Exclusive: Wealth Minerals – “Chile can be the Saudi Arabia of lithium”

Wealth Minerals was born in late 2016 when CEO Henk van Alphen got together with Chilean businessman Marcelo A. Awad, a former director of the London Metals Exchange and long-time CEO at Antofagasta (one of the world’s largest copper mines).

The pair noticed an ongoing paradigm shift in the world regarding the consumption, use and storage of energy and that Chile, as a huge supplier of lithium to the markets, had an important role to play. The first step was to put together a platform and the right team to boost its capabilities. Wealth Minerals became that platform, and the hunt for lithium assets in their natural home of Chile began in 2016 with an acquisition vector which saw the company pick up the Trinity project, Atacama, Laguna Verde, the Five Salars and the Seven Salars (which includes the Salar de La Isla, believed to be Chile's second largest lithium deposit) within the space of 10 months.

Wealth’s focus has now shifted from acquisitions to development, with work programmes underway at the combined 46,000 hectare Atacama site, Trinity and Laguna Verde projects, with plans to develop Chile’s Aguas Calientes Norte, Pujsa and Quisquiro Salars.

“The truth of the lithium space is that 50% of the world’s resource comes from hard rock deposits and 50% from dried salt-lake beds, which in Spanish are known as Salars,” explains the President of Wealth Minerals, Tim McCutcheon. “Salars are a type of geological formation visible from outer space. They’re all at surface, nothing is hidden. You’re never going to discover a new one, so the entire world knows where these things are and certain salars have a tendency to yield lithium. By recognising the paradigm shift before others and by recognising Chile as the premier jurisdiction to be involved in, Wealth was able to make up a lot of ground in a short space of time. By securing title to land up front and then using the equity platform to spreading out the payments, we’ve lowered the burden on the company and punched above our weight. If we’d had to borrow cash to do this in one go I don’t think it would have happened.”

Argentina also boasts considerable lithium activity, though McCutcheon asserts the benchmark his company needs to beat is far from onerous. “Grade is always very important to any mining operation,” he says. “There’s been a lot of market excitement about some of the recent results from Argentina, but the grade is at a level we feel very comfortable meeting or exceeding, even at this early stage. A key issue of processing lithium from salars is the use of solar evaporation to dry out the lithium-bearing salts from the brine water extracted.

“This process happens a lot faster when you’re at lower elevation,” maintains McCutcheon. “Our Atacama Salar is the lowest altitude salar in production today, so when we look at the investor enthusiasm in Argentina it makes us very optimistic about our project because we think our grade and faster process will translate into profitability.”

Wealth Minerals is also committed to risk management and reduction achieved through data points and statistics gathered through sampling, trenching and drilling. “Geologically, salars are relatively young and because of their nature with sediments deposited over thousands and millions of years, they’re fairly predictable,” explains McCutcheon. “With hard rock deposits containing the likes of copper or gold, you’re dealing with several billion years of faulting, thrusting and subduction. The data points are required to have a reasonable level of statistical confidence that your resource actually exists. With a salar, the number of points you need to have at a very high statistical confidence level is actually quite low, which means less drilling and less of a burden to show what actually exists underground because of the nature of the geological unit. It’s sedimentary which means a uniform process is happening throughout the entire geological feature.”

McCutcheon is particularly excited about the company’s project at Laguna Verde because as well as the presence of above ground brine, its density below ground is going to show a lot more volume and a higher grade, hence more lithium. “We’re going to be drilling on that,” he confirms. “It’s the same at Atacama and then 80km to the east at Trinity we will piggyback the mobilisation effort. So, Wealth Minerals will have three projects with fresh data points for the market to digest. The key thing is that because all three have uniform geological features, and though a couple of data points might not be a resource, it will become very clear that the risk has been significantly removed.”

