Pursuit Minerals Limited (PUR) Earnings Call Transcript & Summary

While I've got everyone online at the moment, I just wanted to go through the housekeeping. So before I hand you over to Aaron, we will be taking some Q&As during the session today, which we'll get to at the end of the presentation. If you have any questions, just submit them using the Q&A button on your screen and between Aaron and myself, we will monitor them, and then we'll get to them once he has concluded his presentation. So on that, I'm going to leave you to it and you can start.

Fantastic, thanks. Hi, everyone, and thank you for joining today's webinar. I'm Aaron Revelle, the Managing Director of Pursuit Minerals and we've just prepared to show a presentation, just getting some of the competencies out of the way, with our forward-looking statements. Today's agenda, just to really cover off where we are, where Pursuit is after a very strong year, laying the groundwork for the advancement of the Rio Grande Sur project. We're just going to give you a bit of an overview of where the company is and how we're looking at the moment and what 2024 is going to hold for Pursuit, as we move the project forward. Just a bit of a corporate overview. The company, like everyone else in the lithium sector has faced the correlations of share price declines with the spot price of lithium coming off the highs of the 80,000 per tonne mark, settling around the 20,000 tonne to 15,000 tonne levels that we're seeing in December this year. However, we remain strong. We're still sitting on about $3.36 million of cash. There's no capital raise plans in the future. We are fully funded through the exploration program that we have outlined to shareholders. So pursued despite tough market conditions. We're still in a very strong position to move forward and advance the project. Key highlights that have really occurred with the project, obviously, for us is that delineation and the announcement of the maiden JORC resource. This was completed in October, earlier this year and a really great benchmark for us to start in terms of the size, 251,000 tonnes, 351 mg/Li, excellent grades. And we've been really able to work on that, as we clock forward our production and start working on the processing from the processing plant. The resource in itself for us is something that we're expecting to increase, especially as we've seen from our geophysical surveys across both on the salar tenements, as well as the Mito tenement in the north. We're seeing these geophysical surveys, as well as adjacent drilling from our competitors and neighbors, really extending to depth. The resource itself is only quite shallow from existing drilling, whereas we're seeing the potential for lithium to really extend quite deep. In terms of our drilling program, it has been outlined for a period of time. And myself, I was actually in Argentina last week with my COO, Alex Rodriguez. We've had very consistent dialogue with the Salta Mining Secretary, and within those dialogues, we've really been able to define the hold up on our permits, we've had these permits going for a period of time now. And as well as -- in conjunction with the Argentinian election, the appointment of Milei, which did create some uncertainty, the real delays resulted in 3 key factors, one of which was the transfer of the mining licenses from Pursuit's former owners to Pursuit subsidiary. In addition to that, there were some administrative errors on the licenses, and then we'd also require to give some more further classification on our camp location. So within our meeting held last week with Luciana Cerusico, who is in the photo on the presentation and the actual administrator who processed the applications. We're expecting those permits to be awarded to us in the immediate term. However, the official position that we have is that, no further amendments are required to the permit applications themselves. And on top of that, there's no further amendments, and for us, we're expecting those in the immediate term. So we're hoping to get the drilling program moving as soon as we can, be it at the end of this year, where we'll be mobilizing rigs or into the first couple of months of 2024. So for us, the drilling program is in the immediate term and really goes in conjunction with where we have achieved on our processing side. The announcement that we released yesterday really demonstrates that we're about to start making some considerable progress on the production side. The lithium market is now shifting away from exploration, but more really looking at the supply side response, where producers are able to produce lithium carbonate, lithium hydroxide and the qualification of product from end users is becoming something that's very apparent in a lot of the discussions that Pursuit's having, when we're out on the road with investors and end users. For us, we have completed the processing as mentioned, in terms of the initial pilot plant, which was purchased for 100 tonnes per annum nameplate capacity. So upon purchasing that plant, we engaged engineering from Worley to go through and identify the mass balance and the block flow that would be required to produce battery-grade lithium carbonate, which is something that we successfully achieved. The battery grade lithium carbonate coming out of the 99.99% purity for that 100 tonnes. The processing from the ponds, we were also able to look at that and understand how much size we needed and also what the evaporation was, in terms of the processing lead time. So from when we actually pump out of the wells, the evaporation is a 363-day process, that's when the brine starts going through the processing circuits. So from that perspective, we were also able to look at our own engineering. And we've appointed some very top talent in Argentina, ex-SQM and Galaxy plant managers, very proficient chemical engineers in Pedro and Adrian, who have taken the work from Worley along with their own experience and being -- and looked at upgrading this to a 250 tonne per annum plant. Within that, we have the layout of the purpose facility, which is