E3 Lithium Limited (ETL.V) Earnings Call Transcript & Summary

Good afternoon. Campbell Mccrary here, Amvest Capital in New York City. Welcome to the Amvest Capital Inc. live webinar with E3 Metals Corp. E3 trades on the venture as ETMC and as EMMF on the OTC. We hope you'll enjoy today's program. It will also be available in replay mode. Q&A is very important, so please send in your questions. And we'll ask them in real time in the Q&A portion of today. Amvest Capital, New York-based specialist investment management and corporate finance firm focused solely on the natural resource sector. Please note this disclaimer and read it carefully. This webinar -- this call is for informational purposes only. We're pleased to have with us today not 1 but 2 persons from E3 Metals: Chris Doornbos, the President and CEO and Director of the company; and Liz Lappin, Vice President, Corporate Affairs and Exploration. With that, going to give both of you the floor. And Liz, if you want to share your webcam as well, and we'll get started, but I think we have contact.

Excellent.

Yes.

Thanks, Campbell. Thanks for the intro. I'm actually going to hand off the baton today to my Vice President of Exploration and Corporate Development, Liz Lappin, to take you through the presentation. I'll be around at the end as well for some Q&A. So take it way it, Liz.

Thank you. Hi, everybody. Welcome to the E3 Metals corporate updates. I'm excited to be sharing this update with you and, of course, to hear your questions at the end of the session. With us as well, in addition to Chris, is also our Manager of Communications, Jennifer Langford. So she'll be available for questions at the end of the presentation as well. The next slide just shows our forward-looking statements. These are available for your consumption on our website at any time, so please make sure you read them. Okay. So E3 Metals, for those of you who are new to the story, we're a combined resource and technology company with the vision of being a global leader in the production of sustainable lithium hydroxide. And there's, of course, a lot of things that go into that. Our focus is our proprietary technology, a class of technologies called DLE or direct lithium extraction. This is a differentiator for us, and we plan to use that technology that we've developed on our very large resource that we've outlined in the inferred category in Alberta, just in between Calgary and Edmonton. And of course, we have a very great team that I'm excited to introduce to you. So for those of you who saw the news this morning, we welcomed Raymond to the role of CFO. Raymond has been with the company for a few months now as Finance Manager and has already made an important contribution to the company. We will be saying goodbye to John Pantazopoulos in the role of CFO but not so long because he will be remaining with us as a director. So that's very good news for all of us because we love working for John -- or working with John. Oh, there we go. There's our team. And the rest of us are on there as well, Jennifer and Chris, who are on the call today. So stellar team that's actually expanded quite a lot in the last little while. So in terms of our Board and advisers, we're very well supported on that front as well. We have a very well-rounded Board. The majority of whom are independent with experience in marketing, operations in oil and gas. We also have a Technical Advisory Board. These folks are experts in their fields and everything from battery components to desalination and oilfield activities. And then we also have a Corporate Advisory Board, and everybody's very active and involved. The latest additions to our Board of Directors was Kevin Stashin, who is the former CEO of an oil and gas company in Calgary called NAL Resources. And the latest addition to the Corporate Advisory Board was Brad Wall, who is the former Premier of Saskatchewan. So moving along. I'm going to introduce the lithium market a little bit. So what we're showing on the left-hand side there is a comparison in the costs between internal combustion engines shown in the red line with battery electric vehicles shown in the bar graph. And you can see from that circle that somewhere in the mid-2020s, we're anticipating a crossover between those price profiles. And that's really meaningful because as a consumer -- even I'm, myself, in the market for an electric vehicle right now. It's important to me that when I walk into that dealership, there's -- price isn't going to be that much of a driving factor. And of course, there's a lot of things behind this, why those prices are coming together. The industry is scaling, we're seeing technology getting better and those costs coming down. And a lot of what's behind that, of course, is this global movement towards reducing our emissions and a lot of those policies that have come into place around the world, the EU, Canada and China and so on. So how that all manifests together in terms of supply and demand, in the next slide is we've got the market share of internal combustion engines anticipated to be declining over time. That's the light blue line. And then the market share for electric vehicles, of course, is corresponding, taking more market share. That crossover is anticipated somewhere in the 2030s. And of course -- and behind that is the demand for the raw materials that are required to go into those batteries, so things like lithium. And so as you see in the orange line, that lithium demand is forecasted to increase and actually outstrip the supply. So that's a great opportunity for a company like E3 to be coming to the market with a sustainable and secure source of lithium hydroxide that's battery grade to the market. So now what I'll do is I'll take you through our preliminary economic assessment. So this was a disclosure that came out at the end of 2020, and we were really pleased to be able to finally share all of the elements of this project with the market. Preliminary economic assessment is what it says it is. It's preliminary. It's the first step of outlining the economics of our project, and it was completed on our inferred mineral resource in the Clearwater project area. So what I'll do is I'll just step through all of the main steps that we've outlined in the PEA that kind of show you how we're planning on producing that lithium hydroxide. So what's shown on the left here are a series of wells that have been drilled from a surface location. So this is a technology that's well established in the oil and gas industry. It's called multi-well pad drilling and directional drilling. So we drill multiple wells off that same surface footprint that further minimizes our land disturbance. And we placed those wells into the Leduc Aquifer, which