Mother Nature has provided Chile with some of the largest salars on the planet, with grade consistently shown to be higher on average than similar assets in Bolivia or Argentina. “Chile is essentially the ‘Saudi Arabia of Lithium,’” reveals McCutcheon. “Chilean mines feature the largest confirmed lithium reserves in the world, with over 7.5mn mega tonnes. The lithium produced from the Atacama Salar in Chile is the highest grade produced from brine in the world.”

From a jurisdictional point of view, McCutcheon believes the industry is keen to choose Chile because it’s very stable. Since the mid-70s it has gone through peaks and troughs with copper prices, world expansions and contractions, but despite global swings, Chile has stood out as a place where companies can feel comfortable about their property rights, the rule of law and the local fiscal regime. This guards against the kind of budgetary issues that cause debt problems and defaults in other parts of South America.

“Lithium’s moniker is ‘white petroleum’ thanks to a dramatic need for supplies due to the rise of battery gigafactories, electric vehicles, powerwalls and energy storage businesses,” notes McCutcheon. “As a country, Chile recognises its well-endowed with lithium and the press is highlighting the need to ramp up activity and allow investment into its lithium sector. It’s their chance to have two legs to stand on. Right now, Chile stands very much on the copper leg, but having lithium is going to be very complementary to that.”

To ramp its own operation, McCutcheon aims for Wealth Minerals to team up with one of three state-owned Chilean companies in the mining space – CODELCO (the copper giant), CORFO (the Chilean Economic Development Agency) or Enami (copper processing). “So far, we have managed to raise money from the capital markets to fund our activities and our acquisitions,” he explains. “As we enter the development phase the numbers are getting much bigger. The key thing now is to remove the perception of financing risk. I don’t think we’ll have a problem raising money, but the general investor public would like to see bigger capital raises, which means it would be better to have a strategic partner in the shareholder structure to help us push everything forward and put people at ease with the knowledge that money is going to be available when we need it.”

In 2018, Wealth Minerals is targeting a data set for two of its assets that will have a resource as a foundation to begin engineering work. McCutcheon hopes to then be commissioning a preliminary economic assessment that would serve as the basis for moving towards a feasibility study.

So, where does McCutcheon see the industry heading in the next five years and what are his hopes for Wealth Minerals? “It doesn’t take a genius to look at the sector and see a big gaping hole in the pipeline of what’s happening in the world today,” he notes. “In any commodity, usually you have a fairly robust pipeline from projects being wound down, to projects at the peak of their production, projects being commissioned, projects being developed, projects being explored and projects being staked. Companies tend to allocate capital to respond to demand from world markets.”

However, in the lithium space there’s a big hole between projects in production and projects being developed. With very few set to come online in the next five years McCutcheon sees an opportunity for his company. “If you look top down there are plenty of projects out there that have more than enough potential to supply demand in the long term – I don’t see a situation where because we run out of lithium we don’t use lithium-ion batteries anymore. It’s very clear there’s plenty of lithium for everyone to consume, but in the medium term there will be a big scramble to find this resource.”

McCutcheon concludes with words of warning for the energy sector and a clarion call for investment: “If you’re going to spend $5bn on a lithium-ion battery factory and then have it stand idle because you didn’t spend $100mn on scooping up a resource project, that’s just stupid, and a lot of the players are starting to realise that. Elon Musk made the comment that lithium’s not a big element – it’s ‘like sprinkling salt on a salad’. That’s a totally erroneous analogy because if you don’t have the salt, there is no salad. Lithium-ion batteries de facto must have lithium in them – it doesn’t matter how small the amount.

“If you look at the announced plans from auto manufacturers alone – Mercedes, Volvo, GM, Ford – across the board, there’s going to be massive demand for lithium well in excess of where we are now. We’re a little over 200,000 tonnes of lithium into carbon equivalent a year and looking in the next seven to 10 years at more than double that – that’s a conservative estimate. When paradigm shifts happen, they happen exponentially, not incrementally. People are already allocating capital to make it happen because they’ve been trained that commodities are available at any price, it’s simply a question of supply and demand curves. They need to understand the supply curve can just end, so will need to start investing in their supply chain for raw materials or the capital investments they’re making into everything else will be for nought.”

