Besides the big miners, Morella Corp (ASX:1MC) probably has the most battle-hardened lithium team in the business.
1MC’s current management is a slimmed down version of the Altura team which built and operated its namesake lithium project, now owned by neighbour Pilbara Minerals (ASX
LS) after Altura went into administration in 2020.
Coming out of 16 months in suspension, Altura was renamed Morella and recapitalised with a couple of new lithium exploration projects on the go — including ‘Mallina’ in WA’s Pilbara and the ‘Fish Lake Valley’ brines project in Nevada, USA.
* spoke with CEO Alex Cheeseman about keeping the A Team together.
“These guys have done it before, had success, and are looking to do it again,” he says.
Altura appeared tantalisingly close to turning things around before going into administration. Was it a case of you guys just missing the new lithium boom?
“It was a very frustrating and disappointing period,” Cheeseman says.
“We had seen green shoots emerging in the market and were starting to push sales prices back up, [but] we had an expensive finance facility that needed to be addressed.
“In the second half of 2020 we embarked on a large ~$200m capital raise, with strong industry support. It was to be fully underwritten [and] the proposed raise was in line with terms offered under agreed terms to the lending group.
“The deal would have retired the majority of the debt plus provide us with a healthy working capital buffer.
‘If we do hit it the story becomes very simple – it’s hard rock, it’s the Pilbara. We know both very well’
“The day prior to the formal capital raise launch we were expecting approval and consent to finalise the process, however instead we were issued with a default notice plus notification of the appointment of receivers and administrators.
“48 hours later Pilbara Minerals (ASXLS) secured the lithium assets via a fully underwritten offer that was accepted by the lending group. We were all devastated by the loss of an operation we had taken from discovery to full production.”
So you had the loan in place, in principal, and that got yanked out underneath you at the last minute. How did you save the company out of administration?
“There were two DOCA processes. Pilbara Minerals put forward a DOCA for the Altura Lithium Operation, which was successful,” Cheeseman says.
“The administration process for the parent company of ALO – Altura Mining Limited –had its own set of creditors, they were principally our corporate creditors.
“The Altura board of directors put together a DOCA for Altura Mining whereby they funded the payment of the creditors, put working capital back into the company to keep it going, paid the administrators fees and charges.
“There were two other groups trying to acquire the shell, but we were ultimately successful in regaining control of our company.
“Control of the company was formally handed back to directors in March [2021].
“That allowed the directors to then focus on resetting the company – acquiring projects, raising money, and going through all the historical compliance reporting and auditing to get the company requoted with disallowed.”
Surely the leadership team would’ve been shattered by the whole process. Why didn’t you just get a job somewhere else?
“James Brown (the managing director) and the board are very loyal people,” Cheeseman says.
“A lot of shareholder value was decimated at the back end of 2020. They wanted to do everything they could to try and recover value for shareholders.
“They also have large stakes, so recovering value for shareholders is also recovering value for themselves. We all had a vested interest.”
“We had a great operational culture at Altura. We have had several ex-staff across a range of disciplines reach out over the last few months saying, ‘I want to come back and work with the team again’. That’s really nice.”
How many of the current Morella board and management are ex lithium miners?
“We all have lithium experience – it’s certainly not the case of just ‘following the lithium dream’,” Cheeseman says.
“Morella is basically a slimmed down version of the team that took the Altura project from resource delineation through to production.”
Lithium stocks are a dime a dozen. From an investment standpoint does the team set you apart?
“This team has done it before, had success, and are looking to do it again. We have long term industry relationships and we have built trust with many lithium peers,” Cheeseman says.
“One of the things I noticed at the back end of 2020 — when I had been made redundant like everyone else — was that I picked up work very quickly with several emerging or aspiring lithium market entrants.
“It became apparent that the four years of experience I had was light years ahead of this next wave, the next generation of people coming through.
“It will be important to be able to learn from that operating experience — having taken a project from bulk earthworks through to operational production – during Morella’s next phase.
“The plan is to develop a project and bring material to market. It’s what we have done before and want to do again.”
Tell us about the projects.
The 10 exploration tenements making up the Mallina project in the Pilbara.
“There has been a lot of historical work at Mallina; almost 4,000m of drilling by Sayona Mining (ASX:SYA), and another two years of detailed mapping and study work by the Altura team,” Cheeseman says.
“We’ve confirmed there is mineralisation there.
“There is nothing outcropping; the landscape is dead flat, but we believe the primary orebody that is giving rise to this surface mineralisation is probably at depth; probably in the 300 to 400m range:
“The drilling program we have planned for 2022 is targeting those blind pegmatites.
“We have seen this style deposit with some other developers; it’s also a relationship that was seen at Pilgangoora so there is regional precedence.
“We have seen quite decent grade intercepts near surface; 5-6m that are assessed as feeding from a larger source somewhere. We are looking for that larger source.
“We are going to drop three holes, 450m each, to try and intercept that primary orebody.
“If we do hit it the story becomes very simple – it’s hard rock, it’s the Pilbara. We know both very well.”
Fish Lake Valley is close to the US’s only current lithium operation (Albermarle’s Silver Peak mine).
“Fish Lake Valley is an interesting one. It may have been considered a lower grade brine resource with challenging economics in the past if you compare it to South American resources,” Cheeseman says.
“But with the explosion in technology and resources focussed on direct lithium extraction (DLE) processing tech – that’s where it becomes an interesting proposition.
“Lithium Corp, which Morella has an option agreement with for that project, has some preliminary DLE processing work completed by a group out of Canada. That work, while preliminary, was very favourable, concentrating a low grade sample to a commercially viable product in just 45 minutes.
“We have commissioned that same group to do a full study.
“There has been a lot of work done at Fish Lake but insufficient as yet to complete a JORC Resource estimate. We are approaching it more as greenfields – starting with some geophysical work, really spending time building up an understanding of the mineralisation, the hydrogeology and ultimately, trying to work toward a resource that can be extracted and processed into lithium chemicals.”
Are you looking at further project acquisitions?
“From our perspective after the re-quotation with the ASX, which was conducted on the basis of compliance, there is a period of time whereby we were advised that any sort of acquisition would likely not be looked on favourably,” Cheeseman says.
“Our focus since re-listing has been to put time into better understanding and developing the two projects, which both hold great potential.
“We are interested in additional projects but anything we look at must be 100% lithium focused and also be in proven lithium jurisdictions. Any such acquisition will obviously be managed carefully with support from our advisers and in close consultation with relevant regulators.”