on the screen in front of me, and that's work we are commissioning now. So the plant at site in Salta, once it's commissioned, will be at a 250 tonne capacity. The intention is for Pursuit to turn this plant on, start processing material at which, once we have a sufficient amount of material for product qualification, we'll then look at moving that plant up to site. We are quite excited to see where the plant goes, having the layout in front of me and also a battery-grade product purity, which has been identified by our engineers. So for us, once we've completed the initial stage, we'll be looking at moving the plant up to site. The site selected is the Sal Rio 02 tenement. This is in fairly close proximity to the major access roads, at which point we believe this is the optimal location for the plant at this size. There is enough area for this plant. However, for larger 20,000-tonne solution plants, we would be looking at the Mito tenement, given the size of the evaporation ponds is about 11 to 12 hectares. So there's enough area within the Rio 02 tenement. For us, we're submitting the environmental permits for this, once the pond design is complete, and we're expecting that to be in the first couple of months of next year. So for us, really moving forward on a couple of key milestones, we are funded through our exploration program at this point. We have the permits in the Salta mining secretary. Whilst we've suffered some delays, we've identified what these delays are. We have rectified the solution, and now we're at the mercy of the Salta Mining Secretary. We're very fortunate to have good continued dialogue with our team in Salta, and we're rapidly advancing these permits most -- fairly quickly, in fact, considerably faster than most of our peers have been able to -- in the market. From there, the drilling program will commence within Salta, there are 26 active exploration permits. There are 2 other companies drilling on the same salar as us. So the permits are a process that we are going through. It's highly unlikely we wouldn't receive these permits given the proximity to other advanced exploration permits. We're not doing anything outside of the wheel. So for us, that program will commence. We are funded to commence that program, and we're looking to commence that drilling as soon as we get those permit approvals. Building on the permit approvals, that also builds on our JORC resource. So we're expecting these drill holes to be hitting the 500 meters. 600 meters, which, for us, looking at the drilling adjacent to the Rio Grande Sur project and also on the salar, we're expecting a resource increase as we move that project up the value chain. Concurrently, as mentioned, the pilot plant is moving forward. The commissioning is expected to occur in the first couple of quarters of next year, as we work through that already defined block flow. This is quite a critical path for Pursuit, and then, quite an important milestone as once you're developing and processing product at the smaller levels, that really provides that opportunity to then looking at scaling the plant, proof-of-concept, and also some early cash flow potential in terms of the sale of that 250 tonnes, either into the spot market or on a longer-term contract. So for us, we are aware of Argentina, and that's always a question that I get a lot of. Javier Milei has come in, and some of you might have seen this morning, he has devalued the currency and moved that exchange rate. But more importantly, this is a government that Pursuit and over the meetings we've had over the last week in Argentina, he was really confident that his incentives now are to really tackle the economic issues that Argentina is facing. In a surprise move, he appointed Luis Caputo, who was a Wall Street veteran, very market-friendly and part of Macri's administration between 2015 and 2019. So looking at the commentary, we've seen the new president to move away from some of his more hardline policies, to really look at more market-friendly initiatives. And his key objective more than anything is really tackling inflation. So for us, whilst there is some commentary about dollarizing the economy and things like that, we don't really see -- expect this to happen in the near term. There's a lot of obstacles for these radical policies to be implemented. However, we do see more initiatives and more market-friendly policies of tackling inflation. Also more importantly, there was an announcement this morning that the government is very much looking at tackling the currency controls and removing those, which is something that's really positive for Pursuit. This ongoing dialogue with the IMF, removing the currency controls allows a much more market-friendly business economy, moving currency in and out, which, for us, as an eventual exporter is quite favorable. So whilst Argentina has probably some pain to go ahead over the next coming months, the longer-term forecast at the back end of next year is looking like inflation will go down. It's looking like currency controls will be lifted and market friendly policies are going to be introduced. Conversely, the lithium market remains very strong in terms of the long-term fundamentals. If you're looking at the supply and demand curves, the long-term demand of lithium is really starting to hit that sort of 3.6 million tonnes by 2030. From that perspective, there is a very big emphasis on what mines will actually meet that supply-side response. And we're starting to see that in the EV supply chains. Whilst there has been talk of EV supplies and sales cooling off, the data in the top right shows that from 2020 through to 2023, it's a straight 45-degree angle in terms of sales, EV demand. They're not without their spikes, but there's still a very strong interest that Pursuit is receiving from end users, looking to secure that supply. And that's a thematic that we're seeing in terms of the offtake discussions from the plant, is that people are very looking forward to the 2025, 2027, 2030 milestones of where they're securing their supply from as they look to build out these supply chains