Major Advancements in Lithium Mining Projects and Acquisitions

Lithium Ionic Corp. (LTH:TSX;  LYHCF:OTCQX;  H3N:FSE), through its subsidiary, Lithium Ionic Bandeira Corp., has finalized a definitive royalty agreement with ANRF LI (JSY) Ltd., an affiliate of Appian Capital Advisory LLP. This agreement grants a 2.25% gross revenue royalty in exchange for an upfront cash consideration of US$20 million. This deal aligns closely with the terms outlined in the company's previous announcement on May 30, 2024. Appian Capital is renowned for its investment in mining and mining-related ventures, with a focus on long-term value.

Additionally, Lithium Ionic Corp. completed the acquisition of the remaining 15% of select Salinas properties located within the Curralinho pegmatite field of the lithium-rich Aracuai pegmatite district in Minas Gerais, Brazil. This acquisition, finalized through its wholly owned subsidiary, Neolit Minerals Participacoes Ltda., brings Lithium Ionic's ownership of the Salinas group of properties to 100%. As consideration for the transaction, the company paid the vendor the Brazilian-real equivalent of US$2 million and issued 2.5 million shares of Lithium Ionic. An additional payment of US$1 million is required by April 4, 2025. A preliminary economic assessment for Salinas is being conducted by GE21 Consultoria Mineral Ltda. and is expected to be completed in the second half of 2024.

According to the company, the funds obtained from this royalty will play a key role in advancing the development and construction of the Bandeira lithium project situated in the Lithium Valley of Minas Gerais, Brazil. This region is globally recognized for its rich deposits of lithium-bearing pegmatites and has become a significant hub for lithium production. Additionally, the proceeds will support general corporate purposes and meet working capital needs.

A Deeper Dig Into Lithium Mining

The lithium mining sector has demonstrated significant growth potential, driven by increasing demand across various industries. According to a July 1 report by Whatech, the lithium mining market was anticipated to exceed US$685.50 million by 2031, with a compound annual growth rate (CAGR) of 7.07% over the forecast period. This robust growth has been fueled by lithium's extensive applications in electronics, automotive, and healthcare industries. Whatech noted, "Lithium is one chemical element with several industrial applications in producing cutting-edge goods for the electronics, automotive, and healthcare industries."

The potential for lithium in the ceramics market has also been a key driver of the industry's expansion. Whatech highlighted the significant properties of ceramics enhanced by lithium, such as greater strength and improved coating viscosity, which have boosted the ceramics market and, subsequently, the lithium mining industry as a whole. Moreover, the report emphasized the evolving mining technologies, stating, "The mining industry's technology is also evolving, leading to effective and efficient mining processes," which use organic-based sieves to ensure environmental sustainability.

In a June 25, 2024, article by the Investing News Network, it was reported that an Oregon State University geologist had exposed the single largest lithium deposit known to man, describing it as potentially more than 10 times the size of the next largest lithium deposit in the world. This discovery underscored lithium's growing significance in meeting the soaring demand for rechargeable batteries. The article further cited that "rising prices of lithium, cobalt, and carbon are not a bubble. They are underpinned both by rapid growth in electric vehicle sales and tight supplies."

A 2024 report from Energy and Capital also shed light on the future of lithium, noting that Goldman Sachs had called it "the new gasoline," while The Economist had termed it "the world's hottest commodity." The report projected substantial growth in the lithium-ion battery market, with data from Allied Market Research suggesting a compound annual growth rate of 18% to reach US$129.3 billion by 2027.

Company Catalysts

The definitive agreement with Appian Capital marks a significant milestone for Lithium Ionic. The terms of the royalty include a 2.25% life-of-mine gross revenue royalty on the Bandeira project and an upfront payment of US$20 million. Lithium Ionic has the option to repurchase the royalty within five years for US$67.5 million. The agreement is secured by charges and share pledges over almost all current and future assets related to the project.

Blake Hylands, PGeo, chief executive officer of Lithium Ionic, expressed enthusiasm about the partnership with Appian in a company news release, stating, "We are pleased to welcome Appian as an important partner as we continue to rapidly advance the Bandeira project through permitting and towards construction. Their investment will strengthen our financial footing, and their technical expertise will help optimize our development strategies, ensuring we maintain strong momentum as we advance the Bandeira project toward production."

Michael W. Scherb, founder and CEO of Appian, also highlighted the potential of the Bandeira project in the release, noting, "We are pleased to partner with Lithium Ionic to help the Bandeira project realize its potential and become an important lithium producer. This collaboration demonstrates the attractiveness of Appian's credit and royalties offering and reflects our strategic commitment to investing in high-quality mining projects that are well positioned to meet the increasing global demand for critical resources."

What Experts Are Saying

According to a May 30 report from Clarus Securities Inc., the company's recent royalty sale to Appian Capital has notably strengthened its balance sheet, ensuring the company is funded through to a construction decision once the project receives construction permits, expected in Q3/2024. This move also removed a major overhang on the stock and validated management's plan of non-dilutive funding for advancing Bandeira toward construction.

The feasibility study (FS) for the Bandeira project demonstrated robust economics, with an NPV ratio of approximately 4.9x and globally top quartile margins. As explained in the Calrus report, the FS confirmed an operating cost of US$444/t and an AISC of less than US$600/t, compared to developer peers, with costs around US$660/t. This study underscored the significant near-term upside potential, suggesting that the study is "only a snapshot in time, offering immediate upside from the expanded M&I resource reported in April 2024 as well as from conversion of inferred resources into the mine plan." 

Lithium Ionic's strategic plans include advancing the Bandeira project towards production, with the goal of becoming Brazil's next operating lithium mine by H2/2026. Key advantages highlighted for Lithium Ionic included the early submission of permitting applications in November 2023, securing grid power connection and water rights for Bandeira, and the well-progressing permitting process, with mine construction approval expected in Q3/2024. The completion of the FS was also seen as a material de-risking milestone.

The report went on to say that the company's exploration efforts showed promise, with a current company-wide total resource of approximately 60 Mt, including 42 Mt at Bandeira. This exploration upside, along with multiple catalysts over the balance of 2024, such as potential non-dilutive funding opportunities, 50,000 meters of planned drilling, and construction permit approval, further enhances the investment appeal of Lithium Ionic.

Ownership and Share Structure

16.12% of Lithium Ionic Ionic Corp is held by management and insiders. Of this category, the most are held by Director Helio Diniz with 5.43%, Director Michael Lawrence Guy with 5.10%, Director David Gower at 2.52%, and investor Andre Rezende Guimaraes with 2.52%

19.20% is held by institutions. Top in this category include Waratah Capital Advisors with 7.01%, JSP Gestao de Rescurso Ltda. With 2.69%, 1832 Asset Management L.P. with 2.62%, and RBC Global Asset Management with 1.94%.

The rest is with retail investors.

Important Disclosures:

1. Lithium Ionic is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. In addition, [COMPANY] has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
2. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. 
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