Pursuit Minerals (ASX: PUR): an Argentinian lithium play

 

Pursuit Minerals (ASX: PUR)

We talked to Aaron Revelle, Chief Operating Officer of Pursuit Minerals (ASX: PUR), about the company’s new Rio Grande Sur Lithium Brine Project in the Argentine province of Salta.

The company currently has a non-JORC inferred resource of 2.1 million tonnes Lithium Carbonate Equivalent at an average grade of 370 mg/Li and is working towards increasing that resource and switching it over to JORC.

The company recently bought a pilot plant with a nameplate production capacity of 100 tonnes LCE per annum and is working towards feasibility studies.

Pursuit is in great company in the Lithium Triangle, close to Livent’s Fenix operation at the Hombre Muerto Salar and Allkem’s Olaroz Lithium mine.

Full transcription below.

 

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Transcription

 

Stuart: Hello, and welcome to “Stocks Down Under.” My name is Stuart Roberts and I’m one of the co-founders of our service. And joining me today from Melbourne, on the morning of Tuesday, the 30th of May, 2023 is Mr. Aaron Revelle, who’s the Chief Operating Officer of Pursuit Minerals, ASX, PUR. Aaron, good morning.

Aaron: Good morning.

Stuart: Or should I say, buenos dias? I suspect you’ve had enough time to get fluent in Spanish, given how often you go back and forth to Argentina over the last eight years looking for the big lithium payoff.

Aaron: I wish I’m more focused on the lithium but I’ve picked up a few words. But, you know, having said that, no, I’m not fluent as yes. And I’m not looking for…I don’t think I’ll get there in the foreseeable future, unfortunately.

Stuart: All right. Let’s talk a language that we’re both fluent in and that’s lithium. Pursuit Minerals has just acquired a pretty significant project in Salar Province of Northwestern Argentina. Now, for those of us who know the lithium brine space, the lithium triangle, Chile, Bolivia, and Argentina, and the big money is on the three provinces in Northwestern Chile, Hui, Salta, and Catamarca. You’ve just laid your hands on a resource worth about…potentially, you’ve gotta switch it over to, but maybe 2.1 million tons of lithium carbonate equivalent on the Rio Grande Salar. Well done on that transaction. How easy was it to get it all together?

Aaron: It wasn’t [inaudible 00:01:37] there. It’s a very interesting state of play at the moment, and that really comes down to the availability of the projects. As you’ve mentioned, you’ve got the lithium triangle. There’s 50% of the world’s lithium resources within, you know, that area of Bolivia, Chile, and Argentina. If you look at the three participants of that area in terms of Bolivia, that’s very unlikely to ever have a commercialized lithium project. And that’s kind of been the widespread consensus opinion for the past couple of years. You then have Chile which has announced its nationalization incentives. The thoughts are now, is this going to be a soft nationalization, or will it be a hard nationalization?

So, whilst they’ve announced cooperation and discussions are ongoing with major companies, SQM talking with Codelco. If you revert back to 1971, there was a constitutional amendment six years later, 1977, it was the formation of Codelco and all the American copper companies had their mines taken from them. The thought process is that, to repeat that, if you look at the significance of copper in Chilean GDP terms, copper accounts for about 15% of total GDP. So, from that perspective, there is a strong view that the Chilean nationalization plans may actually be a lot harder over time as the conversation develops than what was first announced.

Stuart: In which case, Argentina, let’s just wave the flag there, is the only game in town. Right?

Aaron: Absolutely. And it really points down to the Argentinian, [inaudible 00:03:06] being that area for foreign direct investment. The Argentinian mining minister, Fernanda Avila, came out recently ruling out blanket nationalization, the constitution doesn’t allow for it. The provinces regulate and control the mining code. So, from that perspective, if you look at Argentina, there’s really only about 11 salars. There’s a few other little Lagunas, but the 11 salars are the high points. And we were able to get a very good tenement position on the Rio Grande Salar. Which for us was quite momentous given that if you are, firstly, if you’re gonna be playing in the sandbox, you’ve gotta find a place to play. And we were able to stake a really good position on a project that was significantly de-risked from an expiration site. It already had, as you mentioned, an NI 43-101 resource on the entirety of the salar.

