Pursuit Minerals Limited (PUR) Earnings Call Transcript & Summary

Okay. Well, we're just waiting for everyone to join us today. Welcome to Pursuit Minerals Investor Webinar. Our agenda will be, for Pursuit's CEO, Aaron Revelle, provide an update on the company's flagship, Rio Grande Sur Lithium Project and the recent news following the strategic acquisition of the Pilot Plant and how that will impact Pursuit's ambitions to become the third carbonate produces on the ASX. [Operator Instructions] So Aaron, when you are ready?

Thank you. Here we go. Well, Good morning, everybody. Thank you for joining me. I'm Aaron Revelle, the Managing Director and CEO of Pursuit Minerals. Pursuit Minerals is a lithium developer with our flagship project focused on the Rio Grande Salar in Argentina. The Rio Grande Sur project hosts a land tenure of around 9,200 hectares on the Rio Grande Salar. The Salar itself has an existing NI 43-101 resource. That resource is at 2.1 million tonnes of lithium carbonate equivalent. Over the past several months, we've been working to advance our project. And in this session, I won't be running through a presentation, but more importantly, outlining the key announcements of late and what these announcements impact on our overall development strategy. So I'll cover 4 topics in this presentation, namely our Pilot Plant, our exploration program. I'll also touch on Argentina and the recent elections, the macro environment and how that affects Pursuit as an operating company, as well as touching on the lithium market and where that's sitting at the current prices and what we expect in the long term. So as stated, Pursuit recently announced the completion of the acquisition of our Lithium Carbonate Pilot Plant. The Pilot Plant, you can actually see a recent photo, which was taken by me up in the top right corner of your screen. The plant itself is a 100 tonne per annum facility that we source through our local network in Argentina to really provide us as a footprint and a basis to build a production operation on. Production in lithium is really factored by looking at the environment and understanding you have bench scale production, which is often 1 to 2 kilos and people producing in labs. Moving forward to a commercial scale, which a Pilot Plant of 100 tonnes is considered a smaller scale commercial production. This production at smaller scale often leads to a much larger plant. And there are 2 examples in the market currently, both very well-known with Allkem, formerly Orocobre, who started off with a very similar style and scale plant and then went to a 20,000 tonne per annum production facility and also Argosy Minerals. The Argosy Minerals example where they went from 100 tonnes to 2,000 tonnes, and they're currently seeing that through to fruition. There's quite a lot of advantages in acquiring an already existing plant, both through the existing permitting and infrastructure that have already been put in place. And then on top of that, also this plant has historically produced lithium carbonate from other salars. So where we are at current with this plant is that we are now intending to relocate from its existing facility to a larger specialty facility. The intention of that facility is to basically refurbish the plant and then look at the current chemical engineering to brine profile. As mentioned in the announcement, we have the chemical engineering firm, Worley, who are quite a well-established name in the lithium space, having worked on quite a few significant operations. Working with Worley, we have engaged them to look at the Rio Grande brine profile, identify a block flow processing route to producing lithium carbonate. And then looking at that scenario at a 100-tonne plant, both at its current location, albeit in Salta, and then moving that plant up to the Rio Grande Salar. In moving the plant to the Salar, there are a few intricacies which need to be worked out. For example, water boils at 70 degrees at higher altitude rather than that at a site level. So Pursuit is following a very well-trodden path, which a lot of other companies have done in the past, namely Orocobre and Argosy, as mentioned earlier. Where we are now is we're in the process of dismantling that plant. We're looking at having that relocated in the coming months, and then essentially starting lithium production by processing brine through the exploration program. The overall view of the plant is once it's up at site, we'll be looking at expanding that plant. The current number being discussed is the 250 tonnes level. Why 250 tonnes? That's the [ 80 factor ] increase to 20,000, which was found with some success in other lithium operations, namely Orocobre. So for us, this plant fast tracks the project significantly. It's an already existing plant. It has an already designed flow sheet and has already produced lithium carbonate. For us, now the challenge and the pathway that we're taking is working with Worley to adjust that plant to our brine specification. In the lithium universe, there's a lot of debate about the highest grade. And looking at brine, this is not necessarily an accurate representation. It more looking at the entire brine profile and understanding, can this be produced into lithium carbonate? There's some well-known outliers in the space such as Salar de Uyuni in Bolivia, which has quite a decent lithium content within its brine, but due to the impurities can't actually be produced into lithium carbonate or its consensus view. So for us, this pathway will be taken