Peru Prepares For The Lithium Boom - And This Time It's For Real

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Includes: PLUUF
by: Juan Carlos Zuleta
Summary

In this study, progress being made to implement the first lithium project in Peru by Plateau Energy Metals, the Canadian company that discovered the metal in 2018, is evaluated.

The announcement of an updated mineral resource estimate for the Falchani Project in Puno and the filing of a 43-101 Technical Report of the company are seen as positive results.

But this hasn’t prevented a significant fall in the stock value since the discovery of lithium in July 2018 pointing to the need for a prompt implementation of the project.

Although the Peruvian project may now be the third largest hard rock lithium resource in the world, challenges remain to make this venture a success story.

The article closes with a narrative about my assistance to a local engineering society to organize the first international seminar on lithium to be held in Puno next May 10th.

Plateau Energy Metals (OTCQB:PLUUF) is the name of the company that discovered the new lithium resources in Peru. This occurred in the second half of 2017, but the news became viral on the web only in July 2018. I took up the subject for the first time that month, and in that article, apart from clarifying some minor technical points, I argued that even though the Canadian company did not unveil the largest identified lithium resources on earth, it could nevertheless aspire to a fifth or sixth place in the global production of lithium. In addition, I thought that it would be unrealistic that the company begin production by the end of 2020 mainly because many regulations to extract lithium from uranium deposits were not yet in place and their approval may take more time that that required for regular spodumene ores.

I intend to review these two ideas below. But let me stress for the time being that Plateau Energy Metals seems to have done a good job advancing its lithium project in Peru since I was in Lima in October last year to present on lithium in Bolivia at the First International Conference called Litio Peru 2018, organized by Energia Magazine.

Indeed, in March 4, 2019 the company announced an updated mineral resource estimate for its lithium project now called "Falchani," which almost doubled the previous result. (Incidentally, due to an erroneous information circulating on the web when writing my Seeking Alpha contribution, I mistakenly assumed that the estimated resource figure was 2.5 million tons of lithium, not lithium carbonate.) And just a few days ago it filed an independent National Instrument 43-101 - Standards of Disclosure for Minerals Projects (NI 43-101) technical report on the updated mineral resource estimate at the Company's Falchani Lithium Project anticipated on the above mentioned date.

Nonetheless, as shown in Figure 1, the stock seems to have followed a pronounced downward trend after the hype around the discovery of lithium in Peru in July 2018. Yet investors appear to have valued relatively more the initial information on the new estimate of lithium resources provided in the beginning of March of this year than the news about the filing of the NI 43-101 technical report that took place in the last week of April. In this context, reversal of this tendency will likely require clear signals of a prompt implementation of the project.

Figure 1

We should be now ready to reevaluate the two conjectures I advanced in my previous Seeking Alpha contribution.

Over the last two weeks or so, I have been wondering just how important the lithium discovery in Peru might be at a time when the metal is beginning to make headlines everywhere. A starting point for pursuing this line of reasoning was of course enquiring about the contention by Plateau Energy Metals that the Falchani lithium project would now rank as the 6th largest hard rock lithium resource in the world.

It has then come as a surprise that this lithium project may not be the sixth but the third largest hard rock lithium resource in the world. See Table 1 where Falchani ranks after the Greenbushes and the Pilgangoora - Pilbara projects.

As promising as it might be, two challenges remain and may have to be faced in the years ahead to insure the success of this project. They have to do with the difficulties I foresaw when suggesting my doubts about the possibility of starting production towards the end of 2020. One pertains to the fact that we may be in front of a project with the lowest concentrations in terms of Li2O of all of those being in production at the present time. And, another, to the hurdles of developing the first project on earth to extract lithium from uranium deposits as well as the first lithium project in Peru. Here special attention should be paid to the still missing mining and environmental regulatory framework for this kind of projects in the country, despite promises of the highest authority of Peru to overcome this problem in a timely fashion.

Table 1

Lithium Resources in Hard Rock Projects in Operation and the Falchani Project

Note 1: The Greenbushes operation is ranked second taking into account that its resource data can be traced back to 2012 and no updated figures are freely available. Note 2: Numbers of Contained Li2CO3 were obtained after converting Li2O concentrations into Li2CO3 concentrations using a conversion factor of 2.473. Sources: [1] Clients3.weblink [2] ASX; [3] Golden Dragon Capital; [4] Pilbara Minerals; [5] Altura Mining; [6] SEDAR.

This takes us to the last part of the present article referring to the interest of a group of professional engineers in the surrounding area of the project not only in the progress of the region but also in making university students of different areas fully aware of the technical challenges and opportunities of producing lithium in Peru while building up the support of the government to the project. In this connection, about a month and a half ago the Metallurgical Engineering Society of Peru - Chapter Puno decided to organize a new seminar on lithium in Peru to be held on May 10th to begin a technical discussion on the subject. I was back then invited to participate. During my first contact with the organizers, I advised them that to warrant complete success of the event, they had to focus on extraction, processing and commercialization of lithium from hard-rock rather than brine. I then also conveyed to them my view that it was of outmost importance to directly involve the Canadian company that discovered the lithium in Peru in this endeavor.

I suppose my explanation of what needed to be done was so convincing that much sooner than I would have ever imagined, I found myself embarked on a search for one or two additional specialized speakers for the new seminar. After some failed attempts to accomplish this task, I deemed it appropriate to ask two friends of mine to participate at the seminar. One of them - whom I had met some months back in Lima while attending the Litio Peru conference - excused himself from participating on the grounds that he didn't feel comfortable enough to present on the extraction and processing of lithium from hard rock as he was more akin to the extraction and processing of lithium from brine. The other, with whom I maintain a 10-year friendship - declined to be part of the seminar due to a schedule conflict. Both though were kind enough to suggest substitutes.

My first friend's pick was Rob Bowell, a geochemist with 30 years' experience currently Corporate Consultant with SRK Limited and an adjunct professor at Queens University in Ontario, Canada. Jose Hofer, a young mining engineer from the Catholic University of Chile with studies on mining economics at Columbia University and the Colorado School of Mines, work experience at SQM and a current position as Senior Analyst at Benchmark Minerals Intelligence was my second friend's choice. I couldn't be more delighted to be part of such group of distinguished speakers.

The program and content of the seminar can be described as follows. First, the inaugural remarks will be made by Luis Aguilar, President of the Metallurgical Engineering Society of Peru, Chapter Puno. Second, Ulises Solis, executive manager of Macusani Yellocake S.A.C., subsidiary of Plateau Energy Metals in Peru, will express some thoughts about lithium in Puno as a new energy paradigm. Third, mining engineer Romulo Mucho, former Minister of Mines of Peru and successful businessman will present on how lithium could boost the development of Puno. Fourth, Rob Bowell is expected to talk about the key challenges and opportunities in the extraction and processing of hard rock lithium ores. Fifth, Jose Horfe will discuss the processing and commercialization of lithium concentrates, carbonate and hydroxide from hard rock resources. And, finally, I will speak of the role of lithium hydroxide in the energy value chain of the metal. The poster, basic information and program of the seminar can be found here.

Time will tell whether these kind of seminars could be replicated in the future to enhance the awareness of local communities and motivate the support of governments to accelerate implementation of similar lithium projects in other parts of the world. As of this writing, the organizers have just told me that the seminar has thus far generated a great deal of expectations among the local community and the government and promises to be real success. I'll keep you posted on how things finally unfold.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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