VANCOUVER, July 12, 2016 /CNW/ - Zadar Ventures [TSXV:ZAD] potentially added an Australian hard rock prospect to its lithium portfolio today through an announced MOU with Macarthur Minerals' [TSXV:MMS] 100%-owned subsidiary Macarthur Lithium Pty. The property is within 7km of a producing mine with a capacity of 137,000 tonnes per annum of lithium carbonate.
The announcement comes only a few months after the company's first official splash into the lithium space. That came in March, with the acquisition of its Clayton Valley lithium brine project, immediately adjacent to North America's only current lithium producer.
Today's acquisition now gives Zadar Ventures a hedge on both the prevailing lithium production methods presently in use: hard rock mining, and lithium brine evaporation.
Zadar's exposure to lithium now consists of 755 hectares in Nevada's Clayton Valley next to Albemarle's [NYSE: ALB] Silver Creek Lithium Mine; and up to 75% interest on approximately 9,100 hectares in South Western Australia's Ravensthorpe region, within 7km of Galaxy Resources' [ASX:GXY] Mt Cattlin Lithium Project.
With testing and preliminary work started already on the Nevada property, and the next 4 months to perform due diligence on the Ravensthorpe opportunity, Zadar looks to be currently quite active.
Hard Rock vs Brine
The debate over which method is better for lithium production, hard rock mining vs brine evaporation ponds, comes with pros and cons for both.
Chris Berry of DiscoveryInvesting.com describes the hard rock vs brine comparison, by simply saying:
"It's an age old debate that doesn't have an answer. Like, which one of your kids do you love more?"
A hard rock lithium project typically will have a lower capex, but higher operating expense. It's traditional mining.
A lithium brine project isn't mining, it's chemistry. These types of projects are done through large evaporation ponds, and are subject to natural conditions. As well, brine lithium takes 18-months to produce, thus is slower to react to market signals.
What Zadar has done with this potential acquisition is hedge on both methods, and bank on being near to producers who will want to crank up production, after they prove they're sitting on good feeder stock.
Work has already been underway in Nevada, and now Zadar will be on the clock to start its due diligence in Australia.
By completing their PEA in time, they stand to earn their full potential 75% in the project.
They're already next door to North America's only lithium producers in Nevada. Zadar's WSP Lithium Project is directly adjacent to Albemarle's Silver Peak Lithium Mine property.
The Ravensthorpe acreage in Australia is only 7km away from the Galaxy Resources [ASX:GXY] Mt Cattlin Lithium Project. That project has a stated potential capacity of 137,000 tonnes per annum of lithium carbonate.
Global production right now is closer to 170,000 tonnes per year at this time, but with even a conservative growth rate of 8% per year, global demand will be at around 367,000 by 2025.
While several companies are jockeying for position to become the next new mines, the current producers believe they can increase their own production to meet the oncoming demands from the market.
The theory seems to be that if those producers will need to step up production, they're going to need to expand into nearby resource patches.
Should either Albemarle or Galaxy move towards outsourcing or outright buying nearby lithium assets, Zadar could likely stand to benefit by proximity.
There's a longstanding current debate about where the future's lithium is going to come from, and how it'll be produced.
But those that capitalize sooner will likely reap the rewards, as the price of lithium remains high.
Nearby Feedstock for Current Producers
That Zadar is adding a new lithium asset near another producer shows somewhat of a hedging move by exploring both hard rock and brine options at the same time.
While differing in many ways, the projects both share a similar strategy in their proximity to commercial producers.
The current lithium market is only around 170,000 tonnes per annum. But even at a conservative growth in lithium demand by 8% per year, that number is expected to be at 367,000 tpa by as soon as 2025, which means that there needs to be another 200,000 tonnes per year added in less than 10 years to keep up with demand.
That supply is going to likely come from multiple sources, including rapidly developing projects in Chile, Argentina, and Nevada (brines), and Australia (hard rock).
Given that brine evaporation takes a full 18-months to complete, hard rock projects can respond quicker to market demands when they increase. While brine is cheaper to produce from, it takes considerably longer than hard rock methods.
In the case of Zadar, the addition of a potential new hard rock asset gives the company more flexibility in timelines, and significantly diversifies their lithium portfolio.
The company now has the next 4 months to carry out the farm-in agreement to officially enter into the acquisition in Australia.
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