Wealth Minerals was born in late 2016 when CEO Henk van Alphen got together with Chilean businessman Marcelo A. Awad, a former director of the London Metals Exchange and long-time CEO at Antofagasta (one of the world’s largest copper mines).

The pair noticed an ongoing paradigm shift in the world regarding the consumption, use and storage of energy and that Chile, as a huge supplier of lithium to the markets, had an important role to play. The first step was to put together a platform and the right team to boost its capabilities. Wealth Minerals became that platform, and the hunt for lithium assets in their natural home of Chile began in 2016 with an acquisition vector which saw the company pick up the Trinity project, Atacama, Laguna Verde, the Five Salars and the Seven Salars (which includes the Salar de La Isla, believed to be Chile's second largest lithium deposit) within the space of 10 months.

Wealth’s focus has now shifted from acquisitions to development, with work programmes underway at the combined 46,000 hectare Atacama site, Trinity and Laguna Verde projects, with plans to develop Chile’s Aguas Calientes Norte, Pujsa and Quisquiro Salars.

“The truth of the lithium space is that 50% of the world’s resource comes from hard rock deposits and 50% from dried salt-lake beds, which in Spanish are known as Salars,” explains the President of Wealth Minerals, Tim McCutcheon. “Salars are a type of geological formation visible from outer space. They’re all at surface, nothing is hidden. You’re never going to discover a new one, so the entire world knows where these things are and certain salars have a tendency to yield lithium. By recognising the paradigm shift before others and by recognising Chile as the premier jurisdiction to be involved in, Wealth was able to make up a lot of ground in a short space of time. By securing title to land up front and then using the equity platform to spreading out the payments, we’ve lowered the burden on the company and punched above our weight. If we’d had to borrow cash to do this in one go I don’t think it would have happened.”

Argentina also boasts considerable lithium activity, though McCutcheon asserts the benchmark his company needs to beat is far from onerous. “Grade is always very important to any mining operation,” he says. “There’s been a lot of market excitement about some of the recent results from Argentina, but the grade is at a level we feel very comfortable meeting or exceeding, even at this early stage. A key issue of processing lithium from salars is the use of solar evaporation to dry out the lithium-bearing salts from the brine water extracted.

“This process happens a lot faster when you’re at lower elevation,” maintains McCutcheon. “Our Atacama Salar is the lowest altitude salar in production today, so when we look at the investor enthusiasm in Argentina it makes us very optimistic about our project because we think our grade and faster process will translate into profitability.”

Wealth Minerals is also committed to risk management and reduction achieved through data points and statistics gathered through sampling, trenching and drilling. “Geologically, salars are relatively young and because of their nature with sediments deposited over thousands and millions of years, they’re fairly predictable,” explains McCutcheon. “With hard rock deposits containing the likes of copper or gold, you’re dealing with several billion years of faulting, thrusting and subduction. The data points are required to have a reasonable level of statistical confidence that your resource actually exists. With a salar, the number of points you need to have at a very high statistical confidence level is actually quite low, which means less drilling and less of a burden to show what actually exists underground because of the nature of the geological unit. It’s sedimentary which means a uniform process is happening throughout the entire geological feature.”

McCutcheon is particularly excited about the company’s project at Laguna Verde because as well as the presence of above ground brine, its density below ground is going to show a lot more volume and a higher grade, hence more lithium. “We’re going to be drilling on that,” he confirms. “It’s the same at Atacama and then 80km to the east at Trinity we will piggyback the mobilisation effort. So, Wealth Minerals will have three projects with fresh data points for the market to digest. The key thing is that because all three have uniform geological features, and though a couple of data points might not be a resource, it will become very clear that the risk has been significantly removed.”

Mother Nature has provided Chile with some of the largest salars on the planet, with grade consistently shown to be higher on average than similar assets in Bolivia or Argentina. “Chile is essentially the ‘Saudi Arabia of Lithium,’” reveals McCutcheon. “Chilean mines feature the largest confirmed lithium reserves in the world, with over 7.5mn mega tonnes. The lithium produced from the Atacama Salar in Chile is the highest grade produced from brine in the world.”

