ALB - E3 Lithium: Advancing Its DLE Field Pilot And Upcoming Catalysts

2023-09-25 14:52:04 ET

Summary

• Alberta based E3 Lithium has the largest lithium resource in Canada, with 16 million tonnes of lithium carbonate equivalent on a M&I basis, now testing its DLE field pilot.
• The challenge was extracting the low-grade lithium from well-explored brine discovered and drilled by Imperial Oil in a cold climate. Imperial Oil is an investor and collaborator with E3.
• On September15th, E3 released positive preliminary results from its Direct Lithium Extraction field pilot in Alberta and expects to have additional results and PFS by the end of this year.
• If all goes well, E3 plans to be in commercial production of 20K to 30K tonnes per annum of battery grade lithium hydroxide in a Phase 1 DLE project by the end of 2026 or thereabout.
• With a market cap of only US $185MM, I believe that E3 has multiple upcoming catalysts with substantial potential upside for investors in the next 18 months. E3 should be considered a high risk/high reward investment.

Calgary, Alberta-based E3 Lithium Ltd. ( EEMMF ) (ETL.V) is a lithium development and DLE technology company with the largest Measured and Indicated lithium resource in Canada (one of the largest in the world), with 16 million tonnes of lithium carbonate equivalent ("LCE") described in its April 20, 2023 NI 43-101 Technical Report for its Bashaw District Project in central Alberta effective March 21, 2023.

E3's primary permitted area contains over 600,000 hectares (approximately 1,483,000 acres), located just north of Calgary, in the historic Leduc aquifer.

E3 plans to use Direct Lithium Extraction technology, commonly referred to as "DLE" technology, to unlock its massive lithium brine resource.

DLE's advantage is that it can extract lithium from brines with a very small environmental footprint compared to typical lithium hard rock mining or evaporation brine projects.

E3's DLE technology (and DLE technology generally) can produce lithium products with vastly reduced carbon emissions, utilizing less than 3% of the land of more typical hard rock or evaporation brine projects, with minor or at least far less fresh water impact, and with no tailings or evaporation ponds.

Just as important, E3 may be able to re-purpose existing oil and gas wells (originally developed by Imperial Oil in the late 1940s until about 20 years ago) to pump up brine to be used in the lithium extraction process, and then pump the brine less lithium back down into the aquifer typically 10 or more kilometers away. Much of the technical expertise required is similar to operating an oil and gas project.

E3 is currently advancing its own proprietary ion-exchange DLE technology in a field pilot trial as well as testing two other third-party DLE technologies. E3's DLE field pilot has been fully operational since late August and will continue to be tested and operated over the coming months. See E3's August 29, 2023 press release for more details.

E3 is the first company in Canada to advance DLE technology in an operating DLE field pilot and has a first-mover advantage.

If all goes well during the next few months, E3 plans to finalize its decision as to which DLE technology it will advance into a Phase 1 commercial plant as well as decide on the size and capacity of its initial Phase 1 commercial DLE facility, to be confirmed as well as a Pre-feasibility Study or PFS to be completed by end of Q4 2023 and likely made public in early Q1 2024. This will also upgrade E3's vast lithium resource into a "reserve".

For those unfamiliar with the term "preliminary feasibility study", "pre-feasibility study" or PFS, it is defined under the National Instrument NI 43-101 as set out by the Ontario Securities Commission as,

... a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method... has been established and an effective method of mineral processing has been determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, economic, social, and environmental factors and the evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve..."

E3 plans to build its Phase 1 commercial DLE facility to produce somewhere between 20,000 and 30,000 tonnes battery grade lithium hydroxide and to begin commercially producing battery grade lithium hydroxide by the end of 2026 or thereabouts. Battery-grade lithium hydroxide needs to have a very high degree of purity, generally 99.5% pure or better.

Almost all lithium mining or brine projects around the world currently produce either a spodumene (about 6%) lithium concentrate from hard rock mining, or lithium sulphite, lithium carbide or lithium carbonate which needs further processing (typically in China) into battery-grade lithium hydroxide or battery lithium carbonate.

