Perth-based Strike Resources (ASX: SRK) has entered into an agreement to acquire a majority interest in the highly-prospective Solaroz lithium brine project in northwest Argentina.
The project – which sits within South America’s famed ‘lithium triangle’ – comprises a landholding of 120 square kilometres, most of which is adjacent to concessions held by Lithium Americas Corporation and minerals giant Orocobre (ASX: ORE).
To facilitate the agreement, Strike will acquire a 90% shareholding in Argentina-registered Hananta SA which in turn, will enter into an option and purchase agreement with the owners of the Solaroz concesssion applications.
Under the terms of that agreement, Hananta will pay $9.33 million in cash plus shares (at Strike’s election) over four years to the owner before titles to the Solaroz mining properties can be transferred.
The schedule of payments has been structured to defer the most significant payments until Strike has conducted sufficient exploration activities to confirm the project’s prospectivity.
Solaroz is the second acquisition by Strike in the battery minerals sector, following the 2016 farm-in over two exploration tenements of the high-grade Burke graphite project in Queensland.
Burke is considered one of the highest grade graphite deposits in the world and presents the opportunity for Strike to contribute to growing demand for graphite and graphite-related products.
Strategic and prospective
Solaroz is located in the Salar de Olaroz basin, adjacent to the producing Salar de Olaroz lithium brine project operated by Orocobre and its joint venture partner Toyota Tsusho Corporation.
Strike said the Solaroz project is “highly strategic and prospective” for commercial quantities and concentrations of lithium-rich brine, and believes the aquifer which supplies the product being extracted by Orocobre is likely to extend under its own concessions.
“Previously-published geophysical studies by Orocobre indicate that sub-surface brine-hosting aquifers appear to extend well outside the boundaries of the visible salt area and to depth, and adds evidence supporting the likelihood of lithium-rich brine hosted beneath the Solaroz concessions,” the company said.
This theory will be tested by geophysical work and drilling with a view to fast-tracking production of lithium carbonate depending on the outcome.
Managing director William Johnson said the Solaroz acquisition offers “tremendous upside potential” for Strike, given its proximity to Orocobre’s operations and Strike’s experience in the region.
“Argentinian lithium brine projects in particular, are recognised as particularly attractive since they are amongst the lowest on the lithium carbonate cost curve, compared to hard rock projects,” he said.
“This project will allow us to capitalise on our extensive experience in South America, where we have been operating since 2005.”
Mr Johnson said Strike will prioritise the completion of an environmental impact assessment for submission to the local mining regulator in the capital city of Jujuy, 230km north-west of the project.
Once the EIA is approved, the company will commence a drilling program to delineate the extent and grade of potential lithium brine along with related hydrological matters to identify the potential for commercial development of Solaroz as a lithium brine project.
The program will include geophysical surveys, drilling and sampling, followed by flow rate testing in the event that sufficient brine is intersected.
Local operating support will be provided via a commercial partnership with Hanaq Argentina SA based in Salta, approximately 350km from Solaroz.
Hanaq is an established explorer and experienced lithium brine developer currently operating a lithium brine project in Salta (through a related company) which is in the final stages of construction.
The company has team of 40 including exploration geologists, engineers and operations specialists.
It has strong links to the Chinese battery sector – and therefore potential offtake partners for lithium – through one of its major Chinese shareholders.
Argentina holds some of the world’s biggest lithium resources (as brine deposits) and is currently the world’s third largest producer of lithium after Australia and Chile.
The country’s lithium brine deposits are known for their low cost of production compared to hard rock lithium projects and are recognised as being the lowest on the lithium carbonate production cost curve.
Once pumped to the surface (typically from aquifers at up to several hundred metres depth), lithium-rich brine is transferred to large evaporation ponds which rely on free energy from the sun and local atmospheric conditions to concentrate the brine.
There are generally no environmentally-damaging tailings or toxic by-products involved with lithium mining in the region.
Mr Johnson said Strike will follow the country’s “well-established and proven production methodology” for converting lithium-rich brines into lithium carbonate.
At midday, shares in Strike were up 42.86% to $0.06.