TSX:WML.V | OTC:WMLLF
Wealth Minerals (TSX:WML.V) (OTC:WMLLF) is a junior mineral exploration company that is well-positioned to benefit from its portfolio of prospective lithium projects in the Lithium Triangle. The company holds control over portions of several lithium salar projects in northern Chile (Atacama, Trinity and others). Management intends to advance its concessions through exploration programs and opportunistically acquire additional ones. The Agreement with ENAMI creates a path for the development of Wealth’s Atacama Project. The Lithium Triangle appears to be the global sweet spot for low-cost incremental supply of lithium.
In a conference call, management of Wealth Minerals provided an update. Most of the call centered on the prospects and development of the company’s Atacama Lithium Project:
• The drilling program continues to be delayed pending a good outcome in addressing the concerns of the indigenous people. The company wants to operate as a good corporate citizen, and management is confident that the situation will be resolved, though no time frame was proffered.
• Given the stratigraphy, the high grade and the quality (low level of magnesium) of the Atacama Salar in general, management is very optimist about the prospects of its Tier I-sized anomaly in the northern part of the salar.
• The company is in the final stages of negotiations with ENAMI (Minería aka National Mining Company of Chile) towards setting the terms for the joint venture that will move forward in developing the company’s Atacama Project. Around March 31, 2019, Wealth Minerals completed a US$2 million option payment. As a result, the company exercised the Option to Purchase Agreement and registered its subsidiary (Wealth Minerals Chile SpA) as the direct title holder of the Atacama Project, a precondition for being able to finalize negotiations with ENAMI.
Management also addressed the company’s financing needs. Wealth Minerals has secured many prospective lithium properties through Option Agreements, some of which require the adherence to payment schedules in order to keep the agreements in good standing. The company needs quarterly financings to fund these option payment and ongoing operations. With the lithium industry under pricing pressure since last summer, has pursued financings that minimize shareholder dilution, including two loan packages.
The company also briefly discussed its Vanadium Project and copper spin-out as opportunities that arose from a constant exposure to deal flow.
Lithium Asset Portfolio Update
Management continuous reviews the options on the mineral properties within company’s lithium asset portfolio. At times, adjustments are made. In the corporate update on February 11, 2019, several changes were announced. Also, in the March 29, 2019 filings, it was noted that the company sold the 400-hectare Salar Property, which is located in the Salar de Aguas Calientes Norte and was part of the Trinity Project.
Three new properties (Flamenco, Vapor and Harry) entered the portfolio while two projects were relinquished (Laguna Verde and Five Salars). The land package associated with the Laguna Verde Project (namely the Salar Green & Union concessions) is being retained and remains in good standing.
The changes were implemented primarily to conserve cash by eliminating the need for additional option payments on those options being relinquished. The development of the Atacama and Trinity projects remains the main focus of management.
Option Agreement for 100% of Meductic Vanadium Properties (New Brunswick, Canada)
On November 28, 2018, Wealth Minerals entered into a formal option agreement to acquire a 100% interest in the Meductic Vanadium Properties, which are located in New Brunswick, Canada. Vanadium redox flow batteries are addressing the large -scale energy storage segment in the electric power industry, particularly for utility-scale, industrial and EV applications. According to Adroit Market Research, the vanadium redox flow battery market is expected to grow from US$ 4.43 on 2017 to US$1.11 billion by 2025. The acquisition of the option increases the company’s exposure to metals critical to new renewable battery technologies.
Wealth Minerals has made the initial $20,000 cash payment and has issued 150,000 common shares, per the payment schedule of the Option Agreement (see below).
The properties are subject to a 2% NSR royalty, half of which Wealth Minerals may purchase at any time upon the payment of $1,000,000.
The Meductic Vanadium Properties are comprised of the Wickham 1, Bright Eye Brook 1, 2 and 3, and Meductic 3, 4 and 5 mineral tenures. The total area of the properties is approximately 1,749 hectares and covers the known areas of vanadium outcrops.
TEM Geophysical Survey Results on Vapor Project
In late February 2019, Wealth Minerals reported the receipt of positive geophysical survey results conducted on and around the Vapor Project. TEM (Transient Electromagnetic) surveys, which were completed by Southernrock Geophysics S.A., have identified highly conductive zones down to at least 500 meters below surface. These extremely low resistivity signals have been interpreted to represent porous media with high-salinity fluids, which potentially could be lithium-bearing brines. Multiple anomalies were identified, and the high-priority drill targets have been identified.
The diagrams above indicate the company’s Vapor Property (blue lines), the TEM survey line locations (red lines) and 1D inversion model resistivity of the best section of the TEM survey, line 4.
Brief Lithium Industry Review
After the steep run-up during the first half of 2016, spot lithium product pricing (battery-grade 99.5% lithium carbonate Li2CO3) corrected slightly and dipped below $20,000 during the first quarter of 2017 despite continued demand for lithium concentrate and lithium carbonate. However, spot pricing began to firm and strengthened during the third quarter of 2017 after Xin Guobin, China’s Vice Minister of Industry and Information Technology, announced at an auto forum in Tianjin on September 9th that Chinese regulators are working on a timetable to phase out the production and sales of fossil fuel vehicles. Spot prices rallied to over $25,000 during the third quarter of 2017.
Since early 2018, spot pricing has been under considerable pressure, beginning after a contract was announced between SQM (Sociedad Quimica y Minera) and CORFO (Corporación de Fomento de la Producción – Chile’s governmental agency for the promotion of production) in mid-January, which allows SQM to produce up to 216,000 tonnes of lithium carbonate annually through 2025, which raised concerns about a potential oversupply situation. Subsequently, a Morgan Stanley report forecasted that an oversupply of lithium would occur starting in 2019. In the second quarter, LCE prices began to decline sharply, pressuring all lithium stocks, including producers and juniors. Since October 2018, the price of lithium carbonate has stabilized around the $12,000 per tonne level.
During 2018, the Global X Lithium & Battery Tech ETF declined 30.4%. However, at the same time, the future demand for lithium appears robust with many industrial companies, particularly EV manufacturers, announcing their anticipated need for lithium for use in battery applications. We believe that the demand for lithium will surpass the available supply in the next few years. Historically, supply projections have been overestimated due to the inability of lithium producers to ramp up production of battery-grade lithium in a timely fashion.
In the near future, the Lithium Triangle is poised to become even more dominate as the major source of lithium in the world not only due to the vast identified lithium resources in the region, but also because brine production more cost-competitive relative to hard-rock and clay sources of lithium.
With the tipping point toward higher lithium prices on the horizon and with brine deposits poised to be a major contributor to low-cost incremental supply, lithium exploration & development companies of the Lithium Triangle, with their blue sky potential, appear to be well positioned to benefit from higher lithium prices.
Headquartered in Vancouver, British Columbia, Wealth Minerals Ltd is a junior exploration company that is building a portfolio of highly prospective lithium-brine mineral concessions located within the Lithium Triangle, currently targeting properties within salars situated in Chile. However, management’s scope for potential lithium-in-water and brine candidates extends beyond the region in the search for prospective mineral properties. Not only has management positioned the company to benefit from the upcoming expected growth of demand in the lithium space, but also continues to seek the acquisition of additional interests in prospective concessions. The company continues to constantly review and evaluate a number of properties in the region and then aggressively pursues control of the attractive ones that would complement the current portfolio of concessions.
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