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3.6¢ argosy minerals limited

Fundamentals, page-985

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MarketingMan

5,765 Posts.

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11/03/18

12:34

Post #: 31669732
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Originally posted by Onspeed ↑

Hey Folks UPDATE No. 6 as promised

Plenty has changed/been de-risked since the last one. We have been listed on the ASX All Ords which now will open us up to potential Fund buying.

PROJECTS

Rincon Project Brief
On 1 July 2016, the Company announced that they had signed a HOA to earn staged interest up to 90% in an Argentinian Lithium Company – JV between a Mr. Pablo Alurralde, Mr. Francisco Menendez and AGY (AGY Earn in of 77.5% has been completed and signed off by Pablo Alurralde - AGY now own 77.5% of the JV Rincon Project). The Company chose Pablo Alurralde due to his extensive Lithium expertise and experience (PA is a Chemical Engineer with 15 years as senior management producing LCE and 30 years’ experience designing chemical processes for multiple Lithium processing companies). Pablo Alurralde has worked on multiple projects including FMCs brine projects as director of Minera del Altiplano S.A. and has his name on two FMC Patents for lithium processing technology. Pablo Alurralde has vast knowledge within the Lithium triangle Salars with Rincon having special meaning to him as he completed his thesis on that Salar from his University days as well as his previous LCE production there. Importantly, Pablo Alurralde has vast experience in the optimisation of industrial plants, international commerce and logistics, and an in-depth knowledge of international lithium markets. He chose the Rincon Salar specifically due to the homogenous brines and high evaporation rates, location and proximity to the Chilean border and Antofagasta port, and the high potential for the delineation and production of lithium products. More importantly for me the Joint Venture Agreement means that he doesn’t get a pay day if he can’t produce. (Recently it has become public knowledge that Pablo Alurralde has been purchasing shares on market over the last month - indicating confidence in the near term production).

View attachment 1005532 Rincon Project Tenements
View attachment 1005535 Stage 2 Ponds - Now filled and Concentrating Lithium
View attachment 1005541 Stage 1 Ponds Concentrating Lithium

Targets
The Joint Venture is officially incorporated in Argentina as Puna Mining Company S.A with the original strategy to “fast track” development of the project in three stages;
Stage 1 targeting 500t per annum of LCE
Stage 2 targeting 1000 – 1500t/pa of LCE (Over and above Stage 1 = 2000t/pa)
Stage 3 targeting a commercial amount of LCE (Personal calculations base this up to 15,000t/pa)

Rincon Salar Overview and Drilling Results
The Rincon Salar itself lies 3700m above sea level with high evaporation rates and 90% cloud free days per year, rainfall is very low due to the altitude at which the Salar sits. There is a lot of infrastructure close by including Electrical, Natural Gas services and Rail. There is extensive historic works on the Salar by multiple organizations all reporting average Li values of 400ppm (Ferretti 1989, Overjero Toledo 2007, Enirgi DFS 2016). The Magnesium is higher than usual but Pablo Alurraldes process is geared to address that issue specifically. A private company called Enirgi currently owns the northern half of the Salar and has conducted a DFS which shows the Rincon Salar to be economical for production of LCE.
AGY are conducting an 8-hole drill campaign for a JORC delineation. Results pending from holes R6 and R7. Important to remember that our brine containing sands are OPEN AT DEPTH meaning potential resource could be 2 - 3 times higher than my estimate and the upcoming JORC report. Current results from holes R1, R2, R3, R4, R5 and R8 are showing the average improvement on historical Li and Mg levels below;

View attachment 1005508
View attachment 1005511
View attachment 1005514

Landholding
AGY/Puna Mining have continuously increased the land holding from the initial JV tenement of 80ha to as of today having tenements covering 2,572.9ha including 31ha site for Stage 2 Processing Plant with all services and approvals in place. A recent allotment of land is purposed for up to 300ha of Stage 3 brine ponds and a Large-Scale Stage 3 Plant in proximity to the existing tenements. A rule of thumb is that 1ha of pond can net 50 metric tonne of LCE per annum so potential for up to 15,000t/pa for stage 3 alone. AGY are also actively looking at acquiring more land tenements at the project to further expand resource even though not required to progress the project.

