Interview with US lithium play Jindalee Resources (ASX:JRL)
October 5, 2021
Jindalee Resources, JRL, video
We spoke with Lindsay Dudfield, Executive Director of US lithium play Jindalee Resources (ASX:JRL), about the company’s McDermitt Lithium Project in the US state of Oregon and how Jindalee stands to benefit from America’s current need for more domestic lithium sources.
Stuart: Hello and welcome to Stocks Down Under. I’m one of the editors of our publication. My name is Stuart Roberts. And with me on the 30th of September, 2021 is Mr. Lindsay Dudfield who’s an Executive Director of Jindalee Resources, ASX, JRL. Lindsay, good morning.
Lindsay: Yes, good morning, Stuart. How are you?
Stuart: Well, I’m feeling great because two weeks out of lockdown I’ll be able to cut this hair off which is going all over the place. You’ve obviously been to the barber earlier than I have in the relatively free state of Western Australia.
Lindsay: Yeah, no, look, at Perth, we’ve got a pretty well life as it was pre-COVID as you would’ve seen now. AFL Grand Final was held here last weekend. And that was a great success and, you know, life’s pretty well back to normal apart from we can’t travel both into state and overseas. So that’s a bit frustrating. But other than that, look, we can’t complain. And as you say, yes, I have been able to get to the barber.
Stuart: Look, very frustrating for you because Jindalee’s potentially company maker is the McDermitt lithium project which straddles the border of Oregon and Nevada in the western part of the United States. That’s a long way to go when you’re locked into the hermit state of Western Australia.
Lindsay: Yeah, look, I mean, we’ve been lucky. We’ve got good people on the ground there that we’ve been able to enlist to assist our program. So, for example, last year we managed to get drilling done towards the end of the calendar year which we didn’t expect was gonna happen because A, we couldn’t get over there to organize things, and then there was COVID obviously, was quite rife through the U.S. late 2020. In fact, actually, we had to…in the end, we had to cut our program short mid-December because the drillers came back from Thanksgiving with COVID and, you know, duty of care to…not only to them but obviously our consultants that we’ve engaged directly. We shut the program down.
But despite that, we managed to get enough holes drilled into McDermitt to enable us to announce in April a significant increase to the resource. And McDermitt is now the largest lithium deposit in the United States by contained lithium end resource.
Stuart: Right, 10.1 million tons of lithium carbonate equivalent. And more if you adjust the cutoff grade somewhat. What’s instructive to me is there are only 200 miles from Reno, Nevada where Tesla has that magnificent Gigafactory which is gonna need a heck of a lot more lithium before they’re through expanding that plant, right?
Lindsay: Yeah, well, look, I think the U.S. generally is going to need a lot of lithium. They’ve got very ambitious plans for the electrification of the U.S. economy. But, you know, they’re not the only jurisdiction in the world that’s also embraced, you know, the new energy. You know, Europe is legislating, basically legislating internal combustion engines out of the jurisdiction. And the Chinese have certainly gone very big on EVs as well.
So, you can see there’s almost, like, a perfect storm, if you happen to hold a large lithium deposit, you know, like Jindalee does where you’ve got incredible demand looming but a real question mark is where the lithium to meet this demand for EVs is gonna come from.
Stuart: Yeah. Now, what’s impressive about your deposit…Aussie investors have gotten to know the brine place quite well. And the hard rock placed trapped in the pegmatite. This is a different kettle of fish again and potentially quite an economic kettle of fish in terms of sediment hosting. Your rocks are so young, they’re relatively spring chickens at the Miocene age. Your deposit’s fairly shallow as far as I can tell looking at the charts. So potentially…and obviously, you have no hard data on this that you can share with us but potentially a low-cost deposit that’ll be relatively easy to work in an environment where the end product can easily convert into lithium hydroxide or lithium carbonite.
Lindsay: Yes. The mining costs will be…I mean, we just put out a scoping study earlier this month. Unfortunately, because of the mix of inferred to indicated, ASX have got sort of quite strict reporting guidelines and we were unable…we tried to but we were unable to include, you know, production rates, you know, financial metrics, etc., you know, that were effectively…ASX asked us to remove those.
Lindsay: But what we were able to say, you know, is that…look, the…it was a positive scoping study. We couldn’t tell the market how positive but the MPV, you know, couldn’t be included but it’s many multiples of their current market capitalization. And, you know, we weren’t able to give an indication of the, you know…a concise indication of the life of mine but we were able to say that it’s many decades. So McDermitt deposit does have the potential to produce lithium carbonate for the U.S. battery market for decades, many decades.