From a jurisdictional point of view, McCutcheon believes the industry is keen to choose Chile because it’s very stable. Since the mid-70s it has gone through peaks and troughs with copper prices, world expansions and contractions, but despite global swings, Chile has stood out as a place where companies can feel comfortable about their property rights, the rule of law and the local fiscal regime. This guards against the kind of budgetary issues that cause debt problems and defaults in other parts of South America.

 “Lithium’s moniker is ‘white petroleum’ thanks to a dramatic need for supplies due to the rise of battery gigafactories, electric vehicles,  powerwalls and energy storage businesses,” notes McCutcheon. “As a country, Chile recognises its well-endowed with lithium and the press is highlighting the need to ramp up activity and allow investment into its lithium sector. It’s their chance to have two legs to stand  on. Right now, Chile stands very much on the copper leg, but having lithium is going to be very complementary to that.”

 To ramp its own operation, McCutcheon aims for Wealth Minerals to team up with one of three state-owned Chilean companies in the mining space – CODELCO (the copper giant), CORFO (the Chilean Economic Development Agency) or Enami (copper processing). “So far, we have managed to raise money from the capital markets to fund our activities and our acquisitions,” he explains. “As we enter the development phase the numbers are getting much bigger. The key thing now is to remove the perception of financing risk. I don’t think we’ll have a problem raising money, but the general investor public would like to see bigger capital raises, which means it would be better to have a strategic partner in the shareholder structure to help us push everything forward and put people at ease with the knowledge that money is going to be available when we need it.”

In 2018, Wealth Minerals is targeting a data set for two of its assets that will have a resource as a foundation to begin engineering work. McCutcheon hopes to then be commissioning a preliminary economic assessment that would serve as the basis for moving towards a feasibility study.

So, where does McCutcheon see the industry heading in the next five years and what are his hopes for Wealth Minerals? “It doesn’t take a genius to look at the sector and see a big gaping hole in the pipeline of what’s happening in the world today,” he notes. “In any commodity, usually you have a fairly robust pipeline from projects being wound down, to projects at the peak of their production, projects being commissioned, projects being developed, projects being explored and projects being staked. Companies tend to allocate capital to respond to demand from world markets.”

However, in the lithium space there’s a big hole between projects in production and projects being developed. With very few set to come online in the next five years McCutcheon sees an opportunity for his company. “If you look top down there are plenty of projects out there that have more than enough potential to supply demand in the long term – I don’t see a situation where because we run out of lithium we don’t use lithium-ion batteries anymore. It’s very clear there’s plenty of lithium for everyone to consume, but in the medium term there will be a big scramble to find this resource.”

McCutcheon concludes with words of warning for the energy sector and a clarion call for investment: “If you’re going to spend $5bn on a lithium-ion battery factory and then have it stand idle because you didn’t spend $100mn on scooping up a resource project, that’s just stupid, and a lot of the players are starting to realise that. Elon Musk made the comment that lithium’s not a big element – it’s ‘like sprinkling salt on a salad’. That’s a totally erroneous analogy because if you don’t have the salt, there is no salad. Lithium-ion batteries de facto must have lithium in them – it doesn’t matter how small the amount.

“If you look at the announced plans from auto manufacturers alone – Mercedes, Volvo, GM, Ford – across the board, there’s going to be massive demand for lithium well in excess of where we are now. We’re a little over 200,000 tonnes of lithium into carbon equivalent a year and looking in the next seven to 10 years at more than double that – that’s a conservative estimate. When paradigm shifts happen, they happen exponentially, not incrementally. People are already allocating capital to make it happen because they’ve been trained that commodities are available at any price, it’s simply a question of supply and demand curves. They need to understand the supply curve can just end, so will need to start investing in their supply chain for raw materials or the capital investments they’re making into everything else will be for nought.”