Equities had a chance to sit down with CEO Robert McAllister who talked about the new opportunities in brine methods for Lithium development and what makes Enertopia (ENRT) special in the ever changing world of Lithium.
Equities: Robert, let's talk about your background first and kind of how that rolls into the company. Let’s talk about your background specifically in oil and gas and the mining, clean energy and water purification and how it kind of allows you to see outside the box elevating the potential and the best ways to process the exciting Lithium market just for potential sources.
Robert: My background is originally in the late 80s, early 90s, I was investment newsletter writer focused on mining and oil and gas sector, picking stocks that people could look at and invest in for opportunities for big growth in the small cap sector. Through that and from that through the people that I’ve met and my learning over 20 something years in the sector that moved me into actual oil and gas production, exploration discovery productions of oil and gas fields. On the mining side, again looking for exploration projects that we could move through to development production and just being able to see different ways to look at different opportunities I think allows myself and Enertopia to have a bigger vision of what can be done in the Lithium space today.
Equities: : Lithium is exciting. People are looking at the commodity itself and how it's going to contribute to all different sectors specifically the auto industry. You and I have had some interesting discussions just about Lithium pricing and kind of how it's changing and how best to evaluate that commodity. How does your expertise relative to Lithium lend itself to Enertopia and why should investors pay attention to your perspective on the industry itself.
Robert: The lithium is a unique industrial metal where it's been strapped on into new technology has really moved it forward. Lithium has been known about since the 1950s, explorers and mineral were looking at lithium but there just wasn’t a technology in the day to be able to process it and transform it cheaply compared to other sources of energy but today we're at that threshold and it's no different than solar panels in the 70s were like a $100 per watt so prohibitively expensive for mainstream. Lithium was the same way it was prohibitively expensive but today with the change in technology, the cost now is estimated $250 per battery and that has been driven down to a scale where cellphones, portable battery packs now make sense where the actual cost of lithium of the battery is 2% of the battery's total cost whether lithium is $5000 a ton or $15,000 a ton that's only going to change in pricing 2% to 6% of the total cost of the battery and it's the latest densest weight metal for use for storing electricity providing such an advantage over the competition in batteries. That is where something that has been known for about 70 years now and moved it to the forefront. We’re at the beginning of the next great cycle. In this case lithium will be a major metal that will be produced over the next two decades at least over the next two decades at least in providing mobile opportunities in battery storage and it's really changing the way we view the world.
Equities: We've talked about that. We’re in the first inning of the game using a baseball analogy. You and I have had that discussion. Where does Enertopia fit into there? Obviously you’recommitting your time and money and pulling in investors. Where do you fit in and why is it important for you to be involved now?
Robert: We’re in the early innings as you mentioned and now with the opportunity for a microcap company to take advantage where again people haven’t yet realized the importance of lithium and the opportunities for companies to go out, bring together new technologies and be able to extract lithium in quantities that make sense for companies to recover and make an economic platform to build a profitable company. In this case it's extracting lithium, processing it and selling it to the end users. With the technologies today we can have a footprint that only takes maybe an acre, only a couple of acres instead of 10,000 or 20,000 acres of used up until just recently where companies are doing these massive evaporative ponds but now with the technology and these mobile water purification systems that have really come a long way in the last 10 to 15 years with the membrane technology and how they can filter out impurities. In this case we're filtering out lithium to recover as an end use product.
Equities: Simplify for the layman if you could what is going on in this process. I see it and I understand it and I think there are many investors are just looking at the word lithium and making investments because they draw the connection between the automobile industry. In layman's terms simplify what is happening in the process and specifically you're kind of focused on let's take it from the macro, recovering lithium in the united states and focus on kind of the small surface footprint which I think defines you some doesn’t it?
Robert: Yes, we're looking at a way to be as environmentally responsible if possible and we believe that using the technologies today whether you're recovering from a Brine well in Nevada or formation water in certain oil and gas wells across the United States where that water is already being produced anyways. It has to be treated and then sent back down into the ground we've seen that with some mobile technology. You can bring these units to an existing oil and gas field, recover that formation water where you take out the lithium and you put most of the formation water back down into the reservoir and you're not putting it out in the settling ponds that cover thousands of acres. That is I think a big plus as companies look to become greener as end users whether it would be Tesla, GM or other automobile manufacturers that are looking to have as green a footprint as possible for their stakeholders and consumers because consumers today want to leave the earth in a better place. We want to be responsible stewards for next generation.