is 2.5 kilometers below the subsurface. And those wells are going to be producing lithium-enriched brine to the surface, and that brine is going to be collected at the central process facility, which is that black kind of angular shape where all those orange arrows are pointing to. So that's half of the brine. The other half of the brine is going to come from the north, which is an area that's not shown. But it's just to sort of keep the diagram a little bit more simple. But all of that brine, 130,000 cubes of it will be coming into the central processing facility, and it will go through our 3-step process, which is outlined by those gray -- sorry, green circles. So the first step is that the brine will go through the direct lithium extraction process or DLE. This is E3's own proprietary technology and is designed to just attract that lithium and let everything else pass by. So it collects the lithium and then essentially all the rest of that brine that contains the rest of the analytes, like calcium, magnesium, sodium, goes back down into the reservoir. So you can see there's an orange arrow pointing towards another black square. That represents the injection wells. So we'd be reinjecting that fluid back into the subsurface about 15 kilometers away from the producer wells on either side. The next step is to further polish and clean that fluid. It's pretty pure already when it comes out of the DLE system, but there's just a little bit more polishing that is required before going to the next step. The third step, which is a crystallization stage, which makes what is essentially a salt -- a white salt product that is ultimately lithium hydroxide, that would be -- what we're aiming for is battery grade ready to go into a battery component. So on the next slide, what we've outlined is the summary of these economics. So our first stage of economics based on inferred resources for a 20,000-tonne lithium hydroxide per year project over a 20-year life, what we've outlined is a $1.1 billion pretax NPV and $820 million after tax. And that comes with about $600 million in capital. Now what sets us apart is not just that this is a highly valuable project, but also that we have one of the lowest operating costs in the industry for battery-quality lithium hydroxide. And this is very important for the industry, for our customers. Keep in mind this is our future customers. Just want to be clear there. And this is only the first stage of E3's planned production. We believe that we can increase that production capacity to over 50,000 tonnes of lithium hydroxide per year based on the resource that we've already identified to date. So now I'm going to switch gears a little bit and take you through some of the technical side of the disclosure that we've had in the last month or so. So I'm going to do that by introducing first our DLE technology if you're not familiar with it. So it's an ion exchange process, which is a fairly standard -- stock standard process that's operational in many different industries like food industry, oil and gas industry, might even be in your house as a water softener. It's the same kind of process. The unique part about it for -- and where our IT lies is in the manufacturing and the development of that sorbent material. So that would -- is represented in that blue cylinder there, the dark blue solid material. That's E3's proprietary DLE sorbent. And what's special about it is that it only likes lithium. It doesn't like anything else. So when you run a brine through it -- and we've conducted tests on the actual brine from our resource. The lithium sticks to the sorbent, and everything else passes by into that gray arrow at the bottom, the lithium void brine. And then every so often, that sorbent solid material gets full of lithium, and then we have to wash it off. So we wash it off and what comes from there out of that process is our Li-IX solution, which is the highly purified concentrated lithium solution that can then be further processed, as I outlined in the previous slides into a lithium hydroxide product. So this is quite different than how lithium is produced in the salars in South America and in Nevada. There, you have brine being pumped to the surface and then concentrating all of the analytes in the brine over an 18- to 24-month period. This process turns that on its head. It's very fast, very efficient, high recovery, and it only is attracting and concentrating the lithium versus all the other analytes in the brine. So in terms of what's new and what we've outlined in our latest news releases is that our R&D process on that sorbent material is complete. We've finalized the sorbent material, and we actually have 3 different forms of it that are great candidates for the pilot. Because we have those 3, we believe all of them will work. We're testing all 3 of them instead of 1. So that was what we announced on the 9th. And it's important to note that this is -- from now on and out, it's -- flow testing is process driven. So now what we're going to be testing is the process rather than that sorbent material. So as we announced later on in June on the 23, we've advanced one of these high potential sorbents for testing, and those results are outlined in the table. So you can see that we were covering 97% of the lithium and very little of anything else. This is a real key differentiator for E3 because if you don't remove all of those impurities upfront, it requires a lot more steps to get to a point where you can make a very pure lithium hydroxide product for the market. And so the fact that we can do this as a first step, it cleans it very well and is going to be allowing us to make that battery-grade product. So now I'm going to step into the geology realm, which is my background. I'm a geologist, so get ready for some rock talk. So on the right-hand side, there's a map. This is a map of Alberta, and the white outline is showing the E3 Metals permit area. The shaded areas are where E3 has lineated inferred mineral resources. And this represents about 34% of our permit area, so lots of room to expand there in terms of the delineation of resources. And to give you an idea of our aquifer, the Leduc Aquifer, where we've delineated these lithium resources. It's an ancient reef. The analog that I like is the modern -- the Great Barrier Reef in the modern off the coast of Australia. And to give you an idea of the size, it's about as tall as the Eiffel Tower, 300 meters tall. And it's -- that area that's denoted on the cross-section and in the Clearwater area denoted on the right, that's about the size of San Diego. So it's a very large area, and it contains a lot of lithium. And so as a geologist and our subsurface team, what we're looking at is the properties of