Lithium South is a Real Deal Lithium Company
Investors are quite familiar with “The Flavor of the Month” resource companies. Some sector of the resource market gets hot. All of a sudden hundreds of companies have sprung up to flog investments in uranium or cobalt or rare earth elements and even gold on the rare occasion. Two years later those same companies are chasing some other willow of the whisp investment having squandered all of the eager investors' money.
The current favorite of the Flavor of the Month is probably lithium. While there is no doubt the demand for lithium is headed higher by leaps and bounds, of the 300-400 “lithium” companies perhaps a dozen or so will survive and some will show a real rate of return to investors. So when one of the most real companies contacted me and briefed me a couple of weeks ago, I was thrilled.
Lithium South Development (LIS-V) owns a 5,687 ha lithium brine project located in the midst of the lithium triangle located in Bolivia, Chile and Argentina. Their 100% owned Hombre Muerto North property is in Salta province in Argentina.
The brine measures an average of 736 milligrams lithium per liter. There is a new 43-101 resource for the project of 1,583,000 tonnes of lithium carbonate EQ worth $37,000 US per tonne (average price in 2022). Over 1 million tonnes is in the measured category.
The Hombre Muerto salar already has extensive lithium production and planned production in the future. Lithium South is surrounded by POSCO and Livent Allkem. POSCO is spending $4 billion to construct one of the world’s largest lithium production plants. Livent has been in production for multiple decades.
There are two basic processes for extracting the lithium and producing refined Lithium Carbonate. Evaporation uses the heat of the sun and time to concentrate the material but recoveries may be as low as 50% and only reach 70-75% with special techniques. Evaporation is the tried and true way of producing lithium. Alternatively a new process has been designed called the Direct Lithium Extraction or DLE. DLE uses a chemical process where special chemicals attract and attach to the lithium and concentrated via osmosis and heat treatment to remove the water. DLE can achieve recoveries of 80 to 85% but costs far more in capital.
The property owned by Lithium South is at an elevation of about 15,000 feet and as such the partial pressure of the weight of the atmosphere means that water boils at a much lower heat and evaporation is enhanced. Lithium South is opting for vat evaporation rather than the far more expensive DLE and that will mean permitting and construction will be far faster to production.
A PEA prepared in 2019 with much lower lithium values showed a production plan of 5,000 tonnes per year of LCE with a 50% recovery rate and a $11,400 per tonne price for lithium carbonate. The company prepared that PEA based on drilling only 14% of their claims and recent drilling has covered 75% of their salar property. The company has revised their recovery projects and now believes an updated PEA will show recovery perhaps as high as 70-75% with the vastly increased resource just announced. Now that the updated 43-101 has been released LIS will release an updated PEA to reflect the increase in the size of the resource, the increase in expected recoveries and the higher price for LCE lately.
Last week the company announced the start of a three well drilling program on the project. When complete the company will conduct the speed of brine transmission and the maximum flow from each well. These are production wells.
Over the past couple of years the price of lithium carbonate has been up and down like that of a nighty of a newlywed bride. It is impossible to predict what the price will be in the future but at the average price from 2022, LIS has over $58 billion worth of brine in the ground. The current price of the shares gives Lithium South a market cap of just over $42 million CAD while they have about $6 million in the till. $58 billion worth of brine containing 1.583 million tonnes must be worth something. While LIS is planning for production, I suspect one of the major car companies or battery manufactures will take them out first. It will be more that $.44 a share.
Lithium South Development is an advertiser. I have purchased shares in the open market therefore I am biased. Do your own due diligence. It’s a good story and easy to understand.
Lithium South Development Corporation