American Lithium: Why Bigger is So Much Better

In the mining business, size matters a great deal. But ultimately, it’s quality (as measured by mineral grades) that matters the most. 

Hence, the latest news from American Lithium Corp. (TSX.V: LI) (NASDAQ: AMLI) (Frankfurt: 5LA1) about its Falchani deposit in southeastern Peru is a veritable game changer. This entails the upgrading of this world-class asset, which makes it even more valuable.  

As the sixth largest hard rock lithium deposit in the world, Falchani also promises to become one of the lowest-cost mining operations of its kind. This gives American Lithium a strong appeal to southeast Asian battery manufacturers, as well as American ones. 

In fact, the deposit’s exceptional scarcity value to end users just got a major boost by way of a recently published upgraded preliminary economic assessment (PEA) by an independent engineering firm, Stantec Engineering. In short, the deposit has grown nearly five-fold.  

The project benefits from an updated resource estimate that was recently announced in October,2023. It represents almost a five-fold increase in size over the original figure that was published in 2020 in an initial PEA. 

Specifically, it has grown in size to 5.53 million tonnes (“Mt”) in the Measured + Indicated category of Lithium Carbonate Equivalent (“LCE”) (447 Mt @ 2,327 ppm Li). This represents an increase of 476% in size.

American Lithium CEO Simon Clarke (centre) 

Work is ongoing on an updated PEA and an Environmental Impact Assessment that was initiated in July, 2022. These milestone developments are expected to be completed in the near term. In particular, the already robust economics will improve significantly by increasing lithium carbonate pricing from 2020 levels to reflect a much higher long-term base price, based on current and future demand/supply fundamentals and the incorporation of Sulphate of Potash (“SOP”) and Cesium as high-value by-products.

Prior to the latest round of in-fill drilling, the deposit’s stated size was 0.96 million tonnes of LCE in the “indicated” category and 3.74 million tonnes in the less well-defined “inferred” category. Based on these figures, the PEA previously assigned a net present value of US $1.55 billion to the deposit.

A newly-updated PEA is expected in the coming weeks — one that should place a much higher valuation on Falchani – which is expected to produce high purity battery grade (about 99.5%) lithium carbonate over a 33-year mine life.

It is also noteworthy that the current resource estimate is just based on about 30 per cent of the project’s overall footprint. 

How Peru is Key to Latin America’s Green Energy Revolution 

The epic size and low production costs of lithium deposits in Latin America makes them especially appealing to battery manufacturers. They offer big volume, long-life mining ventures at relatively low operational costs – along with the assurance of supply security at wholesale prices.   

However, most of these deposits are brine-based ones. And lithium brine extraction methods require large supplies of fresh water. Plus, lithium brine ponds are often fraught with environmental concerns. This is particularly problematic considering that the supply chains for electric vehicles are expected by end users to be as “green” as possible too.

This is another reason why American Lithium’s hard rock Falchani deposits truly stands out. 

Thanks to Falchani and American Lithium’s TLC project in Nevada, the company is at the vanguard of a new generation of environmentally-conscious, sustainable lithium developers that are poised to help power the green energy revolution. This is especially poignant because battery manufacturers are desperate for uninterrupted lithium supplies that are inexpensive and devoid of environmental concerns.   

Also, keep in mind that global production – involving both brine and hard rock operations – is currently capacity-constrained by geopolitical risks. However, Peru is considerable by the US government to be a “business-friendly” nation that could augment America’s long-term supply needs for inexpensive, battery-grade lithium.   

Moreover, Falchani is located in a nation that has traditionally been mining-friendly due to this capital-intensive industry being integral to their economies. Plus, Peru also provides easy access to key markets in Asia, as well as the US. 

The world-class, hard rock Falchani lithium project in south-eastern Peru 

Summary

American Lithium’s lithium projects at TLC in Nevada and at Falchani in Peru are gradually being advanced towards an eventual production decision via a systematic exploration and development programs.

This means that the company is continuing to steadily build accretive value into its value proposition by way of the steady de-risking of these flagship lithium projects. 

Furthermore, the dire need to accelerate the development of lithium deposits throughout the Americas cannot be overstated due to the threat of future supply shortfalls. 

After all, more than 66% of lithium-ion batteries are now made in China which controls most of the supply of raw materials for these batteries, most of which are destined for Chinese automobiles. This means that the US and Latin America need to ensure the security of their own massive supply chains. 

American Lithium is therefore in the right place and at the right time – by being in Peru and Nevada – as the new “Lithium Rush” gathers momentum and as the company’s story grows from strength to strength. 

 

Disclaimer: This article is intended for information purposes only. The opinions expressed in this article are Knox Henderson’s alone. No statement or expression of opinion directly or indirectly, is an offer, solicitation or recommendation to buy or sell shares in the company being discussed. He strongly urges you to consult a professional investment advisor prior to making any investment decisions. 

Knox Henderson does not currently hold shares in American Lithium, nor is he being compensated directly or indirectly by American Lithium or any other companies for this article.