the rock and how it allows the fluid to flow within it. So the rock has holes in it. This is what we refer to as porosity, and the way that those holes are connected is what we refer to as permeability, so flowing the fluids. And we want to move those 130,000 cubes in a way that's very intelligent and actively managed as the aquifer, which is what we refer to as our aquifer management plan. And so all the work that we've kicked off is to do with being very good at predicting how that fluid will move and predicting those properties in between control points. So what we announced earlier in June, something that was really exciting for me is that -- and it was exciting for me because we've had this work on the book for quite some time. And naturally, the development of that DLE technology takes priority. Now we're at a point where it's the right time to be kicking off this work. So we've kicked off a variety of activities, looking at rock samples and doing mathematical and statistical valuations on those rock properties and really kind of taking the current aquifer management plan and our reservoir model to the next level, so we can be very confident in our ability to pick the best well network location. Some of this work will also involve some well testing. So we're planning on reentering some existing wells. We have the advantage of lots of existing geoscience data and lots of infrastructure in place from the oil and gas industry. So we're leveraging that to collect more information about this reservoir that has historically produced oil and gas, now produces mostly brine. So most of that production is 98% brine and only a few percent hydrocarbon. In any case, as we move the resource forward, as we increase that confidence, we're also going to be in a position to upgrade the resource to Measured and Indicated. So that's something that we're anticipating early next year. All right. So the next thing that I want to take you through is E3's sustainability piece. And this is something I'm very excited to be leading at the company. It's -- the sustainability is important to E3. It's part of our core values. It's also important to the development of any new project, is to have ESG at its core. It's very important as well to our customers who are more than ever -- now more than ever prioritizing a lower carbon footprint in the materials that go into the life cycle analysis of their products. So for E3 Metals, what this means is we are looking at our emissions. So the scenario we outlined in the PEA had us using some sources that would require some carbon offsets. We believe that this could fairly straightforwardly be addressed by capturing the CO2 from our project and reinjecting it as part of that injection stream. This is type of thing, carbon capture and sequestration, that is actually happening just north of us in the exact same aquifer for an enhanced oil recovery project. And there's also a carbon trunk line that comes down to that area as well. And so there's a lot of synergies to explore in this area to potentially even become carbon negative. There's also the opportunity for us to use renewable energy sources to power our project. So a lot of that work is going on right now, that optionality. But the end goal is to have a net 0 lithium product coming to market and as well inherently with our DLE process because we bring the brine up and we take the lithium out and we put it back down into the subsurface. We have vastly reduced land use profile and no tailings. As well, one of the advantages I mentioned earlier with the oil and gas industries, there's a lot of that infrastructure in place. And so there's a lot of well sites that are already existing that we believe can be repurposed into lithium production with lithium wells drilled on them. So with that technical update, I'm just going to provide a summary of our development plan moving forward. So on the left-hand side there, that DLE technology, what I was referring to earlier in our news releases is the completion of chemical optimization. That leads directly into the lab pilot and the field pilot. This is -- that will be a really exciting part of the project. It's something that I'm working on right now, so getting that site ready to go for our pilot. And that work is also supported by Alberta innovates, and we are very grateful for their support on this project. The few things I mentioned on the aquifer management plan, that production well testing and the resource upgrade, all of these things are milestones that our investors and the market can look forward to seeing over the next little while and staying up to speed on our progress. And finally, after these things are completed and a little bit in parallel, we're also going to be making lithium hydroxide. This -- we're going to take the Li-IX solution off of our lab and field pilot, and we're going to be aiming for the production of a battery quality, what's called five nines Lithium Hydroxide product. And all of these things come together to produce a pre-feasibility study, and that will be a large milestone that E3 is aiming for moving forward. All right. So the next slide here is the capital structure. That's our most -- our updated cap table, was just updated today. So we closed yesterday at $1.93, our market cap of $102 million and 52.9 million shares outstanding. We've really seen a positive change in the share price and our volumes since the release of our PEA in November, including trading as high as $5.30. So that's been a really important step change for E3 in terms of our stock performance. And just to provide you with a bit of a comparable, we've provided the comparison between E3 Metals and Standard Lithium. We consider Standard Lithium to be our closest peer in the space. We both use a similar DLE process. There's a couple of big differences. We own our own resource, whereas they own about 30% of their resource. Standard lithium at the same time is more advanced than E3 being in the process of currently piloting. And this provides an example or a road map of where E3 is headed as we move towards our pilot. There's a very significant difference in that market cap there, and we see that as the potential growth for E3 Metals Corp. So just to finalize things at the end of the presentation here, what I've outlined to you today is a very exciting year ahead with lots of milestones and moving towards that production that we're aiming for in 2025. We will continually demonstrate our progression on all fronts through our news releases on all the things that we discussed today. And all of these things are back on the fundamentals that are outlined on this final slide. So with that, I'm going to hand things back over, and I look forward to hearing your questions.

