Argentine Hard Rock Acquisition

RNS Number : 8931Y

Cadence Minerals PLC

11 December 2017

 

Cadence Minerals Plc

("Cadence Minerals", "Cadence" or "the Company")

Acquisition of up to 100% of Hard Rock Lithium Prospects in Argentina

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is delighted to inform shareholders that it has executed binding investment agreements with Lithium Technologies Pty Ltd and Lithium Supplies Pty Ltd ("The Vendors") to acquire up to 100% of six prospective hard rock lithium assets in Argentina.

These transactions mark the start of the Company's strategic shift to earn in to early stage lithium assets in well-known lithium jurisdictions where we see the potential to deliver shareholder value by investing in projects that have shorter development timeline to cashflow than a typical lithium carbonate producer.

HIGHLIGHTS

·   The Vendors have claims over 55,773 hectares for six exploration permits within the known spodumene bearing pegmatite fields in San Luis Province, Central Argentina.

·   Initial site visit and reviews by Cadence have confirmed multiple pegmatite outcrops across the six claims. Some of these occurrences are proximate or along strike from known mineralised pegmatites that have been previously mined for lithium minerals (such as spodumene or lepidolite).

·   The pegmatite fields of San Luis have an important past record of producing mica, beryl, spodumene, tantalite (tantalum oxide), columbite (niobium oxide), and recently potassium feldspar, albite and quartz.

·   Historic mines outside of the claims have produced lithium oxide ("Li₂O") at grades ranging from 4.5% to 6.5%.

·   The properties have good access and infrastructure support for exploration activities on a year-round basis.

·   On grant of the exploration permits Cadence will acquire up to 49% by spending £1.1m on exploration and drilling, and by issuing £0.4 million of new ordinary shares in Cadence to The Vendors.

·   Cadence has an option to acquire up to 100% by issuing a further £1.75m of new ordinary shares in Cadence.

Kiran Morzaria, Chief Executive Officer of Cadence, commented:

"These assets tick all the boxes that we were looking for: located in a well-known lithium producing country and in a large pegmatite field with known lithium compound production; potential to deliver quicker and cheaper development timelines and produce lithium oxide concentrate; near-term value triggers in the form of sampling and drilling and low cost in terms of the acquisition itself and the mineral exploration."

Andrew Suckling, Executive Chairman of Cadence, added:

"After an extensive review of opportunities, this acquisition enables us to deliver on our strategic objectives.It also provides us with an excellent platform to investigate building a larger portfolio of interests in a country with an established lithium industry, good infrastructure and supportive regulatory and fiscal regimes.  The presence of operators of the calibre of SQM and others in our view is a testament to this. The next year promises to be an exciting period for Cadence, and, we look forward to providing further updates on our progress in due course."

New lithium assets

The Vendors have claims over a total of six hard rock lithium assets in San Luis Province, Central Argentina. Combined, the total area of the six assets is 55,773 hectares which delivers Cadence a large potentially mineralised footprint to ramp up exploration activities with the target of proving up a commercially viable JORC code compliant resource.

There are over a dozen historic mines (mined between 1936-80) in the Sans Luis area which produced lithium oxide at grades from 4.5% to 6.5% Li₂O. In recent years, assay results taken from the spodumene outcrops across the region have returned results ranging from 5% up to 8.1% Li₂O. Aggregating historic estimates for the legacy mines, there is an estimated 55,000 tonnes of lithium oxide. However, with the application of modern exploration techniques, we believe that there is potentially considerable exploration upside across the six assets.

More broadly, there are several other competitive advantages:

·     Readily accessible infrastructure - the assets are close to main roads, power lines, railroads, and small cities for labour and supplies; with highly competitive labour mining services available

·     Relatively low topographic height range and smooth fields enabling easy access to all project areas;

·     Mining friendly communities and active quarries provide advantages for exploration; and 

·     No cities or lakes inside project areas which mitigates environmental issues to a large degree.

Background of the Lithium - Bearing Pegmatite Fields of San Luis

The San Luis and Córdoba lithium bearing pegmatite fields belong to the Pampean pegmatite province that was defined to include the economic fields of granitic pegmatites of central and north-western Argentina. It contains more than 95% of the granitic pegmatites of the country, with mineral resources that have been mined during the past 80 years, producing most of the potassium feldspar, quartz and mica plus Be‐, Li‐, Ta‐, Bi‐ and Rb‐ bearing minerals.

