Lithium Americas Corp (TSE:LAC) Podcast #2: CTO discusses JV with Sociedad Quimica y Minera
Lithium Americas Corp (TSE:LAC)(OTCMKTS:LACDF)(FRA:WUC) CTO and former Telsa Inc (NASDAQ:TSLA) senior engineer Dr. David Deak returns for Part II of our podcast interview, in which he illuminates the benefits of the company’s Joint Venture with Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM).
Listen to Part II of the podcast interview with Dr. David Deak:
James West: David, thank you for joining us again!
Dr. David Deak: It’s a pleasure.
James West: David, let’s talk about Lithium Americas and the project that they’re developing at the Cauchari-Olaroz, which I understand is the fourth largest lithium brine in development in the world today.
Dr. David Deak: Right, that’s correct. And in fact, Lithium Americas has two projects: the one that’s sort of slated for scale-up and production is the one in Argentina, and our clay-based deposit in Nevada is a work in progress which will come online a few years after our Argentinian project.
James West: Now, most recently, Lithium Americas announced two financings comprised of equity and debt instruments from Ganfeng, who is China’s largest integrated lithium supplier, as well as Bangchak Petroleum, which is Thailand’s national oil company. And that, those two combined financings for, I guess the total was about 286 million, is sufficient for you to meet all of your financial obligations to the joint venture that you have with SQM, is that correct?
Listen to Part 1 of the podcast interview with Dr. David Deak:
Dr. David Deak: That is correct. I mean, it’s almost all of what we’ll need, when you factor in all of the interest rates and so forth. But it certainly fills the gap that we need to fill in terms of financing the project. I mean, now it’s all about execution and getting down into the dirt with our partners, SQM, to execute on the project.
James West: Okay. So construction is slated to start in 2017 with first production in 2019, is that still more or less the schedule?
Dr. David Deak: Yes, that is certainly as it’s planned right now.
James West: Okay. So now in terms of the partnership with SQM, what level of technical expertise do they bring to the equation, and to what extent does that expertise represent a de-risking of the execution risk for Lithium Americas?
Dr. David Deak: So, by partnering with SQM, SQM really are the world leaders in terms of extracting lithium from brine. They’ve been in the industry longer than pretty much almost anybody, with one exception. But you know, the focus that Lithium Americas has taken on this project, and certainly as we move forward, we’re all about pursuing our developments on the basis of risk mitigation and managing the risk around projects. Through partnerships, that’s kind of one of the keystone parts of our approach, and you know, what SQM brings to the table is certainly the world’s best engineers and hydrogeologists to help basically take a lithium brine, put it through an evaporation process, and create what will be, at the end of the day, lithium carbonate products to be sold on the market and feed what is the emerging lithium ion battery industry.
SQM Joint Venture key
James West: Now, the feasibility study that is in the public domain for Lithium Americas was conducted targeting production of 20,000 tonnes per year with a lithium price of, I think tie was $5600 per tonne. Now, you are obviously aiming much higher given the partnership with Ganfeng and Bangchak and SQM. Could you maybe outline what the new targets are?
Dr. David Deak: So in our Phase One, the intention is to build a 25,000 tonne per annum plant, and then once we have that up and running, almost immediately the cash flow that we will produce from that, the intention is basically to start funding the expansion. And that expansion will take us to about 50,000 tonnes per annum. And you know, a lot of this work is based on sort of the due diligence and detail engineering that SQM has been driving forward as part of our efforts.
James West: So the agreements that you have in place, investment agreements with Bangchak and with Ganfeng, stipulate that they will offtake 85 percent of your entire production at market prices. I guess that sort of puts the metrics that are reached in the conclusion of the feasibility study, sort of puts them in the light of quite modest?
Dr. David Deak: That’s correct. I think we’re quite fortunate to have brought in these partners at this stage – as I mentioned, this sort of funds the project by and large, and it also takes care of the other part of our project’s risk portfolio of who’s going to be taking our offtake. 70 percent will be taken by Ganfeng and then 15 percent by Bangchak. We’re really excited, basically, to be at the centre of what is effectively filling a gap of production that the market needs.
PetroLithium Producers like MGX Minerals Inc.
James West: Sure. Okay, so the lithium brines worldwide are the lowest cost source of lithium for producers of EVs and batteries and whatnot, but there are some emerging technologies and sources that are sort of becoming more and more known, particularly in the extraction of lithium from hydrocarbon disposal wells where the water, the produced water or the injected water, has a high degree of lithium content that arguably could become an economic source of lithium and might in the future impact the economic viability of lithium brines?
Dr. David Deak: So I would certainly say that there is potential there, and I do see such sources playing a part in the supply of lithium to the market. But there is a lot of development work that needs to go into that. Every brine in the world is different, it needs to be sort of treated differently. There will be a particular and unique flow sheet that’s applied to every brine resource out there, whether it comes from hydrocarbon wells or otherwise. And the way I see it right now is that many of these lithium sources are actually relatively small and not that scalable, but with the right kind of technological approach, I could easily see them playing a part in producing lithium for worldwide consumption.
James West: Okay. Now, the second project of Lithium Americas in Nevada is clay based, and there also has yet to be any consistent commercial level of production of lithium from clays. Is that something that is also part of that future technological landscape where perhaps Lithium Americas will have a leadership role in developing the technology to extract commercial volumes of lithium from clays?
Dr. David Deak: Absolutely, and you know, a lot of the work that has gone into the project to date has been great. I mean, we did the lithium Nevada project back in 2012 had released a pre-feasibility study with a flow sheet concept that was then implemented on a large demo plant that we had in Germany, and we were producing about 500 kilograms of ore per hour and very robustly turning that into a lithium carbonate product.
Now, what we’re doing now moving forward is taking a second look at that flow sheet, basically to see how we can reduce the costs significantly, and I think that there is a line of sight to making that happen. But we’re taking a step back and working through that, because what we want to make sure of is that – this project is highly scalable in Nevada, but we also want to make sure that it’s part of the, it’s on the lower part of the cost curve, basically.
James West: Okay. Interesting. So then finally, Lithium Americas’ strategy of aligning itself with these big companies, the biggest players in the space, really seems to have de-risked the execution side of things for Lithium Americas. Is that an approach you envision Lithium Americas sticking with going through the development of clay-based resources?
Dr. David Deak: Absolutely. Really what this is all about is bringing the best talent and people and companies all together to execute what will be one of the largest and also lowest cost projects in the world. And one really important part about de-risking a project is bringing the right talent together, and really focusing on high amounts of collaboration. I think that that’s something that the lithium industry right now suffers from, is that there actually isn’t a large talent pool to draw from, and a lot more needs to be done in terms of collaborating and pushing the industry forward.
James West: Okay. Great. Well, that’s a fascinating insight, David. I’d like to thank you for your time today.
Dr. David Deak: Well, thank you very much. This was a great, great opportunity.