In light of the details coming out on BMW and VWs' battery purchase plans I think it is about time to update this thread. First up some general thoughts on the sector and AGYs latest announcement then the usual info including my excel spreadsheet.
A new dynamic: BMW are sourcing raw battery materials to pass on the battery manufacturer CATL. This is the direction the sector is going overall. They aren't the only ones looking at conducting business this way (cue Japanese and Korean conglomerates..). This news is significant once you understand just how these Auto companies will secure supply of raw material - They will need to invest strategically in mining and chemical companies.. Just like AGY. The fact that Angela Merkel is involved in the dealing of such Auto/Battery agreements shows you how important the EV sector is for future economies. In my opinion the Lithium and EV sector is going to be bigger than anyone has thought so far, and it is coming much, much quicker. I think in the brine space AGY has the most near term potential of securing strategic backing by just these kind of groups.
Fundamentals Update 9
Important:
https://www.asx.com.au/asxpdf/20180713/pdf/43whcmq66k02k5.pdf (
Latest Quarterly Activities)
"The Company has made significant progress on a preliminary off-take arrangement for Stage 1 product, subject to process test-works and provision of customer samples, and is also working towards arranging potential medium and long-term off-take agreements with the highest quality major battery and cathode industry participants, as a result of our fast- track development strategy and industrial scale pilot plant operations testing to prove the quality of our targeted battery quality LCE product."
PROJECTS
RINCON PROJECT BRIEF
On 1 July 2016, the Company announced that they had signed a HOA to earn staged interest up to 90% (currently 77.5% earned) 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 1195584
Rincon Project Tenements
View attachment 1195587
Stage 2.1 filled and 2.2 ponds construction
PROCESSING PLANT (Stage 1)
During the last quarter AGY achieved complete plant start up and continued. Special notice should be given to the company confirmation that removal of difficult brine components (Mg, SO4, Boron etc) have been successfully removed to acceptance levels. Now focus has turned to continuity and replication of results across multiple LCE batches in order to meet customer specification.
“Our strategy and processing works do not follow a well-trodden path (given the very limited nature of lithium brine producers worldwide), and the very limited success of alternative processing solutions, thus the Company’s primary focus is to ensure we are fully satisfied with all our processing works to realise the principal Stage 1 milestone – to produce consistent battery grade LCE product whilst confirming the chemical process is efficient, cost effective and scalable for all development stages.
The Company’s in-house Stage 1 processing test-works have currently resulted in removal of more difficult impurities like sulphates, boron, calcium and magnesium to acceptable levels, and the current focus is ensuring targets for process recovery and re-agent use are met. In addition, current test-works are targeting to replicate results from varying batches of LCE product to ensure product quality consistency, which is critical for future product sales to battery and cathode manufacturers.”
View attachment 1195590
Photos of Stage 1 kit in use
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 Battery Grade 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 averaging 90% cloud free days per year, rainfall is very low due to the altitude at which the Salar sits. There is major infrastructure nearby 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.
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 JORC report official numbers. According to AGYs most recent announcement;
“Resource and brine aquifer remain open at depth – with excellent scope for resource expansion from additional drilling and continued tenement acquisitions”
https://www.asx.com.au/asxpdf/20180619/pdf/43vvwt02ltg9hb.pdf (Link to AGY Maiden JORC)
View attachment 1195596
View attachment 1195593
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.
Puna Mining JV now own 100% of all land titles
https://www.asx.com.au/asxpdf/20180528/pdf/43vbjqrln39gm3.pdf (Title purchase)
SALAR / FUTURE PLANT DEVELOPMENT
AGY already have constructed 11Ha of evaporation ponds which are filled with brine undergoing continuous concentration. Remaining Stage 2.2 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 (Cross-batch continuity and modelling ongoing)
- Tenement Option Uptakes (Completed)
- Wells/Exp Drilling/JORC (Completed)
- Offtake/Funding Agreement (Q3/Q4)
- First Lithium Sales (Q3/Q4)
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 $1Billion Company. 26 months ago I said AGY is a 1 in 1000 stock – so far this has proven true. Remember Jerko is currently sitting on about 350 bags and hasn't sold a share. I believe Pablo and Co also own shares in the company now (see recent 3bs). The most important point is that in any Brine Project the biggest factor determining success is the Chemical Process and Team - AGY has one of the best in the business.
Note I have calculated (Using Enirgi Group DFS) the project has up to 200,000t of LCE that is recoverable. (old estimate - correct)
link to resource workings and some announcements here;
(
@GeForce SP calculator)
https://hotcopper.com.au/threads/fundamentals-new.4113475/page-244?post_id=33755110 (Link to Resource, Processing, MC calculator)
http://www.argosyminerals.com.au
https://www.asx.com.au/asxpdf/20180606/pdf/43vl2fx2y6nf02.pdf
http://www.asx.com.au/asxpdf/20170823/pdf/43ln7z8hl42z8r.pdf
http://www.asx.com.au/asxpdf/20161207/pdf/43djz9k4h1c371.pdf
http://www.asx.com.au/asxpdf/20170214/pdf/43fzcy8bwf4378.pdf
http://www.asx.com.au/asxpdf/20170817/pdf/43lgy5dn2stsr7.pdf
https://www.asx.com.au/asxpdf/20180116/pdf/43qvb0mvb9cbnn.pdf
https://www.asx.com.au/asxpdf/20180227/pdf/43rz407vtfszgc.pdf
https://www.asx.com.au/asxpdf/20180213/pdf/43rjq3wk69kg5q.pdf
https://www.asx.com.au/asxpdf/20180130/pdf/43r49sp4qt3gl7.pdf (December Quarter Cashflow Report - 15.2m$ 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
- Stage 1 Process proven to remove contaminants
- 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
- Cost of extraction may be uneconomical
- Fallout between AGY and Puna Mining/Pablo
- Planning/cost blowouts
- Plant design failure
- Ponds design failure
- Plant sabotage
- Dedicated disinformation campaign targeted against AGY
- Severe weather event
- Political climate sours
- Process IP maybe stolen
- New battery tech emerges
- LCE price collapses
- LCE supply/demand reverses
- War
My thoughts and opinions are mine. Always DYOR and Good Luck
(20min delay)