E3 current plans include turning its lithium concentrate into battery-grade lithium hydroxide on-site.

E3's anticipated commercial DLE facility will be located just north of Calgary, Alberta (precise site not yet finalized) where there is substantial infrastructure (roads, rail and power) as well as oil and gas technical talent and manpower where the technical skills are transferable to the DLE process.

E3 has indicated that it will potentially be able to scale up production of its DLE systems up, by adding additional modules, eventually producing up to 150,000 tonnes per annum of battery-grade lithium hydroxide.

In my recent discussions with E3's CEO Chris Doornbos on September 16th, he indicated that based upon quotes provided by industry standard price indexes (which appear to be confirmed in recent feasibility studies published by other near-term DLE producers) long-term battery-grade lithium hydroxide off-take agreements are US $25,000 to USD $30,000 per tonne for battery-grade lithium hydroxide.

From my own review of recent projections based on Feasibility studies released by near term DLE producers, it appears that anticipated operating margins for DLE producers generally are expected to be the 60% to 75% range (based on current assumptions).

If E3's Phase 1 commercial facility is designed to produce 20,000 tonnes of battery grade Lithium hydroxide, E3's gross revenues per annum could be generating US$500 to $600 million in Phase 1 alone.

With a current market cap of approximately US $185 million (Cdn $250 million) and with various upcoming catalysts, E3 has substantial potential upside during the next 18 months as its DLE project continues to de-risk, and investors generally accept DLE technology, with its more environmentally friendly profile, ability to scale rapidly, and as an effective and desirable technology to extract lithium from brine.

Future Possible Off-Take Agreements:

As with many lithium producers, and near producers, as there is an anticipated shortage of battery-grade lithium hydroxide in the near to medium term (as per slide below), OEMs (car manufacturers) that produce electric vehicles, as well as major battery makers, are vying to secure long term lithium supply by entering into long term off-take agreements with lithium producers which may also include a substantial upfront payment by way of an equity investment or otherwise.

For example, in January of this year GM announced a $650 million equity investment and supply agreement in Lithium America ( LAC ), and in March 2023 Energy Source Minerals announced a multi-year offtake agreement with Ford (F); Energy Source Minerals expects to have its DLE geothermal project operating in 2025.

If a lithium producer can also produce lithium from a low-carbon mining/extraction source with an attractive ESG profile it is a very desirable source of lithium production particularly for OEMs (EV manufacturers) which carefully monitor the carbon impact of their manufacturing process and parts.

E3's future lithium hydroxide production potential should be of interest to major parties who are sure to be monitoring E3's DLE field pilot process and test results.

If all goes well, like other major lithium production players once a PFS or Definitive Feasibility Study is published, and expected to produce battery grade lithium hydroxide in the next 2 years or thereabouts, E3 will hopefully be able to enter into binding long-term off-take agreements with one or more OEMs or large lithium-ion battery manufacturers; hopefully with substantial upfront payments. No guarantees of course.

Doornbos has made it clear that E3 won't announce any off-take agreement until such time as the agreements are binding, which is more likely to take place when E3's DLE project is further along towards being commercially ready, after the Pre-Feasibility Study or Definitive Feasibility Study (2024/2025).

Permitting of E3's Commercial Lithium Extraction Project in Alberta

Governmental Support: Both the Canadian and Alberta governments have been supportive of E3's lithium brine development and both have provided E3 with non-dilutive funding totaling C$32 million (described in more detail below).

Alberta's Friendly Regulatory Regime: As well, Alberta has recently passed laws that critical minerals, including lithium, being extracted from brines be regulated by the Alberta Energy Regulator (also known as the " AER ") which also regulates oil and gas companies and has a long history of understanding and approving oil and gas projects.

Extracting lithium from brines is now effectively legally treated in Alberta like an oil and gas project. On December 2, 2021, the Alberta government passed Bill 82 which centralized all critical minerals (including lithium) regulatory functions with the AER. Under new Regulations passed on January 1, 2023, amendments to the applicable legislation which included brine-hosted minerals (such as E3's lithium brine project) provide a very clear path forward for E3 to obtain permitting similar to an oil and gas project.