So, our project sits within an existing NI 43-101 resource. On top of that, we were able to add a lot of the chemical engineering work from adjacent salars with similar brine chemistry and do some of the groundwork that was required to actually look at processing the lithium. So, the project in itself was quite difficult to obtain as… We didn’t deal with a public company, we were dealing with local Argentinian vendors, and there were multiple local Argentinian vendors at the same time. So, is a patchwork quilt of individual tenements that when brought together had the critical mass for a substantial project, which is not exploration. It’s a development opportunity in the prime area of the lithium triangle at the moment.

Stuart: Right. And you are now talking comparisons with, Agosi and Galan, two companies that have been quite successful in ASX. One’s got a market capitalization closer to a billion, the other at least half a billion. How do you draw the similarities there?

Aaron: So, really if you look at the value drivers of these two companies, they have different value drivers. Galan is what I would say is a resource-heavy valuation where they have a massive, I think it’s nearly 8 million ton JORC resource. The project, however, doesn’t have the chemical engineering and the production scenario that Agosi have. Agosi have a much smaller resource. It’s only around 250,000 tons. And that’s a small resource in terms of what is in the triangle, and especially in Argentina. But they have that value driver of a production scenario. So, you know, they’ve gone from 1,000-ton pilot plant to a 2,000-ton plant, which is going through commissioning now at the [inaudible 00:05:38] project. And as a result of that 2,000-ton plant, and that has a strategic investment from Mitsubishi involved as well, that’s really where you’ve seen the driver of their market capitalization come from.

When we draw our comparisons, Pursuit has both of these in play. So, we have the JORC resource potential, which is from that existing NI 43-101, that we’re going through our advanced exploration program now over the six months towards the end of this year, which will encompass TEM CSAMT survey and a substantive drilling campaign. Which for us, we’re very fortunate, as within our resource calculations, once we’ve finished our own campaign, there’s already five existing drill calls that will be able to be added by our CP. So, we have a good opportunity in terms of resource and resource scale which will create that first value driver.

Stuart: And so importantly, the resource you’ve already got, you’ve only estimated that from the first 100 meters. These salars tend to be rich in the lithium right down to about 500 meters.

Aaron: Well, it’s even further. Some say, you know, where is the basement, you know. So, some people estimate [inaudible 00:06:45], for example, goes down to nearly 1,000 meters, 1,200 meters, even 1,500 meters. So, most people are pumping and having significant intercepts at that 400-meter to 600-meter profile. And there’s also another thematic which is very common which was seen on Pastos Grandes, which is when you actually drill the lithi… The deeper you go, the lithium content increases. So, as you’re increasing, and let’s say there’s a factor of five scalability that’s just on the base rate of your lithium, you know, you’re not factoring in additional lithium grade that obviously increases the tons. So, you know, from that perspective, you could have… The Rio Grande Salar could hold anywhere from 2 million, which is that base rate at 100 meters now, you know, it could go as high as 10 million, 15 million tons, you know, because [inaudible 00:07:30.374] which is a very similar size in that sort of 25-kilometer strike, north to south, that has a resource of 16 million tons.

So, now from that perspective, you could have a very high resource, especially on our ground, because we are right in the main depo center, which is one of the…where the concentration of the lithium aquifers is. So, we’re very fortunate that, for us, you know, something over a million tons, you know, could be a possibility for us, which is, you know, as I stated, that’s five times the size of the Agosi resource, if we can get it to that level. However, going back to Agosi, the real driver of Agosi is the production piece, which for us, we just optioned up to acquire an existing lithium carbonate pilot plant. Which, if you go back to 2018 when Agosi announced they had produced their first, you know, 10 kilos from their pilot plant at 100 tons, the market cap in 2018 was $350 to $400 million.

So, for us to be having that milestone also on the horizon, as the plant is fully permitted, it’s fully operational, it’s ready to go in the city of Salta, which when we commence our pumping wells will be taking the brine from the Puna down to start that process. We have a lot of immediate near-term activity that could have some significant rerating events for us in terms of the value drivers being both that production piece, but also the resource piece that those two companies their valuations are driven by.

Stuart: Let’s talk about the location. Yeah. Salta City is about 300 kilometers in one direction. The Chilean port of Antofagasta, about 300 in the other direction, roughly. So, this is a remote part of South America. But there’s grid power available and gas pipelines in the neighborhood. How well placed are you, infrastructure-wise?