Excellent. Thank you all for sending in your questions. Please send in more, and Amvest will also have some questions, too.

So could you provide some insight into, what one writer observes, recent insider buying and exercising of warrants? So maybe just circle back on that.

Sure. I think that's actually a great question for Chris.

And Chris, you're muted.

Yes. Thanks for that. Yes, absolutely. So there's not a lot of insider buying and selling of shares. There has been recent purchasing. As far as I know, myself and a couple of other directors have recently been acquiring shares. Those are obviously posted on SEDI for everyone to see that activity. There was an exercise of options by myself that expired in April that were exercised prior to the expiry as well. So there hasn't been a ton of that sort of activity, but it does show up in everything that is any insider trading, buying or selling, is tracked on SEDI and reported there, so you can go to sedi.com (sic) [ sedi.ca ] to see that.

Okay. Great. Can you talk about lithium concentrations in the brine and the possibility of finding portions of the aquifer with higher concentrations?

You bet. So our resources -- our resource in the Clearwater area is about 74 milligrams per liter lithium. This is, as I mentioned, is a historic oil and gas reservoir, so what we've seen over time is obviously production and injection of fluids. And so we believe that it's possible that in the oil and gas areas, there may have been maybe a freshening of the lithium or reduction of lithium concentration over time just in those specific areas. And because we've been exploring on the back of that oil and gas development, that's where our samples have been taken. And so we actually have -- based on some of the work that we've done, we believe that it's possible that as you move away from that oil and gas production into more of the center of the resource and down below, kind of adjacent and beside the oil and gas production, we might see higher concentrations of lithium. And so that's something that we're planning to test with this upcoming production well test.

Okay. Will you be constructing the pilot plant this year?

That's something that I'll hand over to Chris as well.

Yes, absolutely. The goal is that we will definitely be running the product prototype this year. The construction will hopefully start by the end of this year. The key missing thing that we don't have yet in place that we need the pilot prototype to complete is that -- is the fabricator, the manufacturer of the pilot itself. And we'll start working on that once the pilot prototype is operational, and we have a design basis for the pilot. So it is quite possible that all the pieces will align, and we'll get that started this year. If it's not by the end of this year, it will be very early next.

Okay. Is there any risk the aquifer does not act as intended, i.e., what does the production well testing mean exactly?

Sure. So there's quite a few pieces of information we can get from the reservoir. So when we do this testing, there's, of course, the collection of brine samples where we're evaluating what that chemistry looks like. So that's the first thing. Second thing is we're going to be actually producing continuous volumes over time. And so -- and we're going to be measuring the pressure response. And so that just gives us a little bit more information about how the brine is behaving and how the differences in pressure propagate through the reservoir or the aquifer. And this is really all that comes down to, is having this information allows us to plan an optimal well network, so making sure that we space the wells apart properly, that we're producing at the right rate and sort of optimizing all of those elements. We sort of -- with the PEA, we've come up with a first stab at it, and I think it's pretty good. But I think that we can do better, and so that's part of the work that we're doing right now with that well test.

Yes. And I'll add to that. There's -- unlike most other aquifers that are being looked at for lithium -- and it's most. It's not all because there are some similar to E3's that have a long production history. But E3's -- the aquifer that we're looking at in the Clearwater area where the PEA has been produced has a 60-year production history from oil and gas. Like Liz mentioned earlier in the presentation, that end of the -- we're at the end of the oil and gas life cycle. There's not a lot of oil left, and there's very little production from oil remaining in this aquifer. But it's been producing since the '60s. So we understand the aquifer pretty intimately, and so what Liz is -- what the data that her team is collecting is really just an add-on to get increased confidence for Measured and Indicated.

How deep and thick is the reservoir?

Love that question. So it's about 2.5 kilometers deep, and it's about 300 meters thick. The analogy I used earlier in the presentation was that it's as tall as the Eiffel tower, which I love, kind of gives a sense of, if you're standing beside it, how tall it would look. So it's quite vast, very large.