On March 16, 2023, the AER provided further updates in Directive 056 clarifying well, facility and pipeline licensing requirements for geothermal as well brine-hosted mineral resource developments such as E3's project.

These legislative enactments by Alberta provide an enormous advantage for E3 in an industry where in many jurisdictions obtaining regulatory approval for a lithium project could be a major hurdle (Source: E3's Prospectus June 1, 2023, page S-7, filed by E3 on SEDAR+ - Landing Page ).

E3's Preliminary Economic Assessment, November, 2020, for 20,000 tonnes Battery grade Lithium Hydroxide Phase 1 facility

When E3 released its initial Preliminary Economic Assessment (referred to as a "PEA") report prepared by Scovan Engineering, NORAM Engineering and Constructors, GLJ Ltd. and Fluid Domains, nearly 3 years ago in November 2020, the pre-tax net present value for its Phase 1 DLE projection was US $1.1 billion based upon its Phase 1 20,000 tonnes per year project Lithium hydroxide project, calculated using an 8% discount rate and assuming an average selling price of battery grade Lithium hydroxide at only US $14,079 per tonne. Current assumptions are that battery-grade lithium hydroxide will be set at US $25,000 to US $30,000 per tonne based upon long-term off-take agreements.

At the time of the release of the November 2020 PEA, cash operating costs (OPEX) were estimated to be US $3,656 per tonne and the total initial capital cost for Phase 1 of the commercial project was then estimated to be US $602 million with a 3.4-year payback. With inflation, CAPEX and OPEX costs (in the upcoming PFS) will likely be at least 30% higher than calculated back in November 2020 but the anticipated selling price of battery-grade lithium hydroxide will nearly double from the $14,000 price used in the November 2020 PEA.

Preliminary Performance Indicators of E3's DLE Field Pilot Released September 15th Are Promising

In E3's June 14th press release it delineated the key performance indicators and defined success for its DLE field pilot as follows:

• lithium recovery of >80%.
• lithium grade in lithium stream of >25%.
• concentration of lithium in lithium product of >600 mg/L.
• the flow rate ratio of >3.

E3 Preliminary Test Results from DLE Field Pilot:

On September 15, 2023, E3 press released very promising preliminary test results from the DLE field pilot (from the first of three initial tests), testing E3's proprietary DLE system as well as DLE systems from two other unidentified third-party DLE providers under real-world conditions.

The results of the first of the three tests were at the high end of my expectations and showed that E3's DLE field pilot generated:

• Initial lithium recovery: > 94%.
• Purity of concentrate: > 80%.
• Average lithium grade in concentrate: 884 mg/L.

As described in the September 15th press release, once all of the field pilot testing is complete it will form the basis upon which E3 will choose:

1. the DLE system to be used in Phase 1 of E3's full commercial scale DLE project;
2. the commercial design of the DLE system to be used in the Pre-Feasibility Study ("PFS") expected to be completed and published by the end of 2023, and;
3. subsequent engineering designs.

In response to a follow-up question I had for E3's CEO about these preliminary results, Doornbos indicated that these are conservative results given that they are preliminary.

E3 did not yet publish flow rate ratios as they were waiting for additional data but he didn't expect that the flow rates would be an issue. The bottom line is that these initial data while stressing they are preliminary, are a positive indication that E3's DLE field pilot is operating as expected.

E3 has made it very clear that at least for Phase 1, E3 wants to build the most efficient, commercially risk-free DLE commercial system to get to full commercial operations by the end of 2026. That may mean that while its own DLE system could produce the best KPI results, it may not be quite as commercially ready as the other two DLE systems being tested.

As well, E3 may be able to obtain a performance guarantee from one or both of the DLE technology providers which could be important when trying to finance the construction of the commercial scale project in the future.

Direct Lithium Extraction:

There are a number of types of Direct Lithium Extraction technologies that have been or are being developed by many different technology providers.

Types of DLE systems include:

1. ion-exchange (being tested by E3, and increasingly common DLE system);

2. adsorption/ sorbents (probably the most common DLE system being implemented);

3. membranes (the least common DLE system).