Aaron: Look, we’re very fortunate in terms of there already being a significant project under construction called Mariana, which is, in the [inaudible 00:09:25] salar about 50 to 25 kilometers north of us. That’s a 20,000-ton plant being built by Ganfeng. So, a lot of the public access infrastructure for a 20,000-ton plant that we can, fortunately, tap into has already been done. There are paved roads, there are, you know, now camps and accommodation which, you know, pumping wells for water, things like that. So, the area, whilst it might be remote and it is, it’s 4,000 meters above sea level up in the mountains, we’re not back in 2008 where these salars were basically not being worked on. There’s a lot of activity in the salar. Rio Grande in itself has a couple of other companies that are exploring there, that have camps there.

You know, so from that perspective, there’s also, you know, several companies getting to that sort of 20,000-ton production level. You’ve got Allkem at Olaroz, for example, they’ve got a 20,000-ton plant, you now. Livent with Fenix, that’s a 20,000-ton plant as well. So, the availability of public access infrastructure it is there. Also, the workforce is available in Salta as well. And from that perspective, there is some ground and obviously, when you’re building your own projects, you need to link it all together. But now, having said that, the Puna is attracting a lot of development, a lot of capital, and we’re starting to see the results of that infrastructure there now.

Stuart: All right. Now, your market cap is a mere, not even $50 million yet. And then, in part, that’s because this is a recent, transaction to get hold of your project. You’ve flagged the potential for some pretty significant resource increases. And we’ve talked about the early production from the plant that you’ve just acquired. Let’s close the last link in the chain. Tell me about the people who are working with you on this project and the smarts they’ve got to be able to move forward.

Aaron: Absolutely. I mean, even if you look at our board, starting there, you know, we have Pete Wall, who is our chair. You know, Pete’s a very well-known resources lawyer in the sector. And fortunately for us, you know, he’s a great value addition to have as chairing our board. And that’s something that was a big attraction for us in terms of the original team bringing this project to Pursuit. Alongside Pete, you also have Tom Eadie. Tom Eadie is very well known from his time as chairman of Syrah Resources, which was a graphite plant that went from a $15 mil to a billion dollar market cap. And Tom was instrumental in seeing that project up the project life cycle and getting that from exploration into development. On the ground in-country we have myself. I’ve worked in various lithium companies over the past, you know, 10 years or so, and have a lot of experience in-country, in-ground, and was able to actually put the whole transaction together.

Fortunately, I’ve got some of my team members who I’ve worked with in the past, for example, [inaudible 00:12:18], Alex Rodriguez, you know, he was a senior VP at Rincon Lithium that was purchased by Rio Tinto and he was part of that team with the [inaudible 00:12:24] Group for many years that developed that project, you know, through its NI 43-101, through its pilot plant operation, and actually operated the plant with the Rincon team that was at that site. So, having Alex, who’s a dual Argentinian-Australian citizen speaks the language, you know, for us, we have a very competent in-ground in-country team that has done this before.

Added both at board level, you know, a very significant board filled with guys who’ve got the experience in developing these, you know, microcap companies up to the more mature stage. But also in-country, in-technical team that have worked on lithium. This isn’t an ASX company that’s just gone and bought a project in Argentina, and it’s our first rodeo. You know, Alex is Argentinian and I’ve been there since 2008 from the Rincon days as well. So, from that perspective, we’re very well placed to develop this project and advance it very quickly.

Stuart: Right. What’s motivated you to pursue so much of your career, looking for the big payoff in Argentinian lithium?

Aaron: To be frank, when I started in 2008 in lithium it wasn’t what it is now. You know, you go back to the schematics and the end users, a lot of it was actually glass and ceramics. And I’ll never forget the first…

Stuart: And pharmaceuticals as well.

Aaron: Absolutely. Absolutely. That was also on there. But the, you know, you had the first electric car, which was Vincent Bollore’s Bluecar in 2008, which was Mr. Bean-looking thing with three wheels and an electric battery, and I think it went 50 ks on a single charge. You know, I’ve been very fortunate starting my career in a space that has evolved into what it is now. I mean, lithium in itself is a prime example of becoming too big to ignore. The majors are starting to look at this space. And if you look at where we are in the cycle, you’re starting to see, for example, Vale’s base metal unit, you know, Vale the Brazilian iron ore giant. Its base metal unit made $500 million of EBITDA, whereas [inaudible 00:14:22] announced 3 billion of EBITDA in the last financial year.