and adapt the EV requirements. Once the pricing has hit historical lower segments from that 80,000, we're back down to 14,000. It's really important to see that there is a strong correlation between share prices of lithium miners and spot price, which is evident despite that chart on the bottom right there. Also for us, as a brine producer, we are able to withstand these lower prices. There is a lot of pressure now falling on the hard rock producers. Just with the simple math, you're looking at around 7.5 to 8 parts of lithium oxide to convert that to lithium carbonate. So for a spot price of $2,000, your feedstock is around $14,000 per tonne, which is where the current China spot price is at the moment. However, spot is -- whilst it is there, it's very hard for Koreans and Japanese companies to access spot. Most contracts are done on a long-term basis. And more importantly, there's a lot of product qualification that goes into the lithium. So spot only really accounts for between 10% to 15% of the market, but nonetheless, the prices are returning to a norm, but it's still very healthy for lithium brine producers at the pilot level, your cost of operation can be anywhere between USD 6,500 per tonne to USD 8,500 per tonne to USD 10,000 per tonne, which at USD 15,000 is still making a healthy margin. And then at the larger scale when you're hitting that USD 4,000 per tonne to USD 3,500 per tonne, USD 20,000 to USD 15,000 per tonne price is still very healthy on the margins. So really going back to lithium, we saw FMC and 86 move away from hard rock to brine in Argentina for this exact reason where price crunches made hard rock supply not economically viable. So for us, the levels of lithium at $15,000, that was the price in 2020. There is an expectation in the market that these prices will return to some level above $20,000, potentially up to $30,000 and $40,000. A lot of the commentary that we receive is $80,000 is unlikely to ever happen again. However, there is still a structural deficit in the market, especially on the longer term. So whilst we've seen some increased supply from hard rock and comfortable inventories occur over the last 6 months, this is unlikely to continue for those longer term, where new supply will ultimately be needed in the market. So just recapping where we are and where we're really focused on our execution in the last quarter, we have relocated the plant. We've started that commissioning process. Working through the environmental permits for our drilling program, which is really setting us up for a quite busy Q1, Q2 of 2024. We're looking to commence that drilling program as soon as we can, be it actually mobilizing rigs over the end of this year. But again, that's subject to the receipt of those environmental permits, which for us, we continue that really good dialogue with the Salta Mining Secretary, we have answered all questions of us and actioned all of the items that we needed to action. So now it's the review process, which we're in the final stages of. We're looking to have the completion of the commissioning of the plants and looking to start that buildup of inventory and testing the circuits and ensuring the plant operates as we expect it to. We have the 250 tonne increase, which is quite a small CapEx bill compared to the plant. We're looking in that USD 100,000 range to actually increase that with several mixing tanks and pumps, and we have the funding to execute that. Additionally importantly, we're looking to add the site evaporation ponds environmental permits, so that once we build the plant, have that working, that we can start looking at moving the plant up to site almost immediately upon, once we're getting those permits approved. The permits in themselves, they have a lead time of anywhere between 6 months to 9 months to 12 months. However, with the new business government and some of the initiatives that we've heard over the past couple of weeks to streamline environmental permits in Salta, we're expecting those permits to be on the shorter end. And it was very positive last week to hear the new government initiative of taking out certain judicial figures involved in that permitting process, really looking to streamline permits within the Salta Mining Secretary, not using the Salta Mining Judge, so that should expedite those permits and the processes involved. Towards the end of the year, we're looking at the DFS, which is really dependent on the resource and the completion of our drilling program. Once we have a better idea of what that overall resource is, we'll be looking at the evaluation of several studies, the 10,000, 20,000, 25,000 tonne level. So for us, there's some really key milestones there in terms of -- which commenced with that drilling program, looking at the drilling assays, a potential resource upgrade in terms of the project in itself. On top of that, we have the processing, which is a pretty key defining mark for us, being able to be a lithium carbonate producer and actually produce battery grade material, which starts with the commissioning of that plant and the first product for quality control and quality assurance with end users. We'll also be looking at potential offtake options. The company has received expressions of interest from quite a variety of parties, all looking to secure the lithium carbonate from end users in the electric vehicle space to trading companies through to other end users in Asia as well. So for us, we'll be evaluating those proposals and looking at what benefit they can be to Pursuit with our development plans as we move forward. There's also our Mito tenement, which we are currently in the process of converting that into a mine, which we'll be looking to be drilling that at the back end of next year as well. So for Pursuit, there's some very clear rerating milestones on the horizon over the next 12 months around our exploration, our resource and its potential to increase our production and the associated milestones with that, but also our BFS and looking for how we can complete that study for a much larger commercial scale operation. Any questions?