There is no single "one fits all" DLE solution for all lithium brine chemistries or conditions. A DLE technology that works in one type of brine may need to be tweaked or may not work well in another type of brine solution.

E3's DLE system is based upon using an ion exchange system. Test results from E3's lab studies using E3's own brine in E3's proprietary DLE system showed very high rates of lithium recovery, up to 97% and generally up to 95% in most cases, exceeding expectations. E3's lab test results were summarized in its December 2, 2021 press release.

According to a Goldman Sachs April 27, 2023 report, Direct Lithium Extraction: A potential game changing technology , (which I will refer to as the " Goldman Sachs DLE Report ") most DLE systems have a lithium recovery rate in the 70% to 90% plus range in contrast to evaporation brine salars having a 40% to 60% recovery rate.

The Goldman Sachs DLE Report describes DLE as a potential game changer, not only because of DLE's more attractive ESG profile and its scalability but also because it has the potential to unlock many types of brines which are low-grade and currently not mineable or are hosted in hostile geothermal conditions (such as in the Salton Sea in California) or which are not amenable to be extracted by evaporation methods (dry and hot climates with much higher grade lithium required).

Currently, some lithium development companies are advancing DLE systems designed to extract lithium in a carbon-neutral or a low-carbon manner. For example, Vulcan Energy is advancing its DLE lithium project in Germany which it calls its Zero Carbon Lithium Project which it anticipates will be a fully commercially operational DLE project in 2025 and generate zero carbon emissions.

On its website, Vulcan describes the significant difference in carbon emissions of its DLE project (i.e., zero carbon) compared to a typical hard rock lithium mining operation (very high carbon emissions) and lithium brine evaporation pond systems (high carbon emissions).

In my discussions with E3's CEO, Phase 1 of E3's lithium commercial project, expected to be operational by the end of 2026, will have an attractive ESG profile. E3 is actively looking at E3 becoming carbon neutral (or very close) in future phases of its project, particularly as Alberta and leading oil and gas companies advance major carbon capture projects in the province.

While there are still many skeptics of DLE technology (at least until they are shown that DLE works in full commercial operations in the Western world, and not just in China), there are an increasing number of investors, experts and analysts who believe that DLE technology will be a successful technology in extracting lithium from brine and may become the future standard for lithium extraction.

Furthermore, Chile (2nd largest lithium producer in the world) on April 20, 2023 announced its National Lithium Policy which included a statement that future lithium projects in Chile use direct lithium extraction technology to reduce the environmental impact of lithium extraction, and particularly to reduce evaporation pond's impact on water tables.

Albemarle Corporation ( ALB ), one of the two largest lithium mining companies with operations in Chile, has already announced (Reuters article) that it plans to implement DLE technologies in its lithium projects in Chile expected to be in operation in 2028 or 2029. Chilean-based SQM (25% owned by Chinese entities), also one of the two largest lithium producers operating in Chile, has also committed to implementing DLE technology in Chile.

The Goldman Sachs DLE report describes three existing commercial-scale DLE projects (all private) already operating in China, as well as new commercial-scale DLE projects (in the Western world) expected to begin operating in the relatively near future including Eramet S.A. ( ERMAF )( ERMAY ) and Rio Tinto ( RIO ), both expected to begin operating in Q2 2024, and then a number of other full commercial scale DLE projects coming online in 2025 and 2026 including Energy Source Minerals (private), Vulcan Energy Resources ( VULNF ) (ASX: VUL), Compass Minerals International ( CMP ), Standard Lithium Ltd. ( SLI ), Lake Resources ( LLKKF ) and various others.

Traditionally, apart from DLE operations, the vast majority of all lithium currently being produced today is either:

1. Hard Rock Mining: extracted through traditional hard rock mining where lithium is found in pegmatite deposits (such as in Australia and in North America) and sold in the form of 6% spodumene to be processed in China into battery-grade lithium carbonate or lithium hydroxide, and;

2. Lithium Brines Evaporation Ponds/ Salars : extracted through evaporation brines, primarily from brines found in sub-surface aquifers, which are then pumped into enormous shallow ponds called salars, and using evaporation to extract lithium salts). These lithium salar evaporation pond systems are mostly found in Chile, Argentina, Bolivia and to a smaller degree in Brazil where the weather is dry and warm.