Of particular importance for hard rock lithium exploration are those pegmatite districts located in San Luis and western Córdoba.

Two parallel belts of Lithium-Caesium-Tantalum ("LCT") pegmatites are found orientated NNE-SSW. In the western belt, pegmatites are enriched with Sn, whereas in the eastern belt pegmatites are Nb-Ta rich. The Sn-enriched pegmatite bodies were exploited for cassiterite during the 1940's. The lithium mineralisation is predominantly represented by spodumene with minor amblygonite and lepidolite.

Future Work Program

We are looking to evaluate and define the most prospective targets across the six areas. Initially, this will focus on geological mapping, mineralogical studies of exposed pegmatites and the mapping and any newly identified historical workings. We anticipate we will be able to start this in Q1 of 2018.

This will be followed by an extensive sampling programme to identify any potential mineralisation, after which we can develop a drill programme with a target of identifying a JORC code compliant economic resource.

Argentine Background

Since 2015, reformist economic and political policies have placed Argentina back on the radar as a favourable investment destination: the economic landscape is improving while inflation is being tamed. Further, a US free trade deal has been negotiated, while debt issues are mostly resolved, and exchange controls eliminated, which has seen credit ratings improve. 

For the mining sector, the government has eliminated export taxes on metals and allowed foreign-owned mining groups to repatriate profits overseas. More recently, the government signed a mining deal with 20 provincial governors to harmonise taxes and regulations to attract mining investment away from Chile and Peru.

Argentina is a growing lithium producer, and since 2015 Argentina has received more investment than any other country in the 'lithium triangle'.  It is currently the world's third-largest producer, with at least five new projects slated to come into production over the coming years.

Details of the Assets

Lithium Technologies Pty Ltd and Lithium Supplies Pty Ltd each own 100% of Argo Mining S.A ("Argo") and Mining and Metals (S.A) ("MinMet") respectively. On grant of the exploration permits, Argo and MinMet will become the titleholders of the exploration permits. Further details of exploration permits are outlined below.

Assets	Titleholder	Interest	Licence area (hectares)
Carpa	MinMet	100%	9,948
Chutunsa	MinMet	100%	9,943
Conejo	Argo	100%	8,913
Lagu	MinMet	100%	8,910
Lulu	Argo	100%	9,810
Martin	MinMet	100%	8,249

Details of the Transactions

Cadence can acquire 100% of the interest in the exploration permits and will initially earn 49% via staged investments of cash spent on exploration and development and the issue of new ordinary shares in Cadence to The Vendors. Ninety percent of the cash investment and all of the share consideration is contingent on the grant to the titleholders of the exploration permits. Cadence also has a one-year option to acquire the remaining 51% of the interest in the exploration permits. Key details of transactions are contained in the table below.

Stage	Ownership %	Total Ownership %	Lithium Technologies Pty Ltd	Lithium Supplies Pty Ltd	Purpose
Stage 1	4%	4%	£0.05 M	£0.05 M	Earn-in early non-invasive exploration (pre -exploration permits being granted)
Stage 2	20%	24%	95,153,846 shares in Cadence	57,692,308 shares in Cadence	On grant of exploration permits - acquisition of Lithium Technologies and Lithium Supplies shares
Stage 3	7.5%	31.5%	£0.15 M	£0.15 M	Earn - in on commencement of exploration works after grant exploration permits
Stage 4	17.5%	49%	£0.35 M	£0.35M	Earn - In on identification of suitable drill targets
Stage 5	51%	100%	480,769,231 shares in Cadence	192,307,692 shares in Cadence	1-year option to acquire all the outstanding share capital of Lithium Technologies and Lithium Supplies

The vendors will retain a 1.5% net smelter royalty on products produced from the assets. The royalty will be deferred and only become payable upon the repayment of the capital and any debt associated with establishing a mineral processing facility.

Lithium Technologies Pty Ltd and Lithium Supplies Pty Ltd reported a loss of A$ 31,950 and A$ 4,680 respectively for the 5-month period ending 30 November 2017.