over the coming months where we're targeting it, having the plant moved into its new location by the start of the fourth quarter of the year. And obviously, there can be some slippage in that timeline, given that these plants are intricate operations and needs to be moved with [ care and courtesy ]. So, this is quite an exciting process for us. We're on that track. Now, we're producing lithium carbonate. It's a lot closer than was earlier on prior to the acquisition. The replacement value of these plants run into the millions of dollars. We were able to acquire this plant basically at cost, which is also advantageous as it allows us to put that extra capital to work in refurbishing, and also ensuring that the plant produces the lithium carbonate. Why lithium carbonate? This is the entry level, where we've decided on carbonate due to, really, its use in the LFP batteries. Lithium phosphate batteries are using lithium carbonate now. And we're seeing a shift away in the market from end users where hydroxide was formally the basis, and that was due to the NCM batteries. And we saw a lot of that in investment decisions in WA over the past couple of years, whereas now we're seeing that shift towards the lithium carbonate demand. So for us, again, recapping, this plant will be moved from its current location, which we're in the process of now. Once that plant is moved, it's going to be refurbished and the block flow sheath that's being worked with WorleyParsons, that's going to be basically retrofitted to the plant and the circuit block will be upgraded to match our brine profile, of which we'll then start processing the lithium carbonate. Once we've produced several hundred kilograms of lithium carbonate at battery grade, that's when we'll be looking to evaluate the move up to the Rio Grande Salar. In doing that, you are building several hectares of evaporation ponds, which is about 5 hectares at 100 tonnes or 10 hectares at 250 tonnes, of which the operation then becomes a very small-scale commercial producer. Pilot plants were always intended to test the process, but with lithium carbonate prices, even still at the spot level of $30,000 per tonne, there can be some expected profit in the margins. Not massive profit, but still some expected profit when selling into the spot market. Covering our exploration programs, as also announced to the market, we have recently announced the completion of the TEM and the ongoing near completion of the CSAMT surveys. The intention remains on track to -- once we have completed these surveys to outline the drill hole locations for the exploration program. Once we've done this, we'll then commence our drilling, which is subject to the approval of the environmental permits and we're expecting those relatively shortly. We've had some very fruitful and engaging discussions with the Mining Secretary of Salta about those permits and the expected timeframe of those. Whilst we would always love permits tomorrow, we do rely on regulatory bodies and they go through their processes. However, we've had very meaningful discussions and even had our meetings appear on the relevant social networks of the Mining Secretary, which really evidences strong support for Pursuit in the province of Salta and the support of our program at the Rio Grande Sur project. Upon that drilling and some of the TEM results have really shown some highly conductive and highly prospective brine potential within our tenements. So we have some very good expectation and also some relative understanding given the large amount of historical exploration, but also current exploration that's taking place on the Rio Grande Salar at current. So with the drilling program, the intention is for a pumping well to be included within that suite of works. The pumping well will actually facilitate for us the brine, which will go into the lithium carbonate plant. So working hand in hand, the operation is working on 2 pathways, being the exploration pathway, which should culminate in a maiden JORC resource and then also the Pilot Plant production, which will culminate in that first production of lithium carbonate. Currently, there are only 2 producers of lithium carbonate on the ASX, the first being Allkem and then Argosy Minerals as well. So we're looking to take that third lithium carbonate production spot at that larger level of 100 tonnes of production. Beyond the project, then we will obviously evaluate the plant, moving to site as mentioned and further resource work, which will be baked in into our exploration program for 2024. The initial exploration program really only focuses on the southern tenements primarily, given that those are the on-salar tenements and that's where we're expecting to get a lot of our initial brine from. Having said that, the Mito tenement that we have, which was originally pegged for infrastructure, is showing through some of the preliminary results of our CSAMT work that we can expect continued trends. So we're quite eager to put some drill rigs up there and put those to work, once we've completed that initial Phase 1. So, that's a very high-level snapshot of where Pursuit is in terms of our very focused pathways to production, our exploration programs and where we intend to take the company to really add value for shareholders over the coming months. This is quite an aggressive exploration and production pathway. Bearing in mind that within the last 12 months, Pursuit will be moving quite quickly through from where we were having currently completed the acquisition