(TheNewswire)
By Juan Carlos Zuleta
Monday, April 8, 2024 7:25 AM EDT
Lithium potential inCanada
Based on a cursory examination of official information , at least fivejurisdictions are seen to have lithium projects in Canada: Québec,Ontario, Manitoba, Alberta, and Saskatchewan. Globally, Canadaappears in eighth position (together with DRC) in lithium resourcesand sixth place in lithium reserves. There is no doubt that thepotential of lithium in Canada is great. However, it all indicatesthat we will still have to wait for a few years for its completetakeoff. In 2023, it ranked, together with Zimbabwe, in the sixthposition in world lithium production. Nevertheless, this reflects animportant improvement over the previous year when it only produced 520metric tons of contained lithium.
Policy andregulatory framework
In 2022, the Canadian Critical Minerals Strategy was launched. Outof the 31 critical minerals that have been identified, six have beenprioritized “for their distinct potential to spur Canadian economicgrowth and their necessity as inputs for priority supply chains.”They are lithium, graphite, nickel, cobalt, cooper, and rare earthelements. Regarding the mining laws and regulatory frameworkin Canada , like in many federalstates, mining projects may be impacted by certain federally regulatedareas, such as indigenous people’s rights, trade and commerce,railroads, nuclear energy, and environmental issues. Nonetheless, themajority of the areas that will have an impact on a mining projectfall under the purview of the provincial governments. There is nospecial regulatory framework applied to lithium in Canada, other thanthe recent extension of the concept of mineral resources tolithium from brines despite thesetypically being found in bedded, sedimentary deposits.
The role of theInflation Reduction Act (IRA)
At the center of this legal package is a generalframework for US climate and industrial policy by offering financialincentives for the production and acquisition of domestic energysources that emit little or no greenhouse gases (GHG), or "cleanenergy," as well as for the promotion of the use of clean energy.A key to reducing GHG emissions is electric vehicles (EVs). Given itsproximity to the US market, this would put Canada in an expectableposition as the main supplier of critical minerals for it. However,Canada is interested in taking many steps further in the developmentof the lithium/battery/EV value chain as one of the 20 countries withwhom the US has a free-trade agreement to benefit from the IRA whilecontributing to the US to meet its IRA targets. The Bloomberg New EnergyFinance (BNEF) Lithium-ion Battery Supply Chain Ranking for 2023situated Canada in the first place in the world to accomplish thistask (See Figure 3 below). The report ranks 30 leading countries’Li-.ion battery supply chain performance based on 45 metrics across 5 key themes: 1) Availability and supplyof key raw materials; 2) manufacturing of battery cells andcomponents; 3) Environment, Social, and Governance (ESG) approach; 4)infrastructure, innovation, and industry; and 5) local demand for EVsand energy storage. Canada is seen to have overtaken China as the“leader in forming the battery supply chains of the future.”Significant integration of the country with the US automotive industrycontributed to the accomplishment of the “friendshoring” ambitionsof the IRA. So did Canada’s policy pledge at the provincial andfederal levels.
Main ongoinglithium projects in Canada
Only 14 companies with at least maiden mineral resourceestimates and market capitalization were included in this analysis. For Joint Ventures, the area numbers as well as the mineral resourceand reserve estimates were recalculated following the differentownership interest percentages to individualize the participation ofthe distinct companies. This gave rise to 14 companies and 18projects. The projects were broken down into 3 groups. Those withmineral resource and reserve estimates from standard feasibilitystudies; those with mineral resource estimates only from standardtechnical reports; and those with contained lithium carbonateequivalent (LCE) estimates only from standard technical reports. Note that the first two types of projects are hard-rock lithiumprojects while the third consists of brine lithium projects. The keyfindings here are:
i. The market capitalizationranges from US$5,201M to US$3M.
ii. Out of the 18 projects, 7 areJVs and 11 are standalone projects.
iii. The total area in the firsttype of projects was 30,236 ha, 186,174 ha in the second type ofprojects, and 1,910,069 ha in the third type of projects.
iv. Of the 18 projects, 12 arelocated in Québec, 4 in Ontario, and 2 in both Alberta andSaskatchewan.
v. The total resources amountedto 42.779Mt of contained LCE which can be translated into 8.04Mt Licontent. This number would exceed by more than 5Mt the resourceestimate for Canada by the USGS. However, excluding the contained LCEdata corresponding to the two projects in Alberta and Saskatchewan wewould end up with 3.71Mt Li content which is only 0.71Mt above the 3MtLi content estimated by the USGS. This would also imply that themineral resource estimates of E3 Lithium and LithiumBank would nothave been yet homologated by the USGS. Interestingly enough, if thetotal resources number is confirmed through the ongoing feasibilitystudies by the different projects, Canada would become the sixthcountry with the most lithium resources on earth after surpassingGermany and China.
vi. The total reserves for thefirst group of projects reached 4.928Mt of contained LCE whichtranslated into 0.926Mt Li content. This number can be compared to theUSGS figure of 0.930Mt Li content for Canada. Similarly, if it isassumed that approximately 45% of those total resources will beconverted into reserves after the feasibility studies, they wouldamount to 3.618Mt Li content, which would put Canada in third place inreserves in the world, after displacing the US, China, and Argentina,only behind Chile, and Australia. Note also that the 5 most advancedprojects (i.e. with reserves from standard feasibility studies) areall located in Québec.