Can you comment on how much change do you expect in resources from the inferred resources of last year to the new ongoing geological evaluation? And second, would it be a mechanism to audit the inferred resources?

My expectation, as we continue to do more and more work on this, is that the resource would expand. So we -- at least the inferred resource for sure. So -- and in terms of the audit, I don't know if I completely understand what you mean, but we're building off of the resource that we already produced. So all of the work we've already done is sort of just forming that foundation. Now we're working on it more and building more detail into the reservoir model. So my personal anticipation is that it will increase in its total size, but of course, no guarantees.

Would horizontal well technology allow for the required production of brine volumes with fewer wellbores, surface locations than vertical directional wells?

Also a great question. So what we outlined in our PEA was vertical wells. So we have a series of wells drilled from a surface location using directional drilling or what are also called S wells. And we designed them to be vertical so that they can access various horizons within the reservoir. Typically, because it's a sedimentary rock, you tend to have better flow in a horizontal direction than you do in a vertical direction. So that design kind of is meant to be capturing flow from all of those units simultaneously. But when I talk about intelligent well network design, that's something that I think is something that we would reevaluate once we know more about how this -- the reservoir changes spatially. And we get to -- get very good at predicting what those changes are in between control points because it could be that what the right solution is, is a combination of those 2 technologies. But yes, certainly, there's room for both of those, and we'll be picking whatever is the most cost effective to sweep the reservoir to the degree that we need to.

Can you reuse any of the present wells?

Yes. Yes and no. So a lot of the wells in this area have been around since the '60s. And so in terms of the subsurface infrastructure, so the existing well that's already down there, those ones were not drilled specifically, obviously, to produce water. They were drilled for hydrocarbons. And that infrastructure is getting a little old. So I think what's most likely is that we would cut and cap any subsurface infrastructure, but we would focus on reusing the site itself. So -- and all of that is -- cannot be discounted how important that is because what you have there is a site. A lot of them have a power hookup to them already. There's a road, so it's easily accessible. It's sitting on typically agriculture land where the farmer has already agreed to allocate that portion for the use of resource development. So you've got that kind of social license built in as well. And you also have in that spot geological information. So it's quite advantageous to be able to use the surface location and just drill a fit-for-purpose well that's meant for lithium production.

It seems like the chemistry is easier to go to lithium carbonate. The lithium carbonate market stays strong, how hard would it be for E3 to target lithium carbonate instead of lithium hydroxide?

Well, at this stage, we still have optionality there to go one way or the other. We're favoring hydroxide due to what we're seeing in the market. But I do know that we are relatively flexible at this stage where we could go either way. And maybe what I'll do is I'll just pass that over to Chris to add any additional color.

Yes. And I think on top of a market driver, and we're seeing estimates and these are not our numbers but other people who are much more into the market and the depth of detail, 500,000 tonnes is the number that's been thrown for U.S. demand for lithium by 2030, 80% to 90% of that being lithium hydroxide. So it makes a lot of sense for the local market that we're producing hydroxide to Liz' point. There's a lot of project efficiencies, however, to go to hydroxide for us over carbonate. And we did that evaluation last year before we put out the preliminary economic assessment, looking at which one works better. And we found that making lithium hydroxide, there's a lot of recycle streams of efficiency that can be gained. We also have access to cheap power, making our production lifting hydroxide very low cost. And the combination of the 2 drove us firmly to lithium hydroxide. As Liz mentioned, until the plant is under construction, there's flexibility to change that, and it's something that we continually evaluate. But at the present time, the company is firmly pushing towards the hydroxide front for those reasons.

Right. Thank you very much. Going to pass it over to my colleague, Stuart.

Yes. This week, there was a change in the pricing in lithium hydroxide and carbonate for the first time that crossed over the [ MA ]. If you had any comments on that?

I think Chris should answer that one as well.

Yes. I mean I follow the market a bit more closely. I think that the prices are going to fluctuate over the next 5, 10 years as different chemistries of batteries become prevalent at that given time. I think right now, there's a big push for lithium iron phosphate because of the safety of the battery and there's a well-established manufacturing process. And so like I have a lithium iron phosphate battery in my camera bag. And I didn't go buy an NCM811 because I wanted a safe battery and I get a little bit the cost of efficiency that you get from a lithium iron phosphate. But looking at the predictions of where the market's going, and not lithium hydroxide versus lithium carbonate but what consumers are going to be driving and what battery's going to be powering those cars. High nickel cathode is the dominant choice for things like the Ford truck or Tesla's vehicles because of the [ hydrogen density ] that they get, giving them better range per weight, better range for cost. So I think that the hydroxide market will remain quite strong. But there's -- that does not discount the fact that there will be a strong carbonate market, and there is a place for carbonate-based batteries like lithium iron phosphate into the future indefinitely. So I think they'll both be strong, and I think you'll see them continue to bounce back and forth in price between each other.

