Corp. is targeting a lithium clay zone near Sonora, Mexico.  Called the Electra Project, the partners have completed a technical report and are moving toward a pre-feasibility study.

Another sort of joint venture is underway with Tin International AG, a subsidiary of Deutsche Rohstoff AG, to extract lithium from the Sadisdorf tin project. The tin orebody is thought to contain as much as 15% lithium mica.  A number of other valuable by-products such as potassium-sulphate fertilizer and sodium silicate are present and can be treated with the SiLeach process.  The joint venture with Lithium Australia is turning the Sadisdorf tin-tungsten mine into a polymetallic operation.

Lithium Australia has numerous other projects under development, including thirteen in Australia and one in Canada.  Like the Sadisdorf effort, the various projects could result in higher revenue from sales of additional metals and lower costs from the reduction of tailings.

There is considerable demand for lithium materials for use in batteries.  Lithium Australia plans to deliver a finished cathode product to battery manufacturers.  The company acquired controlling interest in the Australia-based Very Small Particle Company (VSPC), which has developed a proprietary process for producing lithium-ion battery cathode materials.  Delivering a finished cathode material to market rather than simple lithium chemicals is expected to command higher sales value and profits.

Still in a developmental stage, Lithium Australia operations also require cash.  In the last six months of 2017 (corresponding to the company’s first half fiscal year 2018), operations used AUS$390,540 or about AUS$130,000 per month.  This is considerably lower rate of cash usage than the previous year when about AUS$610,000 per month was needed to keep things going.  Cash at the end of December 2017 totaled AUS$15.6 million.  Even at the higher rate of spending, the company could support operations for about two years with its present cash kitty.     

Joint ventures and acquisitions also require investment capital.  Fortunately, the VSPC deal was completed through the issuance of common stock.  Construction of a pilot plant for the SiLeach process is in the design stage.  Its construction by 2012 will require cash.  In February 2018, Lithium Australia issued 3.35 million shares of common stock and raised AUS$650,000 in cash.  Additionally, in March 2018 the company was entered into a convertible note facility with an institutional investor for a total of AUS$21.0 million that will be made available in tranches.

The mining industry has been slow to adopt new technology.  High upfront capital investment and long-lived assets make it possible and desirable to stay faithful to the processes that work with the equipment in place.  However, with costs rising in most mining operations, the promise of new revenue streams and lower costs force mineral developers to become more receptive to innovative metallurgical process.   Lithium Australia’s long list of projects and joint ventures suggest someone is listening.  Investors should too.  That said, a position in LIT will require patience to wait for the next milestone and nerves of steel to cope management’s execution against the various technological and business risks that Lithium Australia is up against.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.