Equities: You pinged me the other day with some news on lithium pricing. Tell me why that was important to you and why that kind of news that might sneak by an investor caught your eye?
Robert:The pricing and the dynamics, the market is there’s a shortage of refined lithium today. It has the strongest market fundamentals going forward. Current market pricing is anywhere from $12,000 to $20,000 for lithium carbonate or lithium hydroxide in china which produces and makes most of the battery packs in the world today. Tesla is the big exception to that and they want to buy only in America. The pricing that we've seen, the historical average over the previous three to five years has been around $4500 to $6000 a ton while today it's double or triple that and we're basing our long term scenario on pricing that is closer to the historic average which is $5000 to $6000 a ton. The reason that when I sent you the information that pricing is now up to $18,000 or more a ton is that segways back to the cost of the battery. It still only amounts to 2% to 5% of the actual cost of the battery.
Again it's not insignificant as a producer it's important as a producer to have a higher value per ton but it doesn’t impact the demand of the metal going forward whereas in other commodities we saw this a few years ago in copper when it rose up to $4 or $5 a pound. People were cutting telephone poles to get a copper wire. They were stealing copper from manhole covers around the world. End users of copper were looking at gee, should we go back to aluminum or what other source can we actually use instead of copper, that is demand destruction to copper where it becomes too expensive whereas lithium we dont see that.
Even if lithium were to go to $50,000 a ton, 10 times the average it's still only going to be under 10% of the cost of your battery. It’s not meaningful until it usually gets above 10% or 15%. There’s a lot of upside for the price of lithium before people would go hey, wait a minute. We don't want to pay that much. It provides investors with a lot of opportunity for companies that can get in on the ground floor and be early producers or the product.
Equities: What does it cost to get it out of the ground? I know in crude oil it's very simple calculations for companies and easy metrics for an analyst to follow. How do we overlay that into lithium cost of getting it out of the ground and why is that important?
Robert: That is a very important question. At the end of the day you always want to be the low cost producer in your industry. It doesn't matter what industry that you're in. For lithium the low cost producers historically has been the brine producers because they've been able to pump out brine up to the surface, let it settle out and let the sun do most of the work however the process for that to happen takes 12 to 18 months for enough of that water to be evaporated off to where it concentrates the lithium to about 6% and then it goes through the refining process. That costs several reports out there, third party reports from mining institutions and mining companies it's about $2000 a ton at the low end.
Then you move to the hard rock deposits in Canada, Australia. They’re hosted in what is called the Pegmatite Rock. It’s a Precambrian rock so it's a very old dense rock like a granite and that cost can run up to about $6000 a ton. Those are the two goal posts if you can for what is the low cost end to the high cost end. There is a new potential source of lithium from, they’re called claystone but that is more soft carbonite rock. They’re being tested in Nevada and we're actually reviewing data points on that right now. It’s early days in that process but that might offer another what I think could be potentially huge opportunity for lithium recovery in Nevada. If these deposits were to be economic it looks like they will fall somewhere in between $2000 and $6000 a ton depending on grade of course but that could be a real game changer for the state of Nevada. That could ultimately be the place to be for lithium in the world.
Equities: You talked about in your recent press release before the holiday in the US about kind of changing the current footprint in the industry and revolutionizing lithium processing technology. Can you expand on that a bit?
Robert:Conventional lithium production from brine was again using thousands of acres to let them settle out and the sun do most of the work. Most economically way that way. There's been push back with a potential for bird deaths because birds fly along and see some water and it's hot out there so they want to go and have a drink and you dont want to be drinking brine water in those concentrations so there’s issues using evaporative ponds that using this mobile technology removes. It fits in a trailer. Test pilot plant looks like it would take four semi-trailers to build out a test plant and the footprint you have a large where the water, brine water comes in. It gets filtered through the system. The system recovers the magnesium, the lithium. You can recover boron and potassium if you want.