Yes. And as you're kind of transitioning from, I guess, the lab scale to the pilot plant you're planning for the end of the year, how do you guys approach mitigating risk as you go through those phases?

Yes. Really, what the technology is that E3 is developing specifically is a direct lithium extraction, and it makes a precursor product that is -- we can put into either a carbonate stream or a hydroxide stream. So the focus right now is to get the DLE side out. And by the end of the year, early next, that will be well into piloting. While we're working on that, as Liz mentioned, today, we're working on the lithium hydroxide flow sheet side of things at the sort of initial testing with vendors who already -- who make and manufacture lithium hydroxide process streams. So we're not reinventing that. So that development work gives us price estimates that lead us towards pre-feasibility study. And even if we go hydroxide into the pre-feasibility study, there's nothing saying that, that can't change and go to carbonate. But I still feel that given the path that we're on, given the efficiencies to make hydroxide, the cost that we can make it, it is, for us at least, the path forward given the local market again.

Yes. Okay. And with that kind of internal technology you have for your direct extraction method, how -- if you're going to have funding partners or project partners down the track, how do you kind of handle the internal confidentiality you have to have on it and getting third party, whether they're customers or project finance people, comfortable with it?

Yes. I mean there's a lot that you can talk about without giving away the secret sauce. And for us, what that is, is it's the [ sorbent ] material itself. But a lot of the demonstration can be done without -- even live demonstration can be done without giving that away. So there's a lot of confidence that we can gain through those types of partnerships. And we've gone through that with Livent, and we've gone down that track and have matured the development and that sophisticated -- how we manage that intellectual property through that relationship. And so it's definitely something that we protect very closely because it is important to the company and to our shareholders. So we don't tell people what it is. We don't give that information away even under nondisclosure. It's just not something that the company is prepared to do.

Yes. Fair enough. And Liz, you mentioned -- you discussed the ESG aspects earlier. From a rebuilding point of view, what would happen here at site to make sure you're down a track when it is being rehabilitated, that say like the competency of the rock around the aquifer's in good standing and everything else in the community?

Yes. So in terms of the competency in the rock, that gets actively monitored throughout the project life. So any issues that arise from that would be handled as part of the production and not, say, for the end. And then in terms of the reclamation -- the closure and reclamation, that's a process that's fairly detailed with respect to the oil and gas industry currently and fairly stringent regulations that E3 would be expected to adhere to. And so that's what we're planning for. We would plan to -- once we're finished with infrastructure to be closure -- cut and capping any wells, closing and then reclaiming the site to its original condition.

Great. I'll pass it on to Adam.

Great. Question that comes to mind is, is the initial capital cost of the absorbent or adsorbent, not exactly sure which one it is, and how frequently that's going to need to be replaced. Just as an analogy for a gold mine, if you're using carbon and stripping the carbon, eventually, you got to throw away the carbon and replace with new carbon. So what's the upfront cost of that absorbent? and what's your anticipated sort of use before it needs to be completely replaced?

Chris, I'll pass that one over to you, but I think that one's handled within our sustaining capital.

Yes, it's all in the PEA that we've outlined, so there's an OpEx line item for that. And I'm going to rattle off a number, but don't quote me on that. Please refer to the PEA. But I think it's about $600 per tonne of lithium hydroxide produced is the cost to manufacture the sorbent on a per tonne hydroxide basis. So the total operating cost is $3,600, so $600 of that $3,600 is the material itself. Because it does have a shelf-life, you're absolutely right. Eventually, it does wear out, and you have to replace it. And it just becomes -- we'll likely have on-site a manufacturing facility for it. We're talking about several tonnes a year of manufacturing capacity that will require. So it's not a huge amount. It's not a huge manufacturing facility either to keep that -- keep those columns or fluidized beds topped up.

And Liz, I presume this is very much like an in situ uranium or in situ copper type of situation where you establish an initial well field and you keep having to shift it in order to access your underground brine in this situation, especially considering the size of your brine. Is that correct?

Yes. So the situation that we've outlined in the PEA contemplates a 20-year mine life for that infrastructure, so for that capital investment. And then as we step out from there and continue targeting other parts of the aquifer, we're going to be able to leverage pieces of that infrastructure as we go. So it wouldn't be about the whole amount upfront. We keep that central processing facility, and we'd just be stepping out and adding new wells. Does that make sense?

Sorry. So the initial 20-year mine life is with 1 single initial well field?

That's correct. Yes. Yes, all the wells, so it's about 60-some-odd wells for that initial well network.

And my understanding from your description, you're going to be injecting basically just brine solution stripped of the lithium. You're going to be injecting effectively almost exactly what you're pumping.