So just if you can just go back on Slide 17, just with that time line. A question came through on the drilling, so can you just reiterate -- so I think that it might have been a little bit misunderstood by someone online. I understood it so, starting now...

Yes, just [ kind of question ]. So the drilling is -- we're looking -- our internal expectation is that will start in -- actually probably drilling in Q1 2024. We're looking at still mobilizing rigs this year, where the rigs will actually be mobilized, the permits will be received, and we will commence operations. However, again, this is us being beholden to the mining secretary. Pursuit has great relationships with key stakeholders within the secretary itself. We were there last week as shown. And whilst we have given this feedback from the Mining Secretary, and we rely on their timelines, it is ultimately their decision and how they move forward. So we've answered all of the concerns and queries that have come out of the initial applications from -- just from a timing perspective, most applications have been taking between 9 months and 12 months, we've been able to get these through in about 5 which we're expecting those to be granted in the immediate term in the next coming weeks. However, with that feedback, that's subject to change, as for Pursuit, we need to maintain being a good corporate citizen in Salta, containing our relationships with the Mining Secretary. And again, we are beholden to them on when those permits are actually granted. Yes, so that's really where we're looking forward with our drilling program. It would be Q1 that we'd start to see results, not June next year. There was also another question feeling about the general election in Argentina affecting Pursuit's operations. The election in itself is something we're quite positive about. Milei's policies are becoming much more market friendly than first anticipated. The radicalization of the dollar economy has really been toned down in his rhetoric. His cabinet appointments are ex-Wall Street veterans, who are very market-friendly and we're seeing that in their policies. Whilst the announcements this morning were very radical and shocked, it's largely the viewpoint of most Argentinians that these are the policies they need to return the budget to fiscal surplus and meeting their IMF target obligations and lowering inflation. So for us, we have some in-built hedges where a lot of our contracts are actually already in U.S. dollar. So the U.S. dollar amount is then reflected in the Pesos, and we have those discussions. But our drilling contract is a U.S. dollar contract, most of the pilot plant operations are U.S. dollar contracts as well. So there are some built-in hedges there. But also the important thing is to remember that Salta, the province is -- that's who controls the mining code and the provincial -- the provinces monitor and deal with the mining tenements and mining within their province. So for us, whilst Milei's policies work on a federal level, there is some separation between the mining sector outside obviously U.S. dollars and currency controls and things like that. The Salta Mining Secretary is the governing body. And we've seen various governments left to right, where companies have been able to get into commercial production, Allkem, which was our [indiscernible] started in 2007, 2008. I think they've been through 5 different presidents from the left, from the right, probably far right, they're a commercial operation that's merging with [ live end ]. So from that perspective, the -- we're very positive about the Argentinian president. We're looking forward to see the next 6 months to see what -- where the measures that announced go, and hopefully that tackles the inflation problems and just makes the operating climate much easier for foreign companies like ourselves. I think that's...

I think that's it Aaron. Thank you so much. That was a great update, and we have recorded these. So anyone that missed it, will be able to watch the replay.

Awesome.

Thank you.