Western Lithium Company (H2 2014 Update)

| About: Lithium Americas (LACDF)


Commercial OrganoClay Production in Q3 2014.

Lithium Pilot Plant Operational in Q4 2014.

Lithium DFS Expected by EOY 2015.

(Editor's Note: Investors should be mindful of the risks of transacting in illiquid securities such as WLCDF. Western Lithium's listing in Toronto, WLC.TO, offers additional liquidity, but is also relatively illiquid.)

Western Lithium Company

Featured In: January 2014

Partnership Average Cost per Share: $0.24

Current Market Price (July 15, 2014): $0.54

Since I wrote about Western Lithium Company (OTCQX:WLCDF) six months ago as the Partnership's Featured Investment, the company has been on fire. Remember that given the unique properties of WLC's Kings Valley project, the company is on track to produce both OrganoClay and lithium carbonate in the upcoming years. However, the hallmark of H1 2014 has been the intense speculation regarding Tesla's gigafactory, which may very well be located next door to Kings Valley in Reno, NV. This led to a share price spike of up to $0.90 per share in early April 2014. The company has leveraged this dramatic spike in investor interest to raise $13M in capital over the past six months (the remaining $4M from Orion and $9M from a May PPM @ $0.58). This brings the company's treasury to a healthy $15M. It is remarkable that the company has increased its treasury (in January 2014 it stood at ~$12M), even as it continues construction on both (1) the OrganoClay manufacting plant in Fernley, Nevada and (2) the lithium demonstration plant in Germany.

The OrganoClay operation is months away from providing near term cash flow, a luxury in bear markets. The company is currently in Phase II of construction and, on May 22nd, announced that all necessary permits have been received to begin commercial production in Q3 2014. According to CEO Jay Chmelauskas: "We currently have approximately 3,000 tons of excavated Hectorite clay that is stockpiled and ready for the commissioning of our Fernley Hectatone manufacturing facility…Once the Hectatone plant construction is completed by the end of summer, a gradual production ramp-up is expected in the fall to match our planned product sales." I expect news flow in the near future announcing the identity of one or more Hectatone offtake partners. (An offtake agreement is where a producer of a resource and a buyer of a resource agree to purchase/sell portions of the producer's future production.)

Meanwhile WLC's ambitions to produce lithium carbonate remain well on track. As WLC will be the first to produce lithium carbonate from hectorite clay, the success of the Germany-based lithium demonstration plant is paramount. In late May, the company announced that "First calcination of our lithium ore is scheduled to commence in July, and the lithium plant is scheduled to be operational for potential strategic investors to visit in October and November, 2014. The plant will likely continue trials into early 2015." This plant is important both to (1) demonstrate to potential off-take partners the viability of lithium extraction from Hectorite clay and (2) provide data for the Feasibility Study, the final technical study needed before construction can commence. My expectation is that WLC will release their lithium Feasibility Study by the end of 2015. Assuming that financing is readily available upon completion of the Feasibility Study, the company should be able to produce 13,000 tpa of lithium carbonate by the end of H1 2016 and double this to 26,000 tpa by the end of 2018.

Disclosure: The author is long WLCDF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.