- Ends -

For further information, please contact.
Cadence Minerals plc	[phone]
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker)	[phone]
James Joyce
James Sinclair-Ford
Hannam & Partners LLP (Joint Broker)	[phone]
Neil Passmore
Giles Fitzpatrick
Square1 Consulting	[phone]
David Bick

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

About Cadence Minerals

Cadence is dedicated to smart investments for a greener world. The planet needs rechargeable batteries on a global scale - upcoming supersized passenger vehicles, lorries and buses - require lithium and other technology minerals to power their cells. Cadence is helping find these minerals in new places and extracting them in new ways, which will meet the demand of this burgeoning market. With over £25 million vested in key assets globally, Cadence is helping us reach tomorrow, today.

Cadence invests across the globe, principally in lithium mining projects. Its primary strategy is taking significant economic stakes in upstream exploration and development assets within strategic metals. We identify assets that have strategic cost advantages that are not replicable, with the aim of achieving lower quartile production costs. The combination of this approach and seeking value opportunities allows us to identify projects capable of achieving high rates of return.

The Cadence board has a blend of mining, commodity investing, fund management and deal structuring knowledge and experience, that is supported by access to key marketing, political and industry contacts. These resources are leveraged not only in our investment decisions but also in continuing support of our investments, whether it be increasing market awareness of an asset, or advising on product mix or path to production. Cadence Mineral's goal is to assist management to rapidly develop the project up the value curve and deliver excellent returns on its investments.

Technical Glossary

The following is a summary of technical terms:

"amblygonite"	is a fluorophosphate mineral, composed of lithium, sodium, aluminium, phosphate, fluoride and hydroxide. The mineral occurs in pegmatite deposits and is easily mistaken for albite and other feldspars. Its density, cleavage and flame test for lithium are diagnostic. Geologic occurrence is in granite pegmatites and high-temperature tin veins. Amblygonite occurs with spodumene, apatite, lepidolite, tourmaline, and other lithium-bearing minerals in pegmatite veins. It contains about 10% lithium, and has been utilized as a source of lithium.
"beryl"	is a well-known mineral varieties of beryl include emerald and aquamarine. Naturally occurring, hexagonal crystals of beryl can be up to several meters in size.
"columbite"	is a black mineral group that is an ore of niobium. It has a submetallic lustre and a high density.
"deposit"	a coherent geological body such as a mineralised body
"exploration"	the method by which ore deposits are evaluated
"exploration permit"	Under the Argentine legislation, The holder of this right can explore an area during the period granted. In case of discovering mineral evidence, the holder has an exclusive right to apply for an exploitation concession. The only way to acquire an exploration permit is through an application to the proper mining authority to explore an area which is free of other mining tenements.
"geological map" & "geological mapping"	A geological map is a graphical presentation of geological observations and interpretations on a horizontal plane. Making, or otherwise acquiring, a geological map is invariably the first step in any mineral exploration programme, and it remains an important control document for all subsequent stages of exploration and mining, including drilling, geochemistry, geophysics, geostatistics and mine planning. They allow theories on ore deposit controls to be applied and lead (hopefully) to predictions being made on the location, size, shape and grade of potential ore bodies. They are the essential tool to aid in developing 3-dimensional concepts about geology and mineralisation at all scales.
"grade"	relative quantity or the percentage of ore mineral or metal content in an ore body
"JORC Code"	Joint Ore Reserve Committee Code; the Committee is convened under the auspices of the Australasian Institute of Mining and Metallurgy
"LCE"	the total equivalent amount of lithium carbonate (see explanation below entitled Explanation of Lithium Classification and Conversion Factors)
"lepidolite"	a lilac-grey or rose-coloured member of the mica group of minerals. It is the most abundant lithium-bearing mineral. It is associated with other lithium-bearing minerals like spodumene in pegmatite bodies. It is one of the major sources of the rare alkali metals rubidium and caesium. Associated minerals include quartz, feldspar, spodumene, amblygonite, columbite, cassiterite, and beryl.
"Lithium-caesium-tantalum pegmatites" or "LCT pegmatites"	comprise a compositionally defined subset of granitic pegmatites; they are typically enriched with lithium caesium and tantalum. They are products of plate convergence and mountain building episodes. Most LCT pegmatites intruded metasedimentary rocks, typically at relatively low pressures and low temperatures.
"lithium"	a soft, silvery-white metallic element of the alkali group, the lightest of all metals
"lithium carbonate"	Lithium carbonate is an inorganic compound, the lithium salt of carbonate with the formula Li2CO3. Lithium is extracted from primarily two sources: pegmatite crystals and lithium salt from brine pools. Lithium carbonate has many uses and is the primary lithium compound that is used in the manufacture of lithium-ion batteries.
"lithium oxide"	lithium oxide or lithia is an inorganic chemical compound. Lithium oxide is formed along with small amounts of lithium peroxide when lithium metal is burned in the air and combines with oxygen. Lithium oxide concentrate is produced from the mining and processing of spodumene ore.
"metallurgical"	describing the science concerned with the production, purification and properties of metals and their applications
"mica"	is a group of sheet minerals that have a layered or platy texture. Micas are used in a variety of applications. Mica's value is based on several of its unique physical properties.
"Mineral Resource"	a concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such a form that there are reasonable prospects for the eventual economic extraction; the location, quantity, grade geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge; mineral resources are sub-divided into Inferred, Indicated and Measured categories
"mineralisation"	process of formation and concentration of elements and their chemical compounds within a mass or body of rock
"pegmatite"	A pegmatite is an intrusive igneous rock composed of crystals usually larger than 2.5 cm in size. Pegmatite bodies are usually of minor size compared to typical intrusive rock bodies. Pegmatite body size is on the order of magnitude of one to a few hundred meters. Compared to typical igneous rocks they are rather inhomogeneous and may show zones with different mineral assemblages. Crystal size and mineral assemblages are usually oriented parallel to the wall rock or even concentric for pegmatite lenses. Pegmatites are the primary source of lithium either as spodumene or lepidolite.
"processing" or "mineral processing"	is the science of treating crude ores and mineral products in order to separate the valuable minerals from the waste rock. It is the first process that most ores undergo after mining in order to provide a more concentrated material for the procedures of extractive metallurgy. The primary operations are comminution and concentration, but there are other important operations in a modern mineral processing plant
"recovery"	the proportion of valuable material obtained in the processing of an ore, stated as a percentage of the material recovered compared with the total material present
"spodumene"	is a pyroxene mineral consisting of lithium aluminium inosilicate, and is a source of lithium. It occurs as colourless to yellowish, purplish, or lilac kunzite (see below), yellowish-green or emerald-green hiddenite, prismatic crystals, often of great size. Spodumene is an important source of lithium for use in ceramics, mobile phone and automotive batteries, medicine and as a fluxing agent. Lithium is extracted from spodumene by fusing in acid.
"ore"	is a type of rock that contains sufficient minerals with important elements including metals that can be economically extracted from the rock. The ores are extracted from the earth through mining; they are then refined to extract the valuable element, or elements.
"tantalite"	is the primary source of the chemical element tantalum. It is chemically similar to columbite, and the two are often grouped together as a semi-singular mineral called coltan or "columbite-tantalite" in many mineral guides.

Lithium Classification and Conversion Factors

Lithium grades are normally presented in percentages or parts per million (ppm). Grades of deposits are also expressed as lithium compounds in percentages, for example as a per cent. lithium oxide (Li₂O) content or per cent. lithium carbonate (Li₂CO₃) content.

Lithium carbonate equivalent ("LCE") is the industry standard terminology for, and is equivalent to, Li₂CO₃. Use of LCE is to provide data comparable with industry reports and is the total equivalent amount of lithium carbonate, assuming the lithium content in the deposit is converted to lithium carbonate, using the conversion rates in the table included further below to get an equivalent Li₂CO₃ value in per cent. Use of LCE assumes 100% recovery and no process losses in the extraction of Li₂CO₃ from the deposit.

Lithium resources and reserves are usually presented in tonnes of LCE or Li.

The standard conversion factors are set out in the table below:

Table: Conversion Factors for Lithium Compounds and Minerals

Convert from		Convert to Li	Convert to Li2O	Convert to Li2CO3
Lithium	Li	1.000	2.153	5.323
Lithium Oxide	Li2O	0.464	1.000	2.473
Lithium Carbonate	Li2CO3	0.188	0.404	1.000

 

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