Hey Folks UPDATE No. 8
I want to firstly link to a very good post by one of our resident chemical engineers, great post mate, suggest you all read and like if you haven't already;
https://hotcopper.com.au/threads/an...ce-produced.4227259/page-349?post_id=33511231
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).
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Rincon Project Tenements
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Stage 2 Ponds - Now filled and Concentrating Lithium
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Stage 1 Ponds Concentrating Lithium
PROCESSING PLANT (Stage 1)
- First Product
AGY has produced its first Lithium Carbonate Equivalent (LCE) Product. The latest announcement from AGY regarding Stage 1 Processing advised the plants ability to remove the main brine contaminants of Mg and SO4 to a Battery Grade Specification. Puna Mining processed material up to the final 3 stages of plant before taking a small sample for manual ‘washing’ due the main line infrastructure gas still being isolated from our plant. This small manual washed sample achieve a Industrial Grade LCE product removing the ‘difficult to remove’ contaminants and metallic impurities. Refer to AGYs statement below;
“
4. What exactly has Argosy produced?
The material sampled is expected to meet 'battery grade' specification in terms of key deleterious elements, but there is some solvent remaining (together with soluble impurities) that has not been washed out properly, meaning the initial batch of LCE produced is ‘industrial grade'. Argosy is extremely happy with the outcome regarding key ‘difficult toremove’elements such as Mg, SO4 and metallic impurities, and the Company is confident the remaining product washing issue is solvable once mains natural gas is available.”
“3. Why is the initial sample size small?
Without the key mains gas reliant stage operating to full effect, the Company cannot complete the last three plant stages on an industrial scale for now (ie, because they flow on from the stage that is not achieving its targeted outcome). As a result, Argosy took a sample from the larger body of the plant material prior to that stage and manually worked the finishing process to establish current product specification available. The 1kg sample referred to in the 5 June announcement is a subset of the material that had progressed through all the prior stages of plant operation.”
The Key point taken from AGYs announcement and comments is that MG and SO4 contaminants have been removed successfully. These chemical constituents were the biggest risk to Pablo Alurraldes process and that risk is now negated. This is a significant milestone in upon itself.
2.
Plant Commissioning
Plant construction is complete and commissioning appears to have extended enough to run product through the majority of stages (except where high flow/constant pressure gas heating is required). The Company advised they attempted to utilise a bottled/temporary system to continue processing but this is not sufficient/fit-for-purpose. Refer to AGYs statement below;
“5. What is the status of the mains natural gas and how long until it is switched on?
The mains natural gas pipeline has been physically extended across the road to the plant site and all the meters / connections have been installed. Argosy is currently awaiting Gasnor S.A. (the gas distributor in Salta Province) to complete its final inspection and issue its approval to initiate supply via the connection. Given that the process is reliant on Gasnor’s actions, the Company cannot provide a hard timeline, but is pushing as hard as possible to have it done quickly. Argosy will make an ASX announcement as soon as the gas supply is switched on.”
“2. Why was the issue with a mains natural gas connection not previously disclosed?
Argosy has always planned for a natural gas connection for the Stage 1 industrial scale plant. However, a ‘work around’ solution to use a tank gas supply was also assembled. It was believed this would still be able to be used to produce battery grade quality LCE until mains gas was switched on, albeit on a less efficient basis. However, it became clear towards the end of last week that the tank gas solution would not provide enough direct heat for enough time on a stable basis for one particular stage of production to have full effect. In that regard, the Company announced the mains natural gas supply issue as soon as it became aware.”
The key point to be taken from here is in regards to the “direct heat”. The process will require a sufficient flow rate/volume to achieve the heat energy requirement. Something which a limited volume system cannot provide.
My opinion is that the latest events move the process from a unproven concept to a proven concept (or the least significantly reduced the risk of failure) I say this due to main contaminants being removed by the plant to a satisfactory level. These contaminants were the main risk and main argument used against the Rincon Salar, those arguments are now irrelevant.
However, more time is required to not only establish main line gas but also to prove the plant end to end and provide data for OPEX, Process limits, Metallic and other impurities, Process timing and Consistency. This data is essential for calculating CAPEX, Business Economies and future OPEX estimations etc.
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 / DRILL RESULTS / JORC
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 in the pictures below.
JORC status is as per below comments from the Company released today;
“6. What is the timing on the JORC Resource estimate and Stage 1 off take agreement?