Development
AGY already have constructed 11Ha of evaporation ponds which are filled with brine undergoing concentration targeting initial LCE production during March/April 2018. Remaining Stage 2 ponds covering an additional 24ha . Stage 1 plant will be in a city within the Salta region close to the project. Managements last announcement advised that the Process Plant is under construction now. Stage 2 plant will either be in the Pocitos industrial complex or on an additional 31-hectare mining easement right at the nearby industrial site of Olacapato (with permits and water access rights in place). Stage 3 as mentioned will be located at the Rincon Salar itself with tapping of the proximal infrastructure.

Opinion
AGY are in a very strong position to take advantage of the EV revolution with a tremendous increase in State legislation and targets to reduce city pollution and China’s ban on 533 ICE vehicles on 01/01/2017 (Including models from BMW and Audi etc.) being a huge catalyst for Li industry interest. Newer information has it that Germany High Courts have determined Diesel Vehicles may be allowed to be banned from Cities where local authorities deem appropriate. This tells me that the transition to EV is well underway.

AGY have stated numerous times that they are receiving strong interest from Major Japanese Conglomerate and Chinese groups regarding Offtake and Investment agreements. Any Deal will likely involve inflow of up to US$140m, through Offtake/Equity/Debt, to fund stage 3. Add the fact of the very strong news flow over the coming weeks and months and AGY is shaping up to be perfectly placed and timed to become a significant industry player. Expected newsflow;

- Stage 2 10ha Pond Fill (COMPLETED)
- Stage 2 24ha construction (In Progress)
- 77.5% Earn in completion (COMPLETED)
- Pilot Plant complete/test/Production and GRADE (Q1)
- Tenement Option Uptakes (As reqd)
- Wells/Exp Drilling/JORC (Nearing Completion)
- OFFTAKE/FUNDING AGREEMENT (Q1/Q2 likely)
- First Lithium Sales (Q1/Q2)
- Stage 4 Announcement? (Post first Production?)

I believe fair value currently is around 55c based on Pablo Alurraldes ability and AGYs financial position as well as the near term production milestone. With Stage 2 and
Interestingly AGY management have stated that it is possible the Project will be expanded to stage 4. Meaning either more Landholdings or an operations deal with Enirgi.
AGY has a very strong cash position with approximately $15.2m as of last report and a $1.9m expected outflow this Quarter.

I am confident AGY will become a $1Billion Company. 22 months ago I said AGY is a 1 in 1000 stock – so far this has proven true. Remember Jerko is currently sitting on about 350 bags and hasn't sold a share. I believe Pablo and Co also own shares in the company now (see latest 3b). The most important point is that in any Brine Project the biggest factor determining success is the Chemical Process and Team - AGY has one of the best in the business.

Note I have calculated (Using Enirgi Group DFS) the project has up to 200,000t of LCE that is recoverable.

link to my resource workings and some announcements here;

http://www.argosyminerals.com.au

https://hotcopper.com.au/threads/20...82062/page-1120?post_id=24835008#.WVDmpTPweRs (My Resource Calculations. Adjust for larger land holding now)
View attachment 1005544

http://www.asx.com.au/asxpdf/20170823/pdf/43ln7z8hl42z8r.pdf

http://www.asx.com.au/asxpdf/20161207/pdf/43djz9k4h1c371.pdf

http://www.asx.com.au/asxpdf/20170214/pdf/43fzcy8bwf4378.pdf

http://www.asx.com.au/asxpdf/20170817/pdf/43lgy5dn2stsr7.pdf

https://www.asx.com.au/asxpdf/20180116/pdf/43qvb0mvb9cbnn.pdf

https://www.asx.com.au/asxpdf/20180227/pdf/43rz407vtfszgc.pdf

https://www.asx.com.au/asxpdf/20180213/pdf/43rjq3wk69kg5q.pdf

https://www.asx.com.au/asxpdf/20180130/pdf/43r49sp4qt3gl7.pdf (December Quarter Cashflow Report - 15.2m$ in bank)

https://hotcopper.com.au/threads/hot-off-the-press-agy-related-media.3615954/#.WlNBeCPwe34 (AGY Media Related Information)

https://hotcopper.com.au/threads/pattersons-site-visit-report.3695196/#.WdWy4a3weRs (IMPORTANT READ)

https://hotcopper.com.au/threads/ann-asian-roadshow-presentation.3667305/#.WdWzTa3weRs (IMPORTANT READ)

https://hotcopper.com.au/threads/ann-appendix-3b-options-and-sars.3932426/#.WlHu6CPwe34 (PABLO AND CO?)