Yes, except for the lithium. Yes.

Exactly. Exactly. And so the only difference per se as you're bringing up your -- the brine through the pumping wells is there's going to be a pressure drop. But do you -- is there any anticipation of any type of precipitants that could clog up the pumping wells, the extraction wells?

Sure. Yes. The scaling is something that we're starting to look at right now because there are a lot of other elements in the brine like sodium and calcium. And lucky for us, that brine has been produced for the last 60 years in this area, so we know a lot about it and how it performs and how to address any scaling issues.

So did the oil and gas industry experience those issues? And do they have a solution? Is that what you expect to see and apply?

Yes. I think that's where we would start. We -- yes, we would start with solutions that are already in place. There are some differences in terms of what we're going to be doing and namely that's the rate of production. And as well as some of the equipment, we're going to be using some electric submersible pumps that are used sometimes for oil and gas, but in this area, it's typically pump jacks. So we will be using some different materials, and so that will be part of the work that we have coming up to -- not only for the aquifer management plan but essentially that brine production plan, all the activities that are required to deliver that 130,000 cubes efficiently to the central processing facility.

Yes. And I would just add that a large part of that, when you asked about precipitation, a large part of precipitation happens at a temperature change. The water out of this aquifer is 80-some degrees Celsius. And we don't anticipate a big temperature drop between that and the production facility due to what Liz was mentioning, which is the rate. So high flow rates through an 18-inch pipeline keeps that water -- and it's 6 feet underground as well. So it keeps that water fairly hot to the process facility where we remove that lithium. We keep it -- it remains fairly warm going back in the aquifers. So that's the way that we mitigate foreign precipitates, is just the volume and the temperature -- the lack of temperature change. In terms of your question about the oil and gas industry, they -- there's definitely a systematic approach that has been well developed in terms of managing scaling, which is a problem regardless of what water you're using, if it's high TDS like ours or any lithium projects in this world are high TDS, you have to manage scale. And that's basically same as something that is in your sink. If you have high calcium in your water, you get the same sort of white crystal forming. So there's descalant that you can add to these things that are very common in the industry, but the whole system runs very hot to minimize that type of impact.

I know in the copper industry and I think in the in situ uranium industry, they set up both their injection and their pump wells to flow in both directions, so they can effectively reverse the circulation to take care of scaling, if that becomes an issue. Are you guys setting up your wells to run in both directions?

They always could. But that's not necessarily the plan because what we're putting down in the aquifer will be lithium void water. So we don't necessarily want to be producing that. So in the case where we need to flush the lines, yes.

Yes. If you're getting -- you can control what you're putting down the lines, but there's no way to control what you're -- if you're going to get scaling on the pumping wells without being able to reverse the flow, right?

Yes. Yes, exactly. And there's 2 -- the way this is designed in the PEA, there's 2 production networks, each 15 kilometers to the north and another 15 kilometers to the south. So the other option is you can pump from one to the other. If you needed to just move water in the opposite direction, you'd be able to push water from one production network to another, and therefore, you're not sterilizing your resource.

Okay. Excellent. I hope I didn't take us down a blind alley too much. And I know there's more questions from the audience. So let me throw it back to Campbell to maybe -- to answer some more questions from the audience.

Yes, if -- unless you disagree, I think we can do another round of questions, and we've got most of our audience if you want to keep going. Okay, good. All right. Do you have concerns about obtaining industrial quantities of the raw materials to produce the sorbent?

No. No, it's all common off-the-shelf stuff that you can get. And we don't use that much quantity-wise that I would be concerned that it would have any sort of impact to the market of that material.

Will the production, once complete, be a full year operation or only during the summer months where temperatures are milder? What -- that's several people asking about that.

Sure, yes. It'll be a year-round operation, 24 hours a day.

What production is assumed by the 27% IRR, 150,000 after ramp-up or lower?

So it'll be -- in terms of the production, it's the 20,000 tonnes of lithium hydroxide and 130,000 cubes of brine a day.

Where or who will be the customer for your lithium? Are you concurrently working on this? Please expand on end user.

Chris, over to you.

Absolutely. So that sort of business development is a big part of my role right now, what I'm doing in -- for the company, developing relationships with end users. They're sort of -- breaks into 3 groups. There's the end, end user, which is an [indiscernible] manufacturer that's using the batteries and you've seen automobile manufacturers go directly to suppliers in some cases. It is more and more common. So we are in those discussions. There's also the battery manufacturers themselves, and those break into cell manufacturing and cathode. At the end of the day, the actual customer is the company that's making the cathode material, is the main customer that we will be supplying to. But in terms of [ auth ] and securing the rights to potential production of lithium from E3's project, I see that happening on all 3 levels. And it is something that we work on right now. And one of the key hurdles to securing those types of contracts is having lithium hydroxide that we can provide to potential customers for them to test. And so that's a big goal for this year, is to have that in place and start to provide samples.

