Arena Minerals Inc. (TSXV:AN) Chairman Eduardo Morales has twice made fortunes for his shareholders in lithium brine companies
Keith Schaefer, Investing Whisperer | November 4, 2021 | SmallCapPower: Arena Minerals Inc. (TSXV:AN) is the lithium stock with the most proven lithium team in the world—and the stock is trading for less than 40 cents.
(The following article was originally published on investingwhisperer.com)
Just TODAY–Arena announced their maiden resource calculation–43-101 compliant–of 560,000 inferred tonnes of lithium carbonate equivalent on their Sal de la Puna brine play in Argentina–at a grade of 460 mg/litre (that’s very good!)
There are many lithium companies but precious few high grade brine resource calculations! And this was only on 6.3% of its brine acreage holdings.
You want to know how big this is? No lithium project in Argentina is producing over 20,000 tonnes a year right now. If this resource does prove economic, Arena CEO Will Randall says it could produce over 20,000 tonnes for a decade!
It’s a big deal financially too–consider that Millennial Lithium Corp. (TSXV:ML), a neighbour in the same lithium brine salar, was just purchased last month for over $375 million. (Their grade is 439 mg/litre.)
I’ll tell you how Randall put all this together. It starts with the Chairman of Arena—Eduardo Morales—who has TWICE made fortunes for his shareholders in lithium brine companies.
Morales is a pioneer of this industry. He literally built the first evaporation ponds in the Atacama desert near the Argentine/Chile border.
He also built the very first lithium carbonate plant in South America.
The world’s first commercial battery grade lithium carbonate was produced because of this man.
Morales oversaw the construction of the lithium brine asset (Salar de Atacama) that Rockwood Lithium eventually sold to Albemarle Corp (NYSE:ALB) in 2014 for US$6.2 billion.
After Rockwood cashed out to Albemarle in 2014, Morales switched focus to next-door Argentina where he joined Will Randall (Arena’s CEO) at the junior mining company Lithium X. Randall is the CEO of Arena Minerals.
When Morales joined him at Lithium X, Randall was working on the Sal de los Angeles lithium brine project that he had discovered in 2009.
With Morales on board in 2016 and the rest of his team——Randall continued developing the project until 2018—when the company was bought by their Chinese partners—NextView New Energy.
For Will Randall the sale of Lithium X meant a big (and fast) win for himself and his shareholders.
MANAGEMENT IS ALWAYS THE MOST VALUABLE COMMODITY
Management is key to all junior resource stocks. And most of The Big Wins come from the same few teams—like this one.
Know that there are exactly FIVE significant lithium brine producing operations on the entire planet—and this group has been involved in three out of those five, leading the full construction of two of them. You literally could not ask for a more qualified, experienced or successful group.
And this team is following almost exactly the same script as they did at Lithium X.
First off, Arena Minerals is developing a lithium brine play, just like Lithium X. More on their play—which has a unique twist—in a minute.
But second, they already have a major Chinese partner.
Ganfeng Lithium is the largest lithium metal producer in the world—and they own 19.9% of Arena’s shares.
They also own 35% of Arena’s Sal de la Puna project. With the alarm bells ringing on lithium supply they are looking to secure as much supply as possible.
The other notable shareholder—at 14%–is $2.5 billion plus market cap Lithium Americas Corp. (TSX:LAC). Just FYI, LAC has $500 million in cash sitting on its balance sheet—3x Arena’s current market cap.
Two of the top lithium companies in the world are vouching for this team and their assets by paying up to be shareholders! As an outside investor I don’t think you can possibly ask for better vetting of an opportunity than this.
But trust me, this gets even better.
The Unique Twist: Arena’s HIGH GRADE Lithium Brine Technology
Morales and Randall are very focused on high purity lithium carbonate. There aren’t many of those.
The brines coming into production over the past 10 years are not contributing much high purity lithium carbonate; the recent projects are mostly industrial grade.
That’s because it is very difficult to handle the impurities in the brines.
