We have Launch on Process Plant Operations. I did speak to Jerko very briefly to get context around what a batch is. All good
Big News out of Left Field is that both Jerko and Alex were in meetings all day today at KDR in Seoul (Korea Development Bank). This is the top tier of the top tier kind of stuff.
Expected Announcements
- JORC (1Q/2Q 2018) (15,000 - 20,000Tp/a x 10y - My estimate)
- Stage 1 Production Startup ("STARTED - TODAY")
- Stage 1 Production Grade results (WITHIN WEEKS)
- Stage 1 Product Shipping for Customer Evaluation (2Q 2018)
- Stage 1 Continuous Production and Sales (CIRCA US$10M REVENUE P/A)
- Stage 2.2 Ponds Construction - Additional 24ha (APPROVALS GRANTED - STARTED)
- Stage 2.2 Ponds Fill and Evaporation
- Stage 2 Plant Construction Start (SOURCING COMPONENTS - PABLO ALREADY VISITED PARTS SUPPLIERS)
- Stage 2 Process Initiation and Testing (2H 2018)
- Stage 2 Grade Results (2H 2018)
- Stage 2 Offtake/Sales (CIRCA US$25M+/- REVENUE P/A)
- ASX 200/300 addition (2019)
- Stage 3 Design and Engineering
- Stage 3 Offtake/Debt/Equity deal (TOP TIER JAPANESE, SOUTH KOREAN OR CHINESE CO)
- Stage 3 Pond Construction - Up to 300ha
- Stage 3 Pond Fill and Evaporation
- Stage 3 Plant Construction Start
- Stage 3 Process Initiation and Testing
- Stage 3 Grade Results
- Land Acquisitions
- Future JV's
- Takeover of other Projects/Companies
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).
Rincon Project Tenements
Stage 2 Ponds - Now filled and Concentrating Lithium
Processing Plant (Stage 1)
Today AGY announced start-up of Stage 1 Processing Plant. A milestone which has been two years in the making. It is important to realise that initially the Stage 1 Plant was purely a 150tpa Lab-scale facility for “proof of concept”. The company expanded the size to 500tpa to both “prove concept” and allow for production and initial sales.
Prior to today Pablo Alurralde’s process should be considered a chemical formula concept however the following weeks will be see Pablo
“refining the chemical balances, formulations and equipment settings”. This is an important step for the process solution proofing as it gives an immense amount of data applicable for the future of operations.
The first “batch” is important for our testing. The lab spectroscopy(?) unit will likely be used to test initial brine concentrate input, they then run the batch with known quantities of reagents and then test the resulting output product. This process is then repeated again and again with each time making small adjustments to temps, reagent mix, additive timing etc. Until they nail the most efficient and cost effective way of producing high grade LCE. This is the time that we need to be patient IMO as this process is absolutely crucial for a number of reasons; 1. Taking the time with this step can potential save thousands of dollars in time and OPEX
2. Process limit data and Concentrate requirements/barrier data can be determined which;
Allow us to fully exploit the Rincon Salar tenements and Pond Concentration timing
Allow us to determine accurate numbers of future ponds needed for Stage 3
Allow us to determine Stage 3 Plant sizings and costs more accurately
3. Prove undoubtedly that Rincon can be capitalised on
4. Prove that our Solution can exploit other Salars
5. Make us an attractive JV partner to other companies who don’t have a simple and proven process (Enirgi + many more)
6. Allows for consistent and clean Battery Grade LCE production
7. Allow for stage 3 investment and off take agreements
I expect 1 - 3 days per “batch” with perhaps up to 10 or so batches in order to have a decent data set to conclude “testing” and begin full ramp up to 24/7 operations however this is only an educated guess. Battery Grade LCE could come quickly or take the whole set of batches however each batch gives us some kind of LCE product and a much better understanding each time. The significance of today and the potential in the following weeks has been severely underestimated I believe, but am happy buying at these levels also.
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
AGY Announced last week that JORC Compliant Resource Estimate AND a PEA are currently in the works. This requires the drilling of 2 more holes bringing the total number to 10 exploration holes
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;
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 continuous concentration targeting initial LCE production during March/April 2018. Remaining Stage 2 ponds covering an additional 24ha are under construction at the time of this post. Stage 1 plant will be in a city within the Salta region close to the project. 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;
I believe fair value currently is around 65c 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 another entity
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.. 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;
AGY Plant operational - proving we a far ahead of other brine companies
Stage 2 Plant equipment being sourced now
AGY TOP 20 is incredible
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
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)
Company continuing to look at more concessions
Close Infrastructure with Electrical and Gas services
Significant resource potential 200,000t LCE (rule of thumb 100t LCE per hectare (@50m depth))
Extensive planning conducted by PA (also historically produced small amount of LCE on the Salar)
Pablo Alurralde strategically aligned with shareholders to produce from the Salar
Pablo Alurralde is a Li brine technical expert (Ganfeng attempted to poach him to help with their project)
Stage 2.2 Ponds currently being constructed
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
- 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
Feel free to comment about anything pertinent that I have missed
Rincon Project Tenements
Stage 2 Ponds - Now filled and Concentrating Lithium
(20min delay)