And, you know, and that’s just on the current resource that fell within an optimized open pit shell. Outside of that resource, there’s also a very large exploration target which has the potential also to be converted to resource with additional drilling. And so, you know, you could be looking at a mine life of plus 100 years, all other things being equal.
Stuart: Right. Now, some people who know the U.S. mining scene might be concerned at this. So, you’re actually on the Oregon side of the Oregon, Nevada border. Oregon’s pretty much a blue state and Nevada very much a red state. Do you anticipate having to jump through a few more regulatory hurdles given you’re on the north of that border?
Lindsay: Yeah, look, I think that’s a correct assumption, Stuart. I think the…and that’s partly because Oregon doesn’t have a mining history. Nevada, you know, has a very strong history, particularly in gold mining. And so approving mining operations in Nevada…you know, the authorities are a lot more comfortable with that than, you know, the Oregon regulators.
Lindsay: So, look, I do expect there will be more hurdles that we’ll have to clear before the project can be developed. But having said that also, I think there’ll be a national imperative to secure lithium for the U.S. EV makers.
Lindsay: I think I indicated earlier there’s a looming shortage of lithium globally. You know, demand from China, demand from Europe and now North America starting. You know, a bit behind the curve but trying hard to catch up and certainly there’s…Biden is, you know, basically pushing very hard for the electrification of the U.S. And that’s not just EVs. There’s also battery storage as well coming behind that, you know. And where’s the lithium gonna come from? The Head of the Department of Energy has made it very clear that they want to have domestic supply, you know, and control of the supply chain from the mine right down, you know, to the product that’s produced whether it be, you know, an EV or a storage battery.
So, to do that, they’re gonna have to permit a lot more of these lithium deposits than, you know, currently. And at the moment, there’s only one permitted, fully permitted, and operating lithium mine in the U.S. and that’s a rather old brine deposit in Nevada, you know, which is owned by Albemarle. And that’s it. All of their lithium currently is imported.
Stuart: Right. Now, we talked about Thacker just down the road owned by Lithium Americas. Now that’s a company with a number of arrows in its quiver. But they’re capitalized $3 billion [inaudible 00:09:03] The comparison I really like with you is Piedmont Lithium developing that…they’re a hard rock play in the tin lithium belt in South Carolina. A while ago, you could get them for less than the market cap you’re trading at at the moment. Subsequently, thanks to getting friendly with Elon Musk, they’re now capitalized more than a billion dollars. And the commonality obviously is short supply chains to be able to have well-provenanced lithium that can easily feed into those giga factories where you’ve got a company that’s doing the right thing.
In an environment where not only is the public policy angle pushing hard but even the lithium prices are going well. Everything’s moving in your favor, it’s fair to say.
Lindsay: Yes, I mean, look, I mean, it’s not without challenges. Obviously, it was very frustrating for our shareholders and I guess interest investors that we weren’t able to communicate the metrics of our McDermitt project, you know, that came out of the scoping study to, you know, to the market generally. I mean, the ironic thing is if you are, you know, Elon Musk and you take a fancy to our McDermitt project, you can sign a CA and get 100 plus pages of detailed scoping study and make a very informed decision as to the value of the project. But unfortunately, we can’t communicate that to our shareholders in the market generally. It is very frustrating.
Stuart: Yeah. You’re only a few drilling campaigns away from being able to convert some of those inferred resources into indicated and maybe measure it, right?
Lindsay: Yeah, one drilling campaign. So, we’ve got two rigs booked at the moment, an RC rig and a diamond rig. We’re currently permitting mainly infill drilling actually too as you said, Stuart, to convert inferred to indicated and be able to then, you know, report those metrics in a lot more detail, the sort of detail that we’d like to be able to report them in. That drilling will commence in, you know, in the…well, it’ll be the December quarter now, probably towards the end of October. All going well, assuming the permitting comes through, you know, on time.
Stuart: Now, for investors who don’t know that part of America, some parts of Nevada being a little bit mountainous up in the north tend to be seasonally constrained in terms of when you can do that sort of stuff. Is that a problem at McDermitt?
Lindsay: We’re more constrained because as part of the permitting of our drill holes, we’ve said there are certain times of the year that we won’t drill. So, we basically said that we won’t drill from January through till end of June. So, there are six months of the year when we won’t drill. You know, and that’s…for example, we share the area with ranchers. They run cattle through the sagebrush in spring.
