Power Metals Corp. (TSXV:PWM) also hopes to distinguish itself by producing lithium hydroxide, which currently sells at a premium to lithium carbonate
Peter Kennedy | June 5, 2018 | SmallCapPower: When Nemaska Lithium Inc. (TSX:NMX, OTCQX: NMKEF, Frankfurt:NOT) recently secured up to another $400 million from an equity raise to finance a mine in Quebec, it didn’t go unnoticed at Power Metals Corp. (TSXV:PWM, OTC:PWRMF, Frankfurt:OAA1), another company that is hoping to ride the wave of investor interest in lithium.
Power Metals is at a much earlier stage in the exploration cycle at its properties in northern Ontario. But the Company hopes to follow in the footsteps of Nemaska by emerging as one of few Canadian companies able to mine lithium from hard-rock sources.
It is working to achieve that goal at a time when lithium has emerged as a hot commodity due to its role as a principal ingredient in lithium-ion batteries used in electric vehicles and mobile phones.
Analysts say identifying new sources of supply and getting it on-stream in time to meet growing market demand is a challenge that could support elevated lithium prices, at least in the near future.
With this in mind, Power Metals joined the hunt for lithium in what has traditionally been a gold mining area near the town of Cochrane, Ontario.
The Company’s portfolio includes the flagship Case Lake project in northeastern Ontario, where the Company explores for lithium in the hope of outlining a maiden mineral resource estimate later this year.
Brines (salt ponds) and spodumene (hard rock) represent the two main sources of commercial lithium production.
In Power Metals’ case, it is exploring for spodumene, typically found in lithium-rich pegmatites, in association with other lithium minerals, such as lepidolite, eucryptite, and petalite. A key target is a swarm of granite pegmatite dykes located on the Case Lake property.
PWM’s status as a hard-rock explorer is what sets the Company apart from its competitors, who are aiming to produce lithium from salt water brines, primarily in countries like Chile and Argentina.
Power Metals also hopes to distinguish itself by producing lithium hydroxide, which currently sells at a premium to lithium carbonate, a product also used to manufacture lithium-ion batteries but is mostly produced from brines.
Currently, lithium carbonate prices have jumped to around US$18,000 per tonne. Lithium hydroxid, by comparison, has been trading at about US$18,500 per tonne.
“There are not too many players doing what we are doing,” explained Power Metals Chairman Johnathan More, during a telephone interview from Phoenix, Arizona.
Power Metals’ Case Lake property is situated in an area surrounded by year-round roads, electricity, and a nearby phone tower. In addition, the targets are at surface, which results in drilling and operational costs that are well below industry averages.
As the stock was trading at $0.51 as June 1, 2018, in a 52-week range of $0.25 to $0.88, Power Metals offers investors an opportunity to gain exposure to this sector.
Power Metals has an 80% stake in the flagship Case Lake property, which covers 7,136 hectares. A 20% working interest in the property is held by MGX Minerals Inc. (CSE:XMG), Power Metals’ partner in a project that aims to develop and commercialize a new method of extracting lithium compounds from spodumene or concentrates.
Under the agreement, Power Metals is providing a 10-kilogram spodumene sample from its Case Lake project that will be used for initial bench-scale laboratory testing.
Power Metals recently sold its U.S. petrolithium brine assets to MGX in exchange for three million shares of MGX, which agreed to acquire a 20% working interest in all of Power Metals’ hard rock assets.
Under the September 2017 agreement, MGX can acquire an additional 15% working interest in the hard rock assets for $10 million. The option has a lifespan of 36 months.
A key feature of the Case Lake property is the impressive grades, which exceed those reported by Nemaska Lithium, a company that has raised $1.1 billion this year to support lithium development at its Whabouchi property, about 300km northwest of Chibougamau, Que.
“Our average grade on the 8,300 metres that I have drilled is currently sitting at about 1.7% lithium [oxide – Li20],” Mr. More said. This grade compares to an average of roughly 1.5% Li20 (open pit P&P) at Nemaska’s Whabouchi project.
The Case Lake property hosts five pegmatite dykes – the North, Main, South, East, and Northeast — that are hosted by one of nine dome-shaped geological structures.
Eight of the nine domes have no historic exploration work on them and they have the potential to host pegmatites similar to the Main and Northeast Dykes, the Company has said.
The Northeast Dyke contains very coarse-grained spodumene. Highlights from a 5,400-metre drill program that targeted only the Main dyke were as follows:
- PWM-17-08: 1.94% Li20) and 323.8 ppm tantalum (Ta) over 26 metres.
- PWM-17-09: 1.23% Li20 and 148.0 ppm Ta over 16 metres
- PWM-17-10: 1.74% Li20 and 245.96 ppm Ta over 15.06 metres.
In a May 15, 2018 press release, Power Metals said it has awarded the contract for a 15,000-metre drill program that is designed to increase known mineralized zones as well as find additional high-grade zones like the one at the Main Dyke.
The Company said the drill program will be split into two components, including an 8,000-metre spring/summer program, followed by a further 7,000 metres in the fall of 2018.
As Power Metals currently has $2.5 million in the treasury, the program is fully funded and permitted to proceed following the snow melt in early May 2018.
“With the money I have and the team that I have behind it, we are going to be able to quickly see what the potential of this property is going to be,’’ said Mr. More.
Exploration is being overseen by Power Metals’ Vice-President, Exploration Dr. Julie Selway, a leading expert on lithium pegmatites. While working for the Ontario Geological Survey in the early 2000s, she visited roughly 90% of the lithium pegmatites in the province.
Up until very recently, lithium carbonate has been the focus of many producers for battery applications. This is because existing battery designs called for cathodes using this material. But according to Benchmark Intelligence, this is about to change. “Supply of lithium hydroxide, which is also a key battery cathode raw material, is tighter than lithium carbonate at present. It is more of a niche product than lithium carbonate but is also used by major battery producers that are competing with the industrial lubricant industry for the same raw material,’’ wrote Benchmark Intelligence in a report.
It is why Power Metals is hoping to move forward with lithium hydroxide as its main product offering.
Meanwhile, the Company has launched a geological mapping program at its Paterson Lake property, which is located about 60 kilometres from Kenora in northwestern Ontario.
The geological mapping program at Paterson Lake will be followed by one at Gullwing-Tot Lakes, located 30 kilometres northeast of Dryden, Ontario.
The purpose of the mapping program on both properties is to confirm the location of the known spodumene/petalite pegmatite dyke outcrops and historic drill collars for a future drill program and to locate additional lithium mineralization.
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