The largest percentages of lithium today are produced from hard rock mines (Australia being the largest geographical source location) and continental brines (Argentina, Chile, and Bolivia being the largest producers, using evaporation ponds).

There can be major environmental and water use disadvantages to mining lithium from hard rock mines (primarily through lower grade spodumene found in pegmatites) and from the evaporation of lithium brine in salars, typically located in very arid warm areas of South America where the evaporation process can take 9 to 18 months and lithium recovery is only about 40%, those mining/extraction processes are well established and hence lower risk for investors.

Currently, valuations for lithium projects involving hard rock mining and traditional evaporation ponds generate much higher valuation multiples compared to brine projects expecting to use DLE technology.

My own view, likely shared by E3's CEO as well as certain analysts, is that there is a valuation discount for companies such as E3 advancing DLE projects and that the discount will disappear or perhaps exceed hard rock/evaporation salar pond projects in the next 2 years as new full commercial scale DLE projects begin successfully operating in Europe, South America and North America.

Part of the reason for the DLE discount is based on investor and market skepticism as to whether DLE will work successfully at full commercial scale despite full commercial DLE operations in China, and the progress of DLE technology providers in the Western world constructing DLE projects and even providing performance guarantees.

Exhibit 3 below taken from Goldman Sach's April 2023 DLE report contains a summary of 27 DLE projects in the world including three currently operating on a commercial scale in China. The DLE project summary is in small print and needs to be seen on a large screen to be read.

DLE Technology Developers:

The Goldman Sachs DLE Report , Exhibit 2, lists various DLE technology developers.

While not a complete list, in addition to E3 Lithium's ion-exchange DLE system, DLE technology providers listed include:

1. Summit Nanotech (Sorption, in pilot/demonstration plants);
2. SunResin (Sorption, already in full commercial operations in DLE projects in China, and one location in the USA being piloted);
3. International Battery Metals (IBAT) (Sorption, Demonstration plant/ commercial operations);
4. Energy Source Minerals (Sorption, demonstration plant, full commercial DLE plant in construction);
5. Koch Technologies Solutions (Sorption, Pilot/Demonstration plant);
6. Lilac Solutions (Ion-Exchange, Demonstration plant/commercial);
7. Conductive Energy , (Ion-Exchange, pilot plant/demonstration plant);
8. EnergyX (Membrane);
9. Geo40, (Membrane, lab pilot);
10. Solvay , (SX system, pilot plant).

Imperial Oil's Strategic Collaboration with E3 Lithium

Imperial Oil (IMO) (a 70% owned subsidiary of Exxon Mobil ( XOM )) originally discovered the oil and gas potential in the Leduc aquifer in the late 1940s. At that time the Leduc aquifer contained significant amounts of oil and gas in these brines and became an area which generated lucrative oil and gas production for approximately 70 years. The discovery of the Leduc by Imperial is generally considered to be the beginning of the Alberta oil rush.

In the process, approximately 3,000 wells were drilled by Imperial Oil in the Leduc which is now considered extremely well explored and geologically understood including the fact that the brines contained low-grade lithium.

In June 2022 Imperial Oil and E3 announced Imperial Oil's US $5 million investment in E3 (by way of 3,413,979 pre-funded warrants) and the entering into a strategic collaboration agreement with E3 as disclosed in Imperial Oil's June 23, 2022 press release .

In Imperial Oil's 3.5-hour Investor Day presentation on April 19, 2023 it described its collaboration with E3 Lithium as potentially transformative, and as a collaboration partner in its low-carbon future. As well, Imperial Oil's parent company Exxon has recently been exploring getting into lithium extraction from brine and making additional investments in that space.

We can expect that Imperial Oil and its parent Exxon will be closely watching E3's progress with its DLE field pilot.

E3 Lithium Corporate Summary (All $ figures in Canadian dollars unless otherwise indicated)

Trading Symbols: ( ETL:CA ), TSX Venture exchange; (EEMMF), OTCQX; (OW3), FSE.

