Resource World Magazine

a u g u s t / s e p t e m b e r 2 0 1 6 www.resourceworld.com 27 iNvESTmENT What investors should look for in a lithium company by Ellsworth Dickson Lithium exploration stocks have lately been on fire with the perception that the white metal will be in demand for electric cars and electronic device batteries. With the cur- rent lithium claim staking rush underway and more than 50 exploration companies seeking the world's lightest metal, resource stock investors may be interested in how to evaluate this specialized mining sector. First, a primer. Basically, there are three types of lithium deposits: hardrock spodumene or lepidolite deposits; brine evaporite salt lake deposits; and lithium clay deposits (which have not yet proven economic). Obviously, a salt lake is a totally different geological environment from a hardrock deposit and calls for different exploration techniques, although a few are similar. Each type of deposit has its own exploration and development challenges; however, in the end, of course, the project must demonstrate economic viability. Dr. Catherine Hickson, P.Geo, COO and International Exploration Manager for Dajin Resources [DJI-TSXV], explained to Resource World, "The exploration process differences are huge. Lithium accumu- lates in brines within closed basins under specific climatic and geological condi- tions. Lithium can originate and build up from volcanic ash, geothermal sources or the bedrock that surrounds the basin. Groundwater carries the lithium into the basin where it evaporates and the lithium concentration increases." She pointed out that this only happens in a few places around the world – the Nevada Hub, (Clayton Valley, Fish Lake Valley), Argentina, Chile and northwestern China. "Using standard evaporation pond technol- ogy, it is possible to process the brines cost effectively," she said. "To start the explora- tion process, you look for the right climate, closed basins and regions of known lithium concentrations." Regarding the other two types of lith- ium deposits, hectorite is a lithium-rich clay that presents processing problems. True hardrock deposits contain the miner- als spodumene or lepidolite in pegmatites that can be easily processed. Pegmatites are coarse-grained igneous intrusions found as dykes, lenses or veins. However, being rock, these deposits need a mill for crushing, grinding and so on which calls for higher capital costs than brine projects. As an example of grade, Nemaska Lithium's [NMX-TSX] advanced hardrock Whabouchi Project in Quebec has 27.9 million tonnes with an average grade of 1.57% Li 2 O in the measured and indi- cated categories. Dajin's early stage Salinas Grande salt lake in Argentina features anomalously high lithium concentrations, up to 1,600 ppm, in near surface brines. Various geophysical surveys are carried out for both brine and hardrock explora- tion. "Gravity surveys are used for brine (salar or playa) exploration as it indicates the depth of the basin and, hence, the potential size of a deposit," Hickson said. "Seismic surveys are used to identify indi- vidual layers that help develop targets. Other electrical methods can register con- ductivity in the salt rich brines." For hardrock exploration, aeromagnetic, gravity and ground magnetometer geo- physical surveys are used. This is followed up with trenching and channel sampling of spodumene mineralization in the peg- matite host rock. Drilling brine salars can be done with a rotary drilling rig that creates chips. Typically, diamond drilling is used for hardrock exploration, a more expensive technique. "The geological exploration challenges are completely dif- ferent between brines and hardrock," she said. "For brine deposits, explorers need to know if the lithium-rich layers extend throughout the basin or not." On permitting, Hickson said that it doesn't matter whether it's a brine or hardrock deposit, permitting is totally dependent on the jurisdiction. Then there are different kinds of permits – explora- tion, drilling, building, water, etc. So what should resource stock investors look for when considering lithium stocks? "I think investors should look for expe- rience in lithium exploration, whether hardrock or brine," said Hickson. "For example, an investor could look for a good brine project that has a large footprint in the right area. Our Teels Marsh brine proj- ect covers an entire salar." Brian Findlay, President of Dajin Resources, added, "Investors should look at the stock price, the management team behind it and potential for upside appreci- ation. Watch out for lithium juniors whose share price has gotten ahead of exploration results. See what work has been done and what the company actually delineated." n

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