Right now our focus on the first pass was just what it would take to recover the lithium because that is the highest priced value add that is in the combination of minerals and elements in the brine so with the technology, the small footprint using the oil and gas, I’ll use that analogy. You have saltwater disposal trucks. There is billions of gallons of water a year in the United States alone that are pumped to the surface in oil and gas operations. Then it's brought or pipelined to a water disposal facility whether it's you're just producing to go back down from one well or a hundred wells these are situated all across the US where there's oil and gas fields.
These facilities are already set up so now what you do is you bring one of these mobile processing units onsite so it's already been permeated. You hook up the water. It goes through the brine water from the truck from the hose. It goes to the mobile processing facility. It goes through that and in a matter of a few minutes and then the water that is left over after the lithium has been extracted goes through to the water disposal well and it gets pumped back down near the formation. You’re not using thousands of acres, you're not even using hundreds of acres. You’re using probably less than an acre to process this water.
Equities: Who do you partner with? I want to walk softly here. Who do you partner with on the water treatment side? Can you talk about that?
Robert: I tell you it's not the biggest firm in the industry but it's a well-known firm. They’ve been around for decades. They’re in several countries around the world and they're well known and it was through our clean energy water purification specialist the Global Solar Water Power Systems that we have a partnership with. They came to us and recommended them that they would be the company we should go to so we entered discussions with them and they've been a good partner thus far and we're using, we have a patent pending process that they’re using on this recovery and that is what we're going through discussions with them right now so I can’t say the name at this time.
Equities: Tell us what haven’t we talked about that we should talk about relative to the company?
Robert: I think one of the big things for our company is we can move very fast because we are so nimble. If we see an opportunity whether it's in another potential way that lithium could be recovered from other maybe a different deposit that I’ve alluded to earlier we can move quickly to asses that situation, retrieve samples, have them analyzed and again it's I think technology really does change everything.
There’s a couple of good examples. People are familiar now with how fracking changed the natural gas industry and then that technology went on to change the oil industry and we've all, society at large has benefited from that with dramatically lower energy prices. Again when you look at lithium as an example the big thing right now is Pokémon where people now are downloading Pokémon on their cell phones and then walking around outside. I have been speaking with a couple last night. We’re sitting at Starbucks and this one gentleman was playing with his cellphone. We said, what are you doing? I just downloaded Pokémon and there's 7 million downloads of that old program but what people do is they're walking around in certain buildings and they put this program together and people are actually spending an hour, two hours a day walking around looking for these clues in buildings where Pokémon could be that has been preprogramed. Now you've got all these people out there walking around. A game has been totally reinvented and it couldn’t be possible without the lithium ion battery providing all this extra energy for your cellphone where you could walk around for a couple of hours doing that.
Equities: Question was about the the global production of lithium is I think a little bit misunderstood. Robert, if you can maybe take the time and talk about recovering lithium in the United States, the advantage, point kind of counterpoint.
Robert: Steve, on the why we picked Nevada for lithium exploration and development and the United States in general is it comes to security and stability of the country and the united states has shown to be the most stable country definitely in our generation and in previous generation and we believe that will do the same thing for the next generation. You can look at other places in the world that have higher grade deposits of lithium but governments come and go and change and these regimes that are imposed where Argentina, just recently changed back to a pro-business environment but before that if you spent money in Argentina you weren’t allowed to take it out unless you bought goods and services for equivalent dollars. That is not a good business model. That hurt the Argentinian business over the last decade. They flipped back and they have a history of flipping back and forth. Chile, there's new taxes coming on so it used to be a very good environment. There’s issues. There’s some unrest there.
I think again you have the rule of law in mining and mining law in the United States especially Nevada. Nevada is one of the largest producers of gold in the world. You know what you're dealing with when you're in Nevada so that is a very good positive from a mining company, any company for that matter and in the united states and other jurisdictions with oil and gas production every state has its own guidelines that are well established. We believed that being in Nevada and in the United States in general that it's a good place to be. We know what we're dealing with when it comes to taxation, environmental regulations. We’re happy to be in a stable environment going forward. We think shareholders whether they would be in Enertopia or other companies they need to assess that risk.
Equities: It's an exciting world and it's ever changing all around us I’m so glad to see that you're participating in it. Robert McAllister from Enertopia. Robert, thank you so much and we appreciate you taking the time this morning to explain your involvement and your company. Thank you so much Robert.
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