Canada Lithium shrinks Quebec Lithium’s resource

This year has been a bumpy ride for Canada Lithium (CLQ-T). The company has lowered the measured and indicated resource estimate for its Quebec Lithium project near Val d’Or, Que., by 37% compared to the previous
estimate, which was prepared in-house last October.

The company says the discrepancy was caused by the geological modelling used to calculate the spodumene-bearing pegmatite dyke-hosted resource estimate, and that some resource blocks should have been labelled waste material.

The revised May 16 estimate prepared by AMC Mining Consultants found that Quebec Lithium has 29.3 million measured and indicated tonnes grading 1.19% lithium oxide, instead of 46.7 million measured and indicated tonnes at 1.19% Li₂O.

Inferred resources are reduced to 20.9 million tonnes at 1.15% lithium oxide, compared to the previous estimate of 57.6 million tonnes at 1.18% lithium oxide. Both estimates use a 0.8% lithium oxide cutoff.

As a result, the company pushed back its construction schedule, saying site work at the project would start in the third quarter instead of May.

Canada Lithium estimates Quebec Lithium will still start producing in late 2012, with the first lithium carbonate sales taking place in early 2013, assuming that major equipment purchases are made by the end of May 2011. 

The company adds that the cost to build the mine and plant remains at $201.7 million, and notes that it would address the effects of the resource reduction in an updated reserve modelling. 

BBA is working on an updated reserve estimate based on AMC’s resource estimate. It is also reviewing the model AMC prepared to update the mine plan.  

Olav Svela, Canada Lithium’s director of investor relations, says, “We have no comment at this time. . . we are waiting for our reserve estimate from BBA.”

Canada Lithium also expects to release a National Instrument
43-101 feasibility study technical report, once the mine plan and reserve modelling are updated.

It was only six months ago that Canada Lithium’s stock noticeably rose after the company released the October resource estimate, which was based on about 7,000 metres of drilling in 45 holes, followed by a positive feasibility study in mid-December.

The good news saw Canada Lithium shares climb from a 52-week low of 46¢ on May 21, 2010, into the 80¢-range in October, and then close at $1.24 on the Dec. 17 feasibility news. The shares reached a 52-week high of $2.23 on Dec. 31, but cooled off
in February.

In November 2010, Canada Lithium raised $10 million by selling shares at 80¢ apiece, and two months later raised $126.5 million by selling shares at $1.50 apiece.

But then the company announced on Feb. 28, 2011, that it had retained Roscoe, Postle & Associates (RPA) to review the resource estimate, after an internal review showed a material reduction in the measured, indicated and inferred resources.

At that time, its shares were trading for $1.35 apiece, before tumbling in March into the 60¢-range, after RPA confirmed that “significant issues” existed with the geological modelling.

Also in March, Canada Lithium hired AMC to produce a revised resource estimate on Quebec Lithium, and to prepare a new NI 43-101-compliant report.

One month later, the company reported that a notice of action was filed by Siskinds LLP in London, Ont., where the plaintiff requested various orders and declarations, including $50 million in general and special damages.

Company president and CEO Peter Secker said in an April press release that the case is “without merit” and would “ultimately” be dismissed. He added that “the company took immediate action when we learned that there was a potential issue with the previously announced mineral resource estimate.”

In May a statement of claim had been filed in the Ontario Superior Court of Justice for the proposed lawsuit.

The Ontario Securities Commission (OSC) notes that the company will stay on its default list until it files a new NI 43-101-compliant technical report on the updated feasibility study for Quebec Lithium. On May 10, the OSC enforced a temporary management cease-trade order on Secker and chief financial officer Germaine Coombs.

Canada Lithium currently has two rigs turning at its Quebec Lithium project as part of a 10,000-metre, 50-hole program to infill and upgrade a portion of the 20.9-million inferred resource. Seven holes have been completed to date.

At presstime, the company’s stock traded for 77¢.