Advantage Lithium shares rise on drilling

Since October, Advantage Lithium’s (TSXV: AAL; US-OTC: AVLIF) stock price has more than doubled after strong drilling results at its 50%-owned Cauchari lithium property in northern Argentina’s Jujuy province.

The exploration targets at Cauchari are northwest and southeast of Lithium Americas’ (TSX: LON) 11.8 million indicated and measured tonnes of lithium carbonate equivalent at its Cauchari-Olaroz property.

So far, exploration drilling in those areas has yielded positive results.

“Our drill program was designed to define our lithium grades and flow potential at the limits of Lithium Americas’ properties,” Advantage Lithium president and CEO David Sidoo says in an interview. “We’ve now progressed with our drilling program to cover the lateral extent of the north and south continuity across all our leases.”

The best sample results so far have come from Hole 7 and Hole 16, the first two in the previously undrilled northwest sector of the Cauchari property.

Hole 7 averaged 635 mg per litre lithium and 4,772 mg per litre potassium, with a magnesium to lithium ratio of 2-to-1 at 236 metres’ depth. Advantage Lithium plans to deepen the hole to reach bedrock where it will sample brine and assess flow by conducting pump tests. Hole 7 is located in the eastern part of the northwest sector, close to Lithium Americas’ brine resource. It has 35,000 proven tonnes lithium and 246,000 probable tonnes lithium.

The surface at Advantage Lithium and Orocobre’s Cauchari lithium project in northern Argentina. Credit: Advantage Lithium.

Hole 16 averaged 619 mg per litre lithium and 4,878 mg per litre potassium with a magnesium to lithium ratio of 2.3-to-1 from between 169 and 199 metres deep. Once sampling is complete, Advantage Lithium plans to turn the hole into a monitoring well.

Drilling at Hole 7 and Hole 16 intersected similar sandy material at the surface and gravels deeper in the hole — much like those found at Lithium Americas’ project. Advantage Lithium says these results confirm attractive concentrations of lithium brine in the northwest sector of the Cauchari property, opening up the area’s resource potential.

Advantage Lithium drilled a third hole, No. 8 — 400 metres deep and farther away — in the southeast part of the property, and is still awaiting results. It will look for deep sand units like the ones found on Lithium America’s property and at Hole 7 and Hole 16. Advantage Lithium is also awaiting results from Holes 9, 10 and 11. 

Advantage Lithium obtained its interest in Cauchari in April 2017 in a deal with Orocobre (TSX: ORL) when the two companies formed a fifty-fifty joint venture at Cauchari. In return, Orocobre received a 35% stake in Advantage Lithium, making it the largest shareholder.

“Everybody was chasing Orocobre,” Sidoo says. “Because they had the best exploration assets and the best development asset, and I know that we beat out six or seven companies for the opportunity to form a joint venture with them.”

Advantage Lithium intends to spend $5 million on the property by the end of 2017. Once they do, they’ll own 70% of Cauchari.

“I asked Richard Seville, the president and CEO of Orocobre, to come on the board of Advantage Lithium,” Sidoo says, “to basically show credibility to the transaction — that it was a true partnership.”

Sidoo says that Advantage Lithium even hired the exploration team that found the resource at Orocobre’s Olaroz facility. Olaroz is also in Jujuy province, its south border contiguous to Cauchari’s north border. It contains 6.4 million measured and indicated tonnes lithium carbonate equivalent and 19.3 million tonnes of potash. 

Advantage Lithium intends to have a new resource estimate by the end of the first quarter of 2018, followed by a preliminary economic assessment.

“We have the right assets, the right partnership and the optionality when we do get to production to deliver to the market quickly through the pipeline, at a very low cost.”
David Sidoo
President and CEO  Advantage Lithium

“And then we’ll continue through the third quarter,” Sidoo says, “at which stage we hope to have converted sufficient resource to the reserve category to support a robust project. Meaning our goal is to have a large enough resource that we can have our own stand-alone facility that we can build in Cauchari. By the end of 2018 we’re looking to complete the National Instrument 43-101 feasibility study.”

Advantage Lithium also sold its Clayton Northeast project to Pure Energy Minerals (TSXV: PE) for 7 million shares on Nov. 30. Prior to the sale Advantage Lithium exercised its option to earn a 70% participating interest in the project, which is contiguous to Pure Energy’s Clayton Valley lithium project. It will add 10 sq. km to Clayton Valley’s 246 square kilometres.

“We want our investors to know that we’re 100% focused on Argentina,” Sidoo says. “All the money we spent drilling those holes we got back in stock, so I think it was a good trade-off for us.”

Pure Energy has a 44¢ share price and a $52.6-million market capitalization, and Orocobre has a $6.08 share price and a $1.3-billion market capitalization.

Advantage Lithium’s share price is $1.21. It sat at 51¢ on Oct. 12 before beginning to rise. It peaked at a $1.32 closing on Nov. 8, but has stayed strong since, dipping briefly below $1 before rising again. The shares have a 52 week range of 36¢ to $1.42, and the company’s market capitalization is $160 million.