Lithium is an essential element in batteries used in electric vehicles (EV) and other applications as well as ceramics, glass and pharmaceuticals. As sales of EVs have increased, demand for lithium has skyrocketed — so much so that the spot price of battery-grade lithium carbonate has spiked from US$10,000/tonne to US$80,000/tonne in the last year, and the long-term contract price is US$40,000/tonne. Investors have their eyes on companies that could offer new sources of production in the relatively near future.
One such company, Spey Resources Corp. (SPEY:CSE; SPEYF:OTC; 2JS:FRA), has several projects in the Lithium Triangle, an area where Argentina, Chile, and Bolivia meet and the expanding source of the world’s lithium production. The lithium in this area is extracted from brines rather than from hard rock that is seen in some other parts of the world.
Catalyst: Spey Signs New Letter of Intent
Spey has just signed a letter of intent with Richlink Capital Pty Ltd., an Australian investment bank servicing international institutions in lithium markets, to supply up to 20,000 tonnes of lithium chloride per year to two Richlink clients. The company notes that neither these Chinese buyers nor Spey will be impacted by the latest Canadian announcements concerning Chinese investment in critical mineral companies.
The lithium would come from Spey's Candella II project in the Incahuasi Salar and from the Pocitos 2 Salar project.
The Candella II project, in which Spey has an 80% ownership interest and an option to obtain the remaining 20%, is located in the Incahuasi salar in Salta Province in Argentina. The project is in the vicinity of well-known lithium salars, such as Arizaro, Pocitos, Rincon, Pozelous, Pular, Cauchari, and Oloroz, and is accessible by road.
To date, the company has conducted trenching to sample brines and TEM (transient electromagnetic) geophysical surveys. In 2021, five holes were drilled to sample brines and test aquifer depth, and earlier this year, the company released an NI43-101-compliant F1 drilling summary. Spey has extracted 3 x 200-liter samples (A1, B1 and C1) and completed assay and testing using the Ekosolve™ process. Lithium carbonate was produced from sample B1 with a purity of 99.5%, which had 173 ppm of lithium; 96% of the lithium in the brine was recovered using the EkoSolve™ process.
"Spey could well have a takeout target on its hands." — Brien Lundin, Gold Newsletter
Some projects use evaporation to extract lithium from the brine rather than DLE processes like EkoSolve; the evaporation process takes a lot of time and necessitates building large evaporation ponds.
Spey is taking another route, using the newly developed Ekosolve solvent exchange system developed by the University of Melbourne in Australia. Spey is the first company to acquire an Ekosolve production license, which the company notes “prioritizes the company to be the first client to commission Ekosolve to complete the construction proposal, preliminary and plant engineering, and manufacturing of the plant at Incahuasi.”
Recent production testing by the University of Melbourne and Ekosolve resulted in a 96% recovery rate and the extraction of 99.5% pure lithium carbonate in a matter of minutes.
Phil Thomas, Spey’s CEO, noted, “We are delighted to achieve these results. This not only proves the validity of the Ekosolve™ process for Incahuasi brines but also the fast processing time using columns. Ekosolve Ltd. is planning to build a 1,000-tonne mini plant in Salta, with Ekosolve Ltd. and SPEY each contributing US$25 million, which should generate about US$75 million to be shared equally. SPEY then intends to buy the Ekosolve share of the plant and add modules to construct a 10,000-tonne plant.”
The company sees a path to production at Candella II in the next 18 to 24 months. The next step is to drill to confirm the size of the resource and then commission a resource calculation.
Spey has estimated that, at current long-term contract lithium prices, revenue from a 10,000-tonne Candela II plant could generate US$325 million per year and at spot US$770 million a year. The company notes that its only expenses apart from production costs of US$2,700-3,000 per tonne are the government royalty of US$2,430 per tonne and US$2,000 per tonne Ekosolve license fee at the long-term contract price.
Industry Observers Paying Attention
The company is on the radar of several industry observers.
Brien Lundin, editor of Gold Newsletter, on Sept. 13, 2022, called Spey “a smart money play.”
He noted that the Lithium Triangle is “home to major miners of lithium, including Jianxi Ganfeng Lithium (USUS$23 billion market cap), Albemarle (USUS$27 billion market cap), Tianqi Lithium (US$164 million market cap), SQM (US$27 billion market cap) and Mineral Resources (US$10 billion market cap),” and states, “Spey is at home among these giants because it has a project in Candela II that’s on its way to having a resource — and access to an extraction process that could give it a huge competitive advantage . . . With Chinese major Ganfeng operating in the area, Spey could well have a takeout target on its hands.”
"We stay long, and Spey continues to be a Buy." — Clive Maund, Clivemaund.com
Lundin concluded, “with the lithium market providing strong tailwinds, Spey Resources is a lithium play you’ll want to put on your short list of lithium names to leverage the trend.”
Technical analyst Clive Maund of CliveMaund.com, on October 18, wrote, “Spey Resources has shaped up well since we looked at it in mid-September . . . All the technical indications on this chart are positive, with price trending higher, moving averages in bullish alignment following a cross a few days back, the volume pattern bullish with good recent upside volume, the Accumulation line strong and momentum trending higher, so for all these reasons it looks like it is heading higher.”
“We stay long, and Spey continues to be a Buy,” Maund concluded.
Additional Projects
In addition to Candela II, Spey holds an option to acquire a 100% interest in Pocitos II and a 20% interest in the Pocitos I lithium projectslocated in the Pocitos salar, also in Argentina's Salta Province.
Spey also holds interests in four hard-rock lithium exploration projects in Quebec’s James Bay region. The projects are sited between Patriot Battery Metals’ Corvette lithium project to the northwest and Winsome Resources’ Adina lithium pegmatite to the southeast. The company just commenced exploration activities with a multi-spectral analysis of satellite imagery.
In addition, Spey has a 100% interest in the Silver Basin project located in the Revelstoke Mining Division of British Columbia, as well as an option to acquire a 100% interest in the Kaslo Silver project, west of Kaslo, British Columbia.
Ownership, Coverage, and Share Structure
Spey trades on the Canadian Securities Exchange under the symbol SPEY and on the U.S. OTC market as SPEYF. Over the last year, it has traded in the range of CA$0.14 to CA$0.40, with a current market cap of CA$23.9 million. Approximately 106 million shares are issued and outstanding, and 137 million are fully diluted.
The company is covered by newsletter writer Clive Maund and of
Marshall L. Farris, co-founder and president of Ascenta Finance Corp., is the largest shareholder, with a 6.2% stake.
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Additional disclosures:
Gold Newsletter: The publisher and its affiliates, officers, directors and owner actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Authors of articles or special reports are sometimes compensated for their services.
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