Frontier Lithium CEO buoyant after Mitsubishi deal for Ontario project even as metal tanks

Frontier Lithium (TSXV: FL; US-OTC: LITOF) and Mitsubishi are partnering to develop the roughly $1.5-billion PAK lithium project and hydroxide plant in northern Ontario, the companies said on Monday. Frontier shares jumped.

The Japanese conglomerate is investing an initial $25 million for a 7.5% stake in a Frontier subsidiary with an option to increase to 25% after a definitive feasibility study due this year, Frontier CEO Trevor Walker said in an interview with The Northern Miner.

Shares in Sudbury, Ont.-based Frontier Lithium soared 22% to $1.12 apiece in Monday afternoon trading in Toronto, valuing the company at $255 million. They’ve traded in a 52-week range of 41¢ to $2.74.  

The partners aim to build Ontario’s first integrated lithium mining and processing operation with the continent’s highest-grade spodumene resource even as prices for the battery metal have plunged to a fraction of their value a year ago. Mitsubishi may help secure debt financing for the project, which is the Tokyo-based company’s first investment in lithium mining. The conversion plant’s technology is being developed by a Frontier technical director with a decade of experience with a large Chinese lithium hydroxide producer, Walker said.

“Lithium producers are making really strong margins and profits even though the price has tanked,” Walker said by phone. “We don’t sweat the volatility of the market. We see three to four times growth in the market from now over the next 10 years.”

Lithium hydroxide was US$11,675 per tonne on Monday compared with US$64,675 a year ago, according to The Wall St. Journal.

PAK project

The PAK project, located just east of the Manitoba-Ontario border, holds 4 million probable tonnes grading 1.8% lithium oxide, 67 million measured and indicated tonnes grading 2% lithium oxide and 2.7 million inferred tonnes at 2.3% lithium oxide, according to a prefeasibility study issued last May.

The plant will aim to produce 23,000 tonnes a year of lithium hydroxide, almost double the amount in the prefeasibility study. As much as a quarter is likely to be headed for the Japanese automobile market if Mitsubishi pursues the investment plan, with the rest for North America’s supply chain.

PAK has a 24-year mine life and a net present value of $1.7 billion at an 8% discount rate and a 24% internal rate of return, according to the prefeasibility study.

The project faces some headwinds in the lack of road access and power. The idea for the Baren’s River bridge and a road to the site date back some two decades and initial government funding for the $9.5 million design occurred in 2009. But there’s still no timeline in place for its completion or a final cost estimate.

“I’m an advocate for government support to come into that key infrastructure led by the Indigenous communities,” Walker said. “We’re really supportive of the Pikangikum First Nation, a strong partner in the region with Frontier Lithium.”

The bridge and a road covering 60 km (with the remaining 50 km to be developed by Frontier) is being developed by a group of seven First Nations (Pikangikum, Deer Lake, Keewaywin, McDowell Lake, North Spirit, Poplar Hill and Sandy Lake). The bridge and road would replace dependence on winter ice roads north of Red Lake which are increasingly unreliable, especially with the current warm season.

Crit-min strategy

The Frontier-Mitsubishi partnership aligns with a recent co-operation memo signed between Ottawa and Tokyo to work more closely to promote global battery supply chains. Western nations are attempting to bond and boost critical minerals funding over a shared goal of reducing dependence on Chinese minerals and processing.

“PAK is an outstanding lithium project and we recognize its strategic value in ensuring a secure supply of lithium to North American markets,” Mitsubishi battery minerals general manager Kota Ikenishi said in a release on Monday. “We are excited to build a long-term relationship with Frontier and leverage our complementary skills and capabilities to deliver PAK into production.”

Walker lauded Mitsubishi for its reputation of integrity and fairness, and track record in co-developing major projects around the world.

“There’s just so much integrity there with them and they have a long-term view and mission in the acceleration of the whole transformation for global energy,” Walker told The Northern Miner. “They want to help North America establish a less Chinese dependent supply chain.”