Comparative Analysisof Stria Lithium Inc. vis-à-vis other similar projects at differentstages of development in Canada
In this section, a novel indicator of geologicalpotential or exploration efficiency (i.e. Standard Estimate of MineralResources/ha) is utilized to show why Stria Lithium Inc. might beundervalued. This company was chosen because of its extremely lowmarket capitalization despite some important milestones achieved overthe last two years or so. The following procedure was followed.
First, the correlation coefficient between mineralresources per hectare (the indicator of geological potential orexploration efficiency) and market capitalization for the second groupof lithium companies was calculated. The result of this exercise was0.57, meaning that a strong relationship exists between those twovariables. This was called the base case.
Second, it was found out whether the calculatedcorrelation coefficient was statistically significant. Here atwo-tailed t-statistic test of significance was performed resulting ina p-value of less than 10%. This confirmed theexistence of a relatively robust association between theabove-mentioned variables.
Third, it was investigated if any of the lithiumprojects with higher market capitalization than Stria Lithium Inc. hadindicators of geological potential below that of Stria Lithium Inc. Inthis case, it was found that two projects met this criterion: RockTech Lithium Inc. and Green Technology Metals Inc. Therefore, thisshowed that at least in these two cases, Stria Lithium Inc. isundervalued because although this company has a higher geologicalpotential than the other two projects, its market capitalization wasfound to be considerably smaller.
Fourth, three additional exercises were performed tofurther validate this result. One was to incorporate the two brinelithium projects of Group # 3 (E3 Lithium Ltd. Project and LithiumBankResources Corp. Project) into the analysis, another was to include thelast project of Group # 1 (Critical Elements Lithium Corp. Project),and the last was to add the three projects. In the two first cases(with correlation coefficients of 0.57, and 0.56, respectively), theoutcome was essentially the same as in the base case, whereas in thethird (with a correlation coefficient of 0.56) the two-tailedstatistic test of significance resulted in a p-value of less than 5%,which validated the working hypothesis for those three added projectsas well. This led the analysis to the interesting conclusion that themarket capitalization of Stria Lithium Inc. would be undervalued for atotal of 5 out of 18 lithium projects in Canada.
It was not possible to extend the reasoning to the restof the projects because of the significantly distinct nature of thefive most advanced lithium projects (James Bay, Nemaska,Piedmont-Sayona Mining, Sayona Mining-Investissement with indicatorsof geological potential on average between 25 and 82 times greaterthan those of the other two groups of projects, which remains asubject of further research.
Positioning of StriaLithium Inc. as a strong lithium investment option inCanada
In what follows, a few points are underscored toposition this company as a strong investment option in Canada.
To begin with, it is noteworthy that Stria LithiumCorp. has relatively tight float with only 25 million sharesoutstanding. This financial structure could be perceived as anadvantageous setup for potential investors, reflecting a potentiallyhigher value per share due to the limited supply. Considering Striahas 9.9 million shares of Cygnus and 1.2 million in bank plus only 28million shares outstanding they are pretty well trading at close tocash amount.
Secondly, it is clear that Stria’s partnership withCygnus Metals in the Pontax Central project, in which, for the timebeing, it has an interest of 49%, seems to be moving forward well. Inabout a year from the start of the JV, Cygnus, acting as the operatorof the project, already managed to obtain a maiden resource estimatethat was just used to demonstrate that the company is undervalued. TheJV stands out as a particularly promising endeavor. The operationalprowess of Cygnus Gold combined with the leadership of David Southam(formerly of Mincor Resources), who brings a wealth of experience inbringing mines into production and securing offtake agreements,presents a compelling case for the JV’s success. Furthermore, thefounders’ previous achievements with Bellevue Gold add an additionallayer of credibility and potential to this venture. Lastly, apotential synergy may exist between Pontax Central and the James Bayand/or Nemaska projects. In the latter one, a lithium hydroxide isexpected for 2025-26. How about joining forces with them to scale upproduction first at the concentrate level and then at the refiningone?