The Arena team plans to be a rare high purity lithium producer by concentrating their brine like it’s done with spodumene—the hard rock source for lithium (mostly in Australia).
This is a working technology that reduces capital costs (capex) and operating costs (opex).
Randall says that, eventually, ALL Golden Triangle salars will use a technology like this–and he estimates they have as much as a 5 year head start on the competition.
This is where having Chairman Morales on board is so key——there is no better person to execute this plan than him – he has done it before in Atacama.
By getting their lithium into a high concentrate of 6% lithium on location, Arena can ship it to a chemical plant anywhere in the world. This can reduce Arena’s capex by 50% because no on-site chemical plant is required–a huge time and cost savings!
Arena is consolidating several smaller, but extremely high quality brine projects within the Lithium Triangle—the Atacama—in Argentina.
There is very little competition for these smaller assets. You need the expertise of the Arena team–with their proprietary processing technology that reduces capex and opex–before you even start thinking about this strategy. ARENA is the leader in that expertise.
This is essentially the approach that has been used forever in spodumene, where they concentrate in Australia, and they ship across to China where it is processed into hydroxide.
All the other brine plays concentrate the brine to about 1% lithium and feed it into the carbonate plants so that the lithium carbonate is produced on site.
Ganfeng and Lithium Americas have vetted the plan and have jumped on board. Ganfeng’s interest is especially noteworthy because their Chairman is probably the best processing engineer in the space–Mr. Liangbin Li.
Arena’s concentration process will be very similar to what Chairman Morales built at Rockwood’s Salar de Atacama operation. That process at Salar de Atacama produces battery grade lithium carbonate at one of the world’s lowest production costs.
Morales and his crew are expecting to be able to replicate that low cost production for Arena.
A Ground Floor Opportunity With Repeat Company Builders
I think a monkey throwing darts at lithium stocks might do very well in the coming years. The rising tide of increasing lithium prices–driven by relentless green economy demand–is going to lift all boats.
But…….there is only one stock that today offers investors a chance to partner with the most successful company builders in the history of the lithium business –and at a micro-cap level valuation!! The stock trades for less than 40 cents per share–and now they have a resource calculation!
I’m almost done—but this story gets EVEN better. Now to tell you about another company in the same salar—that was just bought out for $377 million, or $3.85 per share.
Of the 19,000 hectares of lithium salars that Arena has, 11,000 of them are in a very special salar called Pastos Grandes. What makes it special is—nearby Millennial Lithium Corp. (TSXV:ML) owns 12,000 hectares in this SAME salar—and was just bought by a Chinese company called Contemporary Amerex (CATL).
They outbid another Chinese company—Ganfeng Lithium (yes the same one). After all Ganfeng’s due diligence on Millenial to make a bid, and from their 19.9% ownership in Arena, only Mssrs. Randall and Morales know this salar better.
Now, I don’t want you to think that Arena’s share price will quickly rise to what Millennial was bought out for, because it won’t. Remember, a resource calculation does not mean the deposit is economic.
But this is a bull market in lithium—and it should be a long one if you remember all the macro stats I gave you yesterday. It’s easy to see lithium prices continuing to move up—and taking the valuation of these juniors with it.
Over time, if the resource meets expectations (and we have the Top Team in lithium here at Arena), shareholders SHOULD get rewarded. This is the essence of investing in junior resource stocks.
Arena has it ALL for investors right now.
It’s going after the only mineral commodity the world truly needs.
The Pastos Grandes salar has already produced one buyout.
Their first ever resource calculation has a similar (BETTER!) grade than that buyout.
Management has built and sold TWO other lithium companies.
They own stock in Arena.
They’re backed by two big industry players.
They have a technology that reduces capex and opex.
And the stock trades for less than 40 cents. It has EVERYTHING—that’s why I’m long 200,000 shares!!
DISCLAIMER: Arena Minerals has reviewed and sponsored this article. The reader is cautioned that mineral resources are not mineral reserves and do not have demonstrated economic viability.
The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.
Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.
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