https://hotcopper.com.au/posts/29300282/single
(PABLO RINCON HISTORY)

https://hotcopper.com.au/threads/fundamentals.3508506/page-684?post_id=30124895 (IMPORTANT MC ESTIMATES by @BytheHorns)

listed below are some pros and risks with Rincon;

Pros
- AGY earn in 77.5% of the Rincon Project and Puna Mining S.A including Intellectual Property
- Stage 2 Funding completed
- Pablo Alurralde has “Successfully produced Lab-scale LCE product from Salar Del Rincon historically” – translation – His process works.
- Currently 3 options comprising of 2346Ha of mining concessions (less risk for AGY using option agreements)
- 11Ha of ponds already constructed and Brine currently evaporating
- Paterson’s 3rd party analyst calculated project to be able to produce 5,000 – 10,000t LCE/pa based on previous tenement size of circa 1100ha
- Pablo Alurralde strategically aligned with shareholders to produce from the Salar
- Extensive planning conducted by PA (also historically produced small amount of LCE on the Salar)
- Significant resource potential 200,000t LCE (rule of thumb 100t LCE per hectare (@50m depth))
- Pablo Alurralde is a Li brine technical expert (Ganfeng attempted to poach him to help with their project)
- Company continuing to look at more concessions
- JV legally incorporated as Puna Mining Co
- PA and AGY hold intellectual property for the process to be used specifically for Rincon (will remain in house secret)
- Close Infrastructure with Electrical and Gas services
- Supportive and easy to work with Local Salta Government (Pablo is highly regarded in the community)
- PA has extended family in the Local Salta government which helps for future permits (ByTheHorns takes credit for finding this out)
- The Rincon Salar is in the Top 5 Salars for Li resource size
- PA has many contacts in the construction and Li space, giving us a distinct advantage over other players
- Costs on pond construction and plant are known
- PA has Technical reports of benefit of Rincon and other Salars and these are in the hands of management in case AGY wants to further expand into other projects
- Technical team already in place, Pablo as Principle Chemical Engineer, Francisco Alurralde as Engineering Manager, Francisco Menendez as Business manager, Hector Saravia as Geology Manager and Finally AGY’s Jerko Zuvela in Marketing.
- LCE price currently allows for significant margins to be made from brine
- Supply/Demand for LCE forecast for shortage for years to come
- Brine operations are lower OPEX than hard-rock
- Brine production is considered environmentally friendly way of LCE production
- Management and family account for significant amount of Share on issue
- Dilution through CR is minimal now that the project is funded
- Management are exceptional, haven't missed a target to date
- Management not selling their holdings
- Company is run on shoe string budget
- Clear pathway to lithium production now funded
- Opportunity to use Puna Mining technical team in China on significant projects there

Risks
- No guarantee what grade LCE will come out at scale
- Chinese/other government approvals for foreign investment maybe denied
- Cost of extraction maybe uneconomical
- Fallout between AGY and Puna Mining/Pablo
- Planning/cost blowouts
- Plant design failure
- Ponds design failure
- Plant maybe sabotaged
- Ponds maybe sabotaged
- Exploration/mining permits denied
- Dedicated disinformation campaign targeted against AGY
- JORC shows project unviable
- Severe weather event
- Political climate sours
- Process IP maybe stolen
- New battery tech emerges
- LCE price collapses
- LCE supply/demand reverses
- War

This is by no means a fully comprehensive story but it can be used as a rough guide to understand the AGY Rincon Project and from there conduct further research. There are many other small positive factors but these can be found by looking through the great research done by many posters on the AGY threads.

Feel free to comment about anything pertinent that I have missed

Please Remember to DYOR too

GL
Onspeed

Expand

Great work and very timely considering expected in-rush of new followers of AGY thread (seeing some new names already).

Thank you for taking the time to produce this excellent analysis/summary.

The only refinement I can suggest is expanding on political risk, will Argentina increase royalty levels or impose some other tax to get a greater share of the Lithium boom?
Always a risk for any resource project including in Australia.

IMO
DYOR

AGY Price at posting: 32.5¢ Sentiment: Buy Disclosure: Held
16 Upvote

0 Great analysis

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