of the lithium project in March, advancing towards production within less than a year, which is a very fast timeframe. But having said that, we have a very strong in-country technical team. We're working with some very strong technical experts who have significant expertise in being able to deliver these projects. So we're confident on delivering on this project and are excited to update you within the market as this progresses. So from where we're sitting in terms of the resource work, it's also worthwhile mentioning that the salar has recently produced some very significant grades within Argentina, which also assist with the impurity profile of the salar. We're seeing recent drilling results produced 950 MgLi, which is some of the highest grades ever encountered in Argentina, which also increases both the resource potential of depth, which has been shown within our TEM surveys. Bearing in mind the initial NI 43-101 resource, which is a Canadian instrument, that resource was only to about 100 meters in depth. For us, we're seeing those -- and actually majority of these 50 meters in terms of average hold depth. So for us, we're seeing a lot of encouragement within our resource and we're expecting some of these trends to continue now with some deeper holes being drilled, which are showing the mineralization of the Rio Grande Salar increasing to depth, but also increasing in brine grade So from that perspective, Pursuit has some very exciting news flow coming over the coming months as we look to mobilize drill rigs, as our environmental permits are granted, but also as we relocate the plant and start that pathway towards production of our first lithium carbonate. It's worthwhile mentioning Argentina, the macro environment and upcoming elections there. Naturally, Pursuit is very conscious of the political environments in which we operate. There's been a lot of speculation and talk around the Argentine economy. A recent peso devaluation, for example, was in the news after the shock primary results. However, we were largely expecting that devaluation, that 18% devaluation of the peso was largely in line with IMF requirements for the Argentine Government to release the $8 billion payment, which is actually due within this week. So for us, the macro environment of Argentina is very much subject to some change. However, the talk of the US dollarization, majority of the mining industry in Argentina is actually already US dollarized. A lot of our contracts, for example, drilling is quoted per meter in US dollars. We trade lithium carbonate and we trade lithium in US dollars. So the Argentine economy, whilst being fairly robust, there's a driving impetus there to really create royalties, taxes and GDP growth. And a lot of people are focusing on mining, on oil and gas and foreign direct investment as ways to do this. Argentina has been suffering a very severe drought that has been affecting GDP results. So the Argentinian government is very pro-mining and very non-intervention. From there, the elections will be of interest as they come towards at the end of the year. However, like Australia, the provinces where a lot of our political discussions are held, the mining provinces controlled mining rights, at which for us, Salta as a province is quite different in terms of its political spectrum to the federal level of politics. So we are very optimistic about the operating environment. If anything, with the US dollar strength in Argentina, the operations is actually cheaper to operate in. So for us, we're conscious of the elections and the implications they have. But, however, as has been shown over the past decade and with projects like Orocobre, which started in 2008, Orocobre has gone through numerous Argentinian Presidents, left, right wing, and yet the mine continues to operate and continues to deliver results for shareholders. So for us, Argentina remains a stable regulatory environment. And whilst there are macroeconomic factors such as currency controls, which we expect to be lifted with the new incoming government, the overall policies and themes of the upcoming elections is really that for foreign companies such as us, Argentina will be an easier environment to operate in. Touching on the lithium market. We're starting to see that lithium market spot prices cooled significantly from their longer term highs. The average price in China at the moment is around the USD 30,000 per tonne mark for lithium carbonate. What does that mean for us? The spot market is not accurately representative of the strength of the lithium market. That's a very big defining factor that should be clarified. If you look at Atacama who are the biggest producer in the world, majority of their contracts being 80% or so are actually on 2-year to 5-year fixed variable rates. So when looking at the spot market, it's not the most reflective barometer of the health of the market. Whilst we're seeing some softening in prices, there's generally a September buying season in China, which will see the spot price tick up. However, these spot prices are very healthy in terms of the overall fundamentals of the market. We're seeing prices reflective of lithium carbonate sort of level out with the spodumene going into China. However, the Chinese government is moving away from the converter capacity, which creates limit on spodumene and there's more favoring impetus on brine projects. So for us, the long-term market is still in structural deficit. We're expecting lithium demand to really tick up and that was evidenced