So, from that perspective, I’ve been fortunate to go through this cyclical evolution where companies like Tesla have come in to disrupt the EV supply chain. You’re starting to see now the majors like [inaudible 00:14:35] and SQM, they’ll often acquire on the back of EV growth. So, you know, Biden’s new legislation, you know, pushing that critical minerals path is another example of just, fortunately, being for me in the right space at the right time. It’s not come without its challenges. You know, we’ve had a few waves and a few cycles as 2015 to 2017, 2018 was that sort of first lithium, you know, push. Tesla became very quite well known. You know, but for me, I’ve just been very fortunate to be in a space and operating in a sector that is starting, really at the real infancy of its critical minerals development.

I think that the next 10 years, 15 years, there’s quite a lot of time to run in that lithium story. You know, we’ve hit 10 million electric car sales last year, for the first quarter of 2023. The highest-selling car was Tesla. So, you know, from that perspective, it’s just been very fortunate to be in the right space, sometimes at the wrong time. You know, 2018 was a very painful time for lithium companies and lithium players, but it looks like now that lithium is going for quite a run and a resurgence. So, it’s being in the right space at the right time there.

Stuart: Right. So, I was looking in my dictionary last night under the word optimistic, and there was a photograph of you there. Now, you talked about ups and downs. You’ve had some downs as well. You formed a company called Centaur on the Pastos Grande Salar. Were forced, unfortunately, to sell out at the wrong time to Arena, a Canadian company which is now doing quite well with that asset. So as you say, timing is everything, right?

Aaron: Oh, absolutely. I mean, Centaur was put together in the same way that the Pursuit project was put together. A few differences. Centaur didn’t have as much advanced exploration information. But having said that, that was a phenomenal project. And, you know, that said, that was sold at the bottom of the cycle to Arena for, I think, $23 million Australian. And then, two years later, with very minimal work and very minimal development, you know, Arena goes and sells it to Lithium Americas for $340 million Australian, which, you know, that’s right place at the right time. So, whilst there’s certain optimism, I think that the transactions in the space are very compelling and very precedent over the past year. I mean, you’re seeing a lot of these valuations since that 2008 level, you know, they’re starting to get quite serious. You know, you’ve seen tier one players like Rio Tinto, you know, they came in and bought Rincon. When we were doing Centaur, Rio Tinto weren’t in the space. There was very much that focus on the Jadar project and, you know, but now you’ve got Rio Tinto and all…

Stuart: Which obviously hasn’t worked out so well, right?

Aaron: No, it hasn’t. And I think that’s kind of ironic given the chemical element symbol for jadarite is the same as Kryptonite in the Superman comics. So, you know, from that perspective, you’re seeing, you know, Rio Tinto now go, “Okay, we’ve turned away from that.” They’ve purchased Rincon, and they also have in their decks, you know, that they’re looking aggressively for M&A. So, is it a level of optimism? Absolutely. I think we’re going through that stage now. But, you know, having said that, the market has definitely turned. And I think that’s in the consumer, you know, confidence behind electric vehicle sales that’s been an…you know, there wasn’t 10 million cars being sold in 2018. You know, electric vehicles are becoming more common. You know, Tesla wall packs for electricity storage are becoming more common.

So, as these products begin to get market share, it starts going down the value chain of where is this lithium coming from? Where is it actually being sourced? And I think that there’s now a recognization in investor education that lithium oxide isn’t lithium carbonate. It’s not lithium hydroxide, it’s an oxide that goes through a chemical converter or reactor to turn the end product. And there’s more intricacy in the understanding and knowledge base of lithium which for us is now pushing a lot of these valuations. Because as stated, there’s only 11 salars in Argentina. There’s a few more lagunas that have the brine, but once you get outside of those salars, there’s no more real estate. So, there’s mass demand but very limited supply. I mean, don’t get me wrong, you can always take the nationalization risk with Chile and see if you can do something there, have a bump with Bolivia absolutely.

But for the, you know, arguably more safe money, looking at a jurisdiction that’s open for foreign investment, you know, Argentina is, you know, a very closed area in terms of what you can actually acquire, what actually has lithium and… Center as a case in point, Pastos Grande Salar is completely consolidated by Lithium Americas. You can’t get on the salar, that’s their main project, they have 95% of it. I believe there’s only one or two tenements that are owned by Ganfeng who own Pozuelos in its entirety next door, that are apparently being divested to LAC. So, being able to actually get the real estate’s, you know, 50% of the challenge. And for us, I think we’re only gonna see real estate prices go up when it comes to lithium projects now over the coming years.

Stuart: Right. Aaron Revelle, the man who we think is in the right place, at the right time, keep up the good work and we look forward to the big news flow from Pursuit Minerals.

Aaron: Excellent. Thanks for having me.