High grades light up Canadian lithium explorer
Eye-catching lithium discoveries don’t happen every day.
When they do, little-known lithium explorers can suddenly find themselves in the investment spotlight.
Just look at 92 Resources (TSX.V: NTY). Its share price was a star performer last week (up over 175% at one point) on very heavy volume. Speculators were fired-up about some very high-grade, lithium-rich rocks that the company had found in Canada’s Northwest Territories (NWT).
The news came more as a vote of confidence for the company’s Hidden Lake project, rather than a complete shock. After all, the northern Canadian property is situated at the heart of an old lithium mining camp from a bygone era — one that’s not far from Yellowknife. (This unheralded rare earth metal was briefly mined for its use in nuclear power plants in the 1950s.)
Furthermore, Hidden Lake is known for being a geologically-fertile environment for finding richly-mineralized hard rock sources of lithium. This helps explain why the company found a handful of grab samples (rocks at surface) that have assayed as high as 3.06% lithium oxide, and collectively average 2.54%.
These results compare very favourably with the first batch of grab sample results announced by Canada’s most successful lithium explorer/developer — Nemaska Lithium. Long before Nemaska proved-up its CDN $1.9 billion Whabouchi lithium deposit in northern Quebec, it announced 9 grab samples averaging 2.88% lithium oxide.
Mining logistics aside, this part of Canada also seems to be an ideal geopolitical environment for 92 Resources to hunt for high-grade lithium. Eventually, a mine at Hidden Lake could help support the NTW’s under-developed economy while also playing an important role in powering North America’s electric automobile revolution.
Hidden Riches at Hidden Lake?
Canada is a vast country where lithium discoveries have historically been mostly passed over in favour of gold, and industrial metals like copper, nickel and zinc. But Hidden Lake is something of an exception.
Before a decades-long slump in lithium demand took root during the 1960s, past explorers made impressive headway at the Hidden Lake property and its vicinity. This is where historic work has outlined a near-surface discovery that has the potential for large tonnage, as well as high grades, according to 92 Resources’ president Adrian Lamoureux.
Some small-scale historic drilling also revealed mineralized grades to a depth of 150 metres that are comparable to ones encountered by near-surface sampling. And that’s what has Lamoureux as fired-up as 92 Resources’ fast-growing investor base.
“So far we’re corroborating the kind of high grades that historic exploration work suggests exist at Hidden Lake,” he says. “It’s early days yet. But if this kind of exploration success continues, it’ll help validate our geological model, which postulates that a richly-mineralized deposit is well within our reach.”
Lamoureux also points to a 1977 geological assessment of the Hidden Lake property and adjacent prospects. It suggests their combined potential to host at least 49 million tons of high-grade lithium (averaging 1.40% lithium oxide).
(It should be noted that this historic resource estimate has not completed in accordance with NI 43-101 guidelines, meaning a qualified geoscientist has not conducted sufficient work to classify this figure as a legitimate mineral resource, and the historical estimate is not to be treated as such).
The appeal of the 1,600-hectare Hidden Lake project is sweetened by the fact that its lithium mineralization is relatively close to the surface. This means it could be amenable to relatively low- cost, open-pit (quarry-like) ore extraction methods.
Being close to the NWT’s capital city of Yellowknife also weighs in the project’s favour. Not only is there a skilled labour force nearby, but there’s also plenty of proximal mining infrastructure in the region already in place, as well as a power grid.
All of these favourable factors boost the odds in favour of the Hidden Lake discovery becoming an economically-viable success story one day. However, it’s still far too early to know if a mine is likely to ever be built.
For now, the company is conducting a more extensive surface sampling program, including trenching. This should provide a better understanding of the overall surface parameters of this under-developed lithium resource.
Subsequent to that, an exploratory drill program is anticipated later this year. And by probing the parameters of this emerging discovery, 92 Resources can get a much better insight into whether a richly-mineralized deposit really does lie hidden at Hidden Lake.
How Lithium is Outshining Gold
The rewards for making an important lithium discovery can be very lucrative. For instance, one of 92 Resources’ far more advanced peers in the exploration sector, Nemaska Lithium Inc., has already hit the geological jackpot.
Originally just another tiny lithium explorer, it recently earned an independently-assessed valuation (NPV) of almost $1.9 billion for its Whabouchi project in James Bay, Quebec. Its deposit is nearly 28 million tonnes in size and averages 1.57% lithium oxide.
In fact, lithium is fast becoming more lustrous to investors than gold. So much so that it’s even been hailed “the new gasoline” by Wall Street’s most powerful and influential investment bank, Goldman Sachs.
This is all because of the electrification of the automobile industry, which is reliant on lithium-ion batteries. Tesla Motors is leading the way in the U.S. with the building of its $5 billion “gigafactory” in Nevada, where it will manufacture lithium-ion batteries in partnership with Panasonic, its Japanese battery supplier.
Production is expected to start later this year. And by 2020, enough lithium battery-packs will be manufactured each year to power up to 500,000 electric vehicles.
Most notably, Tesla wants to source as much of its lithium supplies as possible from domestic or Canadian mines. And presently, that’s a tall order because only one North American lithium mine exists, which is also in Nevada.
All of this promises to be a boon to successful lithium explorers here in North America, especially since the U.S. currently has to import over 80% of its lithium supplies. Even the U.S. government is onside with Tesla’s bold mandate because it has declared lithium to be a strategic metal.
Why 92 Resources?
The race is on to find the biggest and best deposits on this continent. And 92 Resources is now among a tiny vanguard of lithium explorers/developers that have rewarded shareholders lately with encouraging exploration and development news.
Another obvious standout is Lithium X Energy (TSX.V: LIX), which is an advanced-stage lithium developer. It has seen its share price rise from 45 cents at the start of the year to as high as to CDN $2.85 (nearly a 640% jump). Currently trading at around $ 1.73, this is still a gain of over 380%.
Another advanced-stage success story in-the-making is of course Nemaska (TSX.V: NMX). Since early January, it shot up from around 40 cents to CDN $1.98 (more than a 480% gain) and has currently consolidated at around $1.42, which is still up over 340%.
However, investors are offered the most leverage to much higher share prices by betting early on. In other words, companies with bright prospects that are still in the early stages of their exploration/developmental timelines fit this optimal risk/reward profile.
92 Resources is an obvious example. And though the company is a long way from becoming a rags-to-riches success story, so far it’s making all the right moves.
Consequently, the company’s early-stage investors have so far been handsomely rewarded. And with plenty of additional exploration news expected in the coming months, new investors are betting that 92 Resources’ share price will continue its impressive upward trajectory.
Disclaimer: The principals of www.BNWnews.ca do not hold share positions in companies mentioned in this article.
By Marc Davis