Thirdly, at present, Stria continues to assess PontaxII viability. However, the company’s potential in tantalum, whichcould be extracted as a byproduct of lithium, seems promising. It canbe suggested that the average concentration of Ta2O5 in Pontax IIwould likely be higher than that found in Pontax Central (75 ppmTa2O5). This is based on a visual observation of tantalum oxide graincounts in till samples on two maps provided by Stria, one of which canbe found in its latest corporate presentation . If thisinformation is confirmed, at least through a maiden mineral resourceestimate, we could be in front of a tantalum deposit with an averageconcentration of about 100 ppm Ta2O5, which is the minimumgrade required by current tantalumoperators in different parts of the world. Tantalum is one of the mostvaluable minerals nowadays. According to the USGS , in 2023, the averageprice of tantalum was $190 per kilogram of Ta2O5 content. Followingthe previous scientific reference, Tantalum (Ta) is mainly used inelectronics (which today accounts for approximately 50% of consumption) in which metal-grade Tapowder, capacitor-grade Ta powder, and Ta mill production are utilizedin manufacturing sputtering targets and Ta capacitors. In addition, Tais quite useful as an alloying element for high-temperature alloys(i.e. superalloys) utilized in aerospace engines. Likewise, Tachemicals such as tantalum oxide, sodium tantalate, and lithiumtantalate, among others, constitute the main inputs in optics,semiconductors, and catalysts. Lastly, Ta carbides are mostly used incutting tools. Interestingly, Ta overall consumption was shown to havegrown at 4-5% between 2016 and 2021 with superalloys exhibiting thehighest rate of increase (7%), followed by chemicals (5%), sputteringtargets (4.5%), and capacitors (1.5%). Note that the use of Ta incarbides was seen to decline by 1%. Here it is argued that therelatively low growth in the consumption of Ta in capacitors can beattributed to saturation of the market and miniaturization ofcapacitors. However, this could change significantly due to two newsources of demand: 5G telecommunications technologies and electricvehicles (EVs). As a recent piece shows,in cars, Ta is already utilized for infotainment, combi instrument,additional light brake lighting, rain sensors, and air qualitysensors. These uses could be multiplied many times in the years tocome with the advent of EVs. A total of 5,950 tantalum oxide grainswere observed, for an average of 156 grains per sample. As acomparative basis, a regional survey in the same area conducted by theMinistère de l’Énergie et des Ressources Naturelles du Québec,processed using the same technology, yielded an average count of 36grains per sample, meaning the average sample from Pontax-II stands atthe 97.6 centiles of the regional population. Samples from Pontaxinclude tantalum oxide counts up to 797 grains, the highest count everrecorded by the laboratory.
Fourthly, Project Jeremiah stands out for its proximityto vital infrastructure, its location within a mining-supportivecommunity, and the simplicity of its landholder arrangements.Importantly, the surface rights are held by private individuals and amunicipality, mitigating the risk of complications often associatedwith indigenous land claims. This situation not only fosters asmoother path to obtaining necessary approvals but also highlights theproject's alignment with the community's economic interests and itsstrategic position near essential utilities and transportationnetworks. The ease of access to highways and electricity, combinedwith its situation in a town with a strong mining heritage,underscores the project's low barrier to entry and its readiness fordevelopment. These factors collectively enhance Project Jeremiah'sappeal as a strategically located and quickly actionable opportunitywithin the vibrant Québec lithium mining landscape. In a similar veinto Pontax Central, the fact that Project Jeremiah is in the vicinityof the North American Lithium project, the only lithium project inoperation today, and relatively close to the Moblan Project, both ofthem with plans to go downstream as well, would open comparableopportunities.
The broader context in Québec, with its burgeoninglithium mining sector, plays to Stria’s strategic advantage. Thegovernment’s investment in lithium and the emerging ecosystem ofsmaller, quickly deployable projects align with our operational model.Stria Lithium with its strategic projects close to essentialinfrastructure, is well-positioned to capitalize on these regionaladvantages.
Fifthly, a $4.7 billion memorandum of agreement, whichwould enable transportation for the resource extraction sectors andsupport efforts to enhance the standard of living and safeguard theterritory, was signed by the Quebec government and James Bay Cree onFebruary 17, 2020. Also known as “La Grande Alliance”, thisthree-phase deal, which is the result of consultations within thedifferent communities of the Cree Nation and with the government ofQuebec, aims at the creation of new employment opportunities, addingvalue to Quebec’s natural resources, and establishing Quebec as ahub for the world's mining industry, particularly for lithium. Unlikein other parts of the planet where the relations between explorationcompanies and indigenous communities are characterized by conflict andconfrontation, in Quebec, mining firms seem to have been working withCree communities for years in a cooperativemanner . At present, thedevelopment agreement appears to havecompleted the feasibility study of phase 1 and the pre-feasibilitystudies of phases 2 and 3 and is engaged in a communication,information, and validation campaign.
In conclusion, Stria’s Lithium Inc.’s ventures,particularly the JV with Cygnus Metals and Project Jeremiah, stand outas strategically aligned with both the current market dynamics andregional governmental support for lithium mining in Québec. Thesefactors, combined with the company’s tight share, present acompelling value proposition to its stakeholders.
Last but not least, the discovery that Canada couldhave more lithium resources and reserves than China is of utmostimportance. It provides further support to BNEF’s contention thatCanada is in effect the “leader in forming the battery supply chainsof the future.” In this context, the five themes included in the BNEF methodology to rank Canada in such aprivileged position acquire the most relevance in Québec, where themost progress in all those areas has been made to date.
* This is a compressed version of the article entitled“ Canadian LithiumOverview And Stria Lithium Might Be An Undervalued InvestmentOption ” published on April 26,2024, on Seeking Alpha. Interested readers can access the completearticle including all the data, tables, graphs, references, and annex,using the following link after joining Seeking Alpha for free:
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