Lindsay: And so we don’t wanna cut up the tracks, you know, driving around in winter and early spring after the snow, you know, starts to melt and create a mess. And there’s also…you know, there’s some sensitivities with, you know, environmental, you know, sort of fauna that we also are working around. So, you know, we’ve had no problem to date getting all of the holes that we’ve drilled permitted. It’s just taking time. And we expect, you know, that’ll be the case. But yes, there is seasonality. It’s a kind of a, if you like, an agreement that we’ve got between ourselves and the regulators that, you know…and also the local ranching community that we won’t disturb any of their sensitivities, you know, for the first six months of the calendar year.
Stuart: All right. So ideally, we get that last drilling campaign done before Christmas basically. What’s the likelihood that the regulators will give you the go-ahead before that window shuts?
Lindsay: Yeah, no, we’re pretty confident we’ll get it in one form or another.
Stuart: All right, good. Well, now’s a good time to be Lindsay Dudfield and his colleagues, I must say.
Lindsay: Oh, look, I mean, you know, as I said, Stuart, you know, these are very, very large deposits. The mining [inaudible 00:13:36] scoping study has demonstrated that the mining costs are low as you would expect because you’ve got mineralization from surface in soft, you know, very soft rocks. The challenge to these deposits is the metallurgy, extracting the lithium and purifying it in the most cost-effective way. And we’re spending quite a lot of effort on metallurgy. In fact, we’ve just engaged a very highly regarded group of metallurgists. There are about seven in the team, I think, who are actually based in Perth and who specialize only in lithium. That’s all they do. And they have worked on, you know, the pegmatite deposits, the [crosstalk 00:14:22] brine deposit.
Stuart: I’m guessing Greenbushes have probably kicked around these guys you’re talking to.
Lindsay: Yeah. Yeah.
Lindsay: Well, they’ve set up a lot of the metallurgical teams that are currently now in, say, for example, WA pegmatite operations. You know, a lot of them got started with, you know, with this group’s expertise. So, we’re spending a lot of time on that. We’ve got about 1,000 kilos of material currently being beneficiated in Colorado for met test work. And so that’s the key to it is to…and that’s really what we’re gonna continue to do. We’ve also started the environmental side of the permitting process. So, you know, there’s a longer lead time items that you need to address and that’s commenced as well. So that’s going on in the background. And certainly, the metallurgy…if any sort of improvements on the flowsheet, you know, and optimization of the flowsheet, that just goes straight to the bottom line.
Stuart: All right. So, before we pressed the record button, you were sharing something of your history prior to McDermitt. A lot of investors won’t know that you and Jim Dali were part of the team that developed the big lithium project that ended up at [inaudible 00:15:45] around the old uranium project in Northern Territory.
Lindsay: Yeah, no, that was a uranium deposit, yeah. Yeah, no, Jindalee’s a project generator.
Stuart: You were going for lithium and then ended up with uranium.
Lindsay: Yeah, yeah, that’s right. Now, look, we’re a project generator. We’ve been listed since 2002. We did our first capital raising in 2019. So consequently, we’ve got a very tight capital structure. We’ve got just about 55 [inaudible 00:16:12] and most of our shareholders have been with the company since we listed in 2002 and, you know, we’ve spun out, Energy Metals as a dedicated uranium explorer in 2005. It was a priority entitlement to shareholders and they did very well out of that. It was a great performer in the market. We got the timing perfect. And we then paid…that company was subsequently…Energy Metal was subsequently taken over by a Chinese, the largest Chinese nuclear power company, China Guangdong Nuclear Power, they used to be called. They’re now called China General Nuclear or CGN.
And, you know, and the GFC for a cash takeout which was, you know, was a great return for our investors. We then paid…Jindalee was the largest shareholder in Energy Metals and we paid a 55 cent [inaudible 00:17:07] dividend to our shareholders on the sale of 70% of our EME, our Energy Metal stake. And so, you know, we’re looking to do the same thing again with McDermitt. We’re adding value to it because, you know, we think this is gonna be a transforming project. There’ll be a point at which we’ll introduce a partner or otherwise, you know, look to monetize the project for the benefit of our shareholders. So, it’s very, very tight as I said, very tightly head management. We’ve got about 30% of the company. So, we’ve got plenty of skin in the game. So, we think like shareholders. You know, our interests are directly aligned and what’s good for the shareholders is good for us.
Stuart: Yeah. Lindsay Dudfield, thanks for sharing the story of McDermitt, and well done on what you’ve achieved today. Good luck for the next stage of the journey.
Lindsay: Yeah, no. Thanks, Stuart. Lovely to chat.