The Mines That Will Fuel The Energy Revolution

Written by Gerardo Del Real
Posted December 10, 2017 at 7:00PM

Publisher's Note: The Outsider Club's mining expert, Gerardo Del Real, had a chance to talk to the CEO of the premier lithium developer in the world. David Sidoo of