by electric car sales, over 10 million sold last year. And when the overall automotive market was actually down in car sales, electric car sales crept up. So even within China, there's a lot of EV subsidies that are going on there to push electrification. So the long-term demand of lithium projects remain strong. Lithium projects are not easy to bring online. They take several years of longer-term investment to hit those 20,000 tonne marks. So from that, that proposition, Pursuit remains well poised for a low cost, scalable efficient project, which is really in the hallmark of where we're building. So just to recap, over the next 6 months, some of the news flow that will be coming out to that trend for us is the Pilot Plant, the pathway to production where we'll be relocating that plant, we'll be optimizing the pilot block and then we will be retrofitting that block to the brine profile of Rio Grande and looking to commence production within the city of Salta at the new site. Additionally and concurrently, we'll be working on the exploration program, which is the mobilization of drilling rigs, following appointment of the -- sorry, following the approval of the environmental permits. Once we have those permits, the drill program will commence, of which we're intending for that and designing that to culminate for a maiden JORC resource. And that's through the use of a pumping well, which in turn will be for sourcing the brine to start that production at the Pilot Plant. So there's some fairly exciting news flow coming over the next 6 months. And within some of those milestones, we expect some re-rating events as well. So in summary, the market in terms of lithium still remains strong. Argentina was coming through an election. We're conscious of the macro factors. However, Argentina in itself is looking at a policy change, which, in the reality for mining companies, we're expecting that to make business and operating conditions easier through policies such as restriction -- sorry, the lifting of the export controls and also the peso devaluation, which in terms of -- makes the US dollar cheaper to operate there. Added these 2 with these factors, the development of our project is really focused on both the production, but also the definition of the JORC resource. So from that perspective, we're expecting an exciting 6 months and even into the next year as we develop the project. So having finished that, I noticed there's a few questions. So we might look at answering some of those.

I've been asked here, are you only looking at evaporation ponds or DLE as well? For the moment, our project is really just touching on this. Our project is focused on the evaporation pond, route to path -- to commercialization. Whilst we recognize that DLE has a part in the market to play and there are companies such as Lake Resources that are essentially championing this process, our view is that majority of the lithium brine market is conventional processing, which we're looking to not reinvent the world there. However, we are looking at DLE. As the technology advances, we are looking at its place in the market. And if there is an opportunity for us to have a DLE solution that creates value for shareholders, then we'll obviously look at this route. However, for now, we're sticking with the conventional processing, which as mentioned has worked quite well for Orocobre-Allkem and Argosy Minerals as they advance their projects. I've also been asked about the plant disassembly, existing place, how much is the cost? Who's doing it, government permits required, submitted, et cetera? So for any -- so we're not going to have any plant. So, our plant is for exclusive use of Pursuit. We're not going to be having any other producer in the region go through to the plant. That really comes from the necessity of brine intricacy in its production. Brine itself is unique to each salar and each salar requires its own -- and brine profile has its own processing formula. So whilst there is a general consensus pathway, the impurity profile of the brine grade makes a specific process. So for us, our intention is to have that process for the Rio Grande Salar only, especially as we go through to production. We're not looking at having any tolling agreements. The plant disassembly is actually rather cost efficient than the actual disassembly and relocation. It's below the USD 30,000 dollar mark, which will allow us to relatively put that together, clean the plants, fix any broken seals or any rusts or anything like this, and then move that to the new location. The plant permits are largely transferable and the new location was sourced, bearing in mind the end use. So there won't be any delays in terms of requiring for new applications of permits or zoning or anything like that. The relocation of the plant only takes about a month to, let's call it a month or 2 months. So from that perspective, it's quite a quick turnaround in terms of actually picking up the plant, dismantling it, and then sending it up in the new location. It's the retrofitting of the block, which might take a longer period of time. But having said that, we'll be working through the drill program concurrently. So we're expecting those programs to coincide and be able to commence at the same time.

I think that wraps it up. Aaron, well done. That was a thorough presentation. Thank you very much. This presentation has been recorded. So we will get the replay out for those that couldn't attend today. So with that, thank you.

Great. Thanks for your time.