Both of these items are dependent on third parties. The JORC Resource is being prepared by an external independent hydrogeological consultant and the initial off take is dependent on the key potential initial customer finalising internal processes related to final negotiation and approval of the agreement. These items are very much nearing completion but the Company cannot put a hard timeline on them given they require outputs from third parties. However, they are a key focus for Argosy and the Company will make an ASX announcement as soon as either or both of these items are completed.”
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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 potentially net 50 metric tonne of LCE per annum so potential capacity 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.
SALAR / FUTURE PLANT DEVELOPMENT
AGY already have constructed 11Ha of evaporation ponds which are filled with brine undergoing continuous concentration. Remaining Stage 2 ponds covering an additional 24ha are under construction at the time of this post. The Company has built out additional warehousing and storage infrastructure at the Salar site. Stage 2 Plant will either be in the Pocitos industrial complex or on an additional 31-hectare mining easement right at a nearby industrial site (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.
MY 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 01/01/2018 (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 banned from Cities where local authorities deem appropriate. EV 2017 sales were up approximately 50% YOY. Many of the main brand Auto Companies have committed significant capital to the roll out of EVs (including VW with a US$80B planned investment) This tells me that the transition to EVs 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.
AGY also appear to be in advanced negotiations regarding a Stage 1 off take with a major brand company
Major announcements;
- Stage 2 10ha Construction and Pond Fill (COMPLETED)
- Stage 2 24ha construction (In Progress)
- 77.5% Earn in completion (COMPLETED)
- Pilot Plant complete/test/Production and GRADE (Mostly complete, initial Industrial grade LCE produced)
- Tenement Option Uptakes (Initiated)
- Wells/Exp Drilling/JORC (Nearing Completion)
- OFFTAKE/FUNDING AGREEMENT (Q2/Q3/Q4)
- First Lithium Sales
I believe fair value currently is around 45c based on Pablo Alurraldes ability and AGYs financial position as well as the derisking of LCE production. 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/other party.
AGY have a strong cash position and I don’t see the need to raise funds again for our project from Retail/Soph investors
I am confident AGY will become a $1Billion Company. 24 months ago I said AGY is a 1 in 1000 stock – so far this has proven true. Remember Jerko is currently sitting on about 350 bags and hasn't sold a share. I believe Pablo and Co also own shares in the company now (see recent 3bs). The most important point is that in any Brine Project the biggest factor determining success is the Chemical Process and Team - AGY has one of the best in the business and has just been significantly derisked.
Note I have calculated (Using Enirgi Group DFS) the project has up to 200,000t of LCE that is recoverable.
link to my resource workings and some announcements here;
http://www.argosyminerals.com.au
https://hotcopper.com.au/threads/20...82062/page-1120?post_id=24835008#.WVDmpTPweRs (My Resource Calculations. Adjust for larger land holding now)
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https://www.asx.com.au/asxpdf/20180606/pdf/43vl2fx2y6nf02.pdf (Todays Announcement)
http://www.asx.com.au/asxpdf/20170823/pdf/43ln7z8hl42z8r.pdf
http://www.asx.com.au/asxpdf/20161207/pdf/43djz9k4h1c371.pdf
http://www.asx.com.au/asxpdf/20170214/pdf/43fzcy8bwf4378.pdf
http://www.asx.com.au/asxpdf/20170817/pdf/43lgy5dn2stsr7.pdf
https://www.asx.com.au/asxpdf/20180116/pdf/43qvb0mvb9cbnn.pdf
https://www.asx.com.au/asxpdf/20180227/pdf/43rz407vtfszgc.pdf
https://www.asx.com.au/asxpdf/20180213/pdf/43rjq3wk69kg5q.pdf
https://www.asx.com.au/asxpdf/20180130/pdf/43r49sp4qt3gl7.pdf (December Quarter Cashflow Report - 15.2m$ 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
- Stage 2 Plant equipment being sourced now
- AGY TOP 20 has maintained holding for long term. Filled with management and friends
- AGY earn in 77.5% of the Rincon Project and Puna Mining S.A including Intellectual Property
- Stage 2 Funding completed
- Stage 2.2 Ponds currently being constructed
- Pablo Alurralde has “Successfully produced Lab-scale LCE product from Salar Del Rincon historically” – translation – His process works and has now been reflected with current production result
- Currently 2346Ha of mining concessions
- 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
- Infrastructure supply failure
- 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
Please Remember to DYOR too
GL
Onspeed