Is computational modeling being used to aid understanding of brine flow in the aquifer?

Yes, absolutely. So what we're doing over the next little while is we're updating the static model, which is essentially a representation of what all the geology looks like. And then we're going to be running simulations within that model to determine the best well, that work location and select that final configuration.

And for the more technical people, we use a reservoir modeling flow model, modeling software. So there are softwares out there in this world that are designed to run that simulation, and so we use a product of that -- a computer program that is designed for that exact thing.

Have you estimated CapEx to get to 150,000 tonnes yet? What is it?

An estimate? I'm not at liberty to discuss unfortunately because it needs to be discussed under the 43-101 code. So I can't rattle numbers off unfortunately as much as I'd love to. But we do have that estimate. What we're looking at right now is how best to run the pre-feasibility study that the company is aiming to put out. And do we stick to the 20,000? Or do we show a ramp-up to 50,000 or even 150,000? Under that, we would have that capital. The easiest way to make an estimate on it is the wells -- because the production doubles, the well -- the number of wells double. So if you look at the PEA, that number doubles but the rest of them is about 6/10 rule. So it does -- economies of scale definitely do play a factor in this. So yes, it is something that we are critically analyzing on a regular basis to see what that looks like because 20,000 tonnes is just a snapshot of what this reservoir can do. So we really just use it as a starting point because, in terms of an initial production, $600 million in capital is about a size that a small company like E3 can grow towards handling. And then from there, once you've proven that, it's a lot easier to go get more debt to finance a expansion project than it is to grow a project from -- at 50,000 tonnes, for example, straight up to the gate.

Going to end with this last question, which is a great segue to close us, is we're talking -- we have a project here. Some of it a science project and some of it now on your stock. So can you tell us about milestones for the next 6, 12, 18 months?

Sure. So some of those I outlined in the talk. With respect to the advancement of the DLE technology, we've completed that R&D and now we're moving towards that flow system testing both in the lab pilot and in a field pilot. So those milestones will be marching along. As well on the geoscience side of things, we're updating and expanding our reservoir model, which will be -- will involve a well test. That'll be a milestone selecting that final well network location for our first development and then as well the associated resource upgrade. And then as well, we're doing some testing on that lithium processing side of things to make lithium hydroxide that will be battery quality. So you can expect to hear more about that as well. Did I miss anything there, Chris?

The only thing I would add -- really, I think you've hit the nail on the head. The only thing I would add is that E3 has had a very busy previous 6 months to today. We started with the release of our preliminary economic assessment at the end of the last year. Through subsequent to that, we've raised $14 million. We got a grant from Alberta Innovates that Liz championed for $1.8 million. So the company is now well capitalized. Since that fundraising completed in February, we've focused the last 3 or 4 months on doing 2 big jobs. One is hiring staff. So we've gone from this time last year, Liz and I have been -- Liz was hired before we went public. Liz and I've been at this company since the very beginning, [ bringing ] our 17 people on staff at E3. That took a lot of energy to get from -- to bring that level of staff up, and we were very thoughtful on who we brought in. And there's going to be some new announcements on some of that coming later on as well. More detail on that, but we talked about Ray today. So the other thing that we've been working on is this Calgary facility. So we opened it up in the beginning of February to make the development of this technology more efficient. And [ we see that ] happen already with the fact that the last step of the sorbent development is complete. And now we're on to designing process, designing pilot, designing commercial. That's really where the company is at in terms of the DLE. And that's been a function of us opening this facility, bringing all of that work in-house. And so I honestly think that the next 6 to 12 months are going to be the most exciting for E3 as our new staff get up to speed and get running with their tasks and their -- what they're doing to the company. Things are going to start to move a lot quicker around here in terms of hitting these bigger milestones. And I just think where we're at now is a very exciting place to be. We're fully funded to get to the next major milestones. We've got the staff now in place to deliver them. So everything is just -- we're on the path now. We just need to get that done. So it's very exciting.

Good. Thank you. I want to thank everyone for tuning in. Quite an audience, and the on-demand replay will be available in the hour. You'll get an e-mail, but you can make your way to amvestcapital.com/replays. It'll be there in a bit, and feel free to share that link with other people. Let's got more friends of E3. And when you check out, you'll be asked for feedback. Please share a few lines or many lines. It'll make its way to Chris and Liz rapidly. I'll pass it to you to anything more we have to say, but I think we've covered a lot of ground, but I'll give you the last word. Thank you.

Thanks so much for being here today and for those great questions. It was fun. Thanks very much.

Yes. really intelligent audience. So it's awesome. Thank you. Good night, everyone.

Thanks, guys. Thanks, everybody, for joining.

Yes.