Shares outstanding : 67,991,165 (source: E3's MD&A dated August 24, 2023).

Pre-funded warrants (Imperial Oil): 3,414,979 (source: MD&A dated August 24, 2023).

Stock Options: 5,706,250 with average strike price of C $2.20, and weighted average life remaining of 3.2 years as of June 30, 2023 (source: E3's Q2 2023 financial statement as of June 30, 2023).

Market Cap (as of close of trading September 22, 2023): C$252 million or US $184 million. (Pre-funded warrants included in calculation).

Working Capital/Cash & equivalents as at June 30, 2023: Working capital of C$20,000,000; Cash and equivalents of C$18,145,000 (Source: E3's June 30, 2023 financial statements, available on E3's website and filed on SEDAR+ - Landing Page).

C$20,000,000 bought dea l announced September 18, 2023 under which 5,640,000 common shares will be issued at C$3.55 per share; expected closing September 26, 2023. In addition, 15% overallotment can be exercised by Underwriters within 30 days after closing. 5% commission and 5% broker warrants compensation to be paid.

Alberta and Canada Government Grants:

1. Alberta Innovates: On April 6, 2022, E3 was awarded C$1.8 million to assist in the development of its field pilot. As at June 30, 2023 E3 received C$1.4 million, with a further $400,000 to be claimed. (Source: Note 13, E3's Q2 2023 interim financial statement).

2. Strategic Innovation Fund ("SIF"): E3 was awarded $27 million grant from the Government of Canada program to help fund E3's resource and technology development up to commercial production. Eligible costs are reimbursed at an amount equal to 33.94% of costs to a maximum of $27 million. Repayment of the amounts advanced (at 1.4x amount advanced) begins the second year post commercial project completion at a rate of 1% of annual gross business revenue over a 20-year period. As of June 30, 2023 claims under SIF were C $5.3 million. (Source: Note 13, E3's Q2 2023 interim financial statement).

3. Natural Resources Canada Critical Mineral Research, Development and Demonstration. As set out in E3's March 7, 2023 news release , E3 was awarded Cdn $3.5 million under this Canadian federal government program. The funds are non-repayable and are to be used in the construction and operation of E3's field pilot. As of June 30th, $2.5 million was claimed by E3 under this program. (Source: Note 13, E3's Q2 2023 interim financial statement).

Upcoming Milestones/Catalysts

During the next 18 months, I believe that E3's major catalysts will include:

1. Announcing additional and complete testing results of the 3 DLE systems being tested in E3's DLE field pilot (anticipated Q4 2023);
2. Disclosing the capacity for its proposed Phase 1 facility (currently stated in recent oral presentations by E3's CEO) to be anywhere from 20,000 to 30,000 tonnes per annum LCE (anticipated Q4, 2023);
3. Pre-feasibility study (anticipated completed in late Q4, 2023 and published in early 2024) which should also disclose the size/ capacity of the Phase 1 facility, the DLE technology chosen for Phase 1, the estimated Capex and Opex, the assumed battery grade lithium hydroxide price per tonne, and the net present value of Phase 1 (both pre-and after tax). Based upon a USD $25,000 per tonne battery grade Lithium hydroxide assumption, minimum of 20,000 tonnes per year for a minimum 20 to 30-year life of the project, my guestimate is that the net present value will be US $2 billion or higher for Phase 1 alone compared to the pre-tax US $1.1 billion net present value calculated under E3's November 2020 Preliminary Economic Assessment report.
4. Publishing specifications for lithium hydroxide produced from the lithium sulphite produced from E3's DLE field pilot (Q4 2023);
5. Binding multi-year off-take supply agreements with a major OEM or battery manufacturer, possibly accompanied by an investment/funding for E3 by the purchaser (2024/2025, my estimate based upon speculative assumption).
6. Definitive Feasibility Study (my estimate, H2 2024/H1 2025);
7. The sale or other monetization of E3's Saskatchewan lithium brine deposit (my speculative guess, 2024);
8. Re-rating upwards of lithium companies focused on advancing DLE projects with credible DLE technologies in safe jurisdictions and expected to be commercially ready in the 2026 to 2028 timeframe (my speculative guess, 2025).

Current Analyst Share Price Targets

According to Bloomberg (as of September 20, 2023) there are two recent analyst share price targets on E3.

Roth MKM - Increased E3 price target to C$12.00 from C$10.00 in a September 18, 2023 note following a tour of the DLE field pilot on September 14, and preliminary field pilot data released September 15, 2023.

Red Cloud Securities - C$13.00 price target, report dated September 18, 2023.

Investment Summary and Conclusion

E3 Lithium is an early-stage lithium development company advancing its massive Alberta lithium brine project with Direct Lithium Extraction technology. E3 is currently testing its own and two other third-party DLE technology providers in a DLE field pilot which has shown preliminary very promising test results. E3 is the most advanced lithium development company in Canada with an operating DLE field pilot.

If all goes well, E3 hopes to complete testing of its DLE field pilot, choose the DLE technology and size of the facility it plans to advance into Phase 1 commercial project and finalize its Pre-feasibility study by the end of 2023 year and publish in early 2024.

With an encouraging permitting environment in Alberta as well as financial support from various levels of government, E3 plans to build and operate a commercial-stage Phase 1 DLE project by the end of 2026 or thereabouts. Phase 1 is expected to produce between 20,000 to 30,000 tonnes of battery grade lithium hydroxide per annum, which would potentially generate US $500 to $600 million per year with healthy margins in Phase 1 alone. If successful, E3 hopes to scale up production eventually to 150,000 tonnes per year in the years following Phase 1 successful operations.

While there remains skepticism about DLE technology operating at full commercial scale, DLE has in fact already been used to operate lithium extraction in brine commercially in China since 2017 and has been used by Livent in a hybrid DLE system in Argentina for years. There are many new DLE plants being built around the world. Some DLE technology providers are willing to provide performance guarantees for their DLE technology.

E3's recently raised Cdn $20 million at C$3.55 per share, expected to close September 26, 2023 (with an additional 15% Overallotment option in favor of the Underwriters within 30 days of closing), which together with E3's existing funds and government grants, I believe will be sufficient to fund E3 into 2025.

As E3 advances closer to Phase 1 commercial production, E3 will hopefully enter into one or more binding off-take supply agreements with one or more major OEMs or battery manufacturers, although there is no assurance that will occur.

Currently trading in the C$3.50 range (with a C$250 million market cap), the two analysts covering E3 respectively recently have set a share price target on E3 of C$12.00 and C$13.00 suggesting a substantial upside assuming E3's success with its DLE field pilot and PFS.

E3 has multiple upcoming catalysts in the next 18 months including the upcoming release of its field pilot test results, the release of its PFS by early 2024, as well as hopefully entering into one or more binding off-take agreements as E3's gets closer to commercial Phase 1 operations.

E3 may also benefit from an upward share price re-rating of companies focused on advancing DLE technology in the next two years as companies such as Eramet, Vulcan, Rio, Energy Source Minerals, Compass Minerals, and others, can demonstrate success operating DLE projects in 2024 and 2025 outside of China in the Western world.

For investors with a high risk tolerance, E3 has the potential to generate a high return over the next 18 months although there is no guarantee of success.

Risks

E3 remains an early-stage company advancing its DLE project in Alberta. There is no assurance that its DLE technology and other systems will be successful, that it can produce battery-grade lithium hydroxide or commercially saleable lithium products or that it will be able to complete or finance a successful Phase 1 commercial facility in the timeframes contemplated.

E3 faces regulatory risks as well as market, liquidity, commodity price and potential competition risks. E3 will need to raise substantial funds in the future to advance to a commercial-stage operation which can be dilutive. Funding will likely be obtained through a combination of debt, equity raises, and/or non-dilutive funding from government and/or off-take partners.

An investment in E3 should be considered high-risk and should only be made after conducting your own due diligence.

For further details see:

E3 Lithium: Advancing Its DLE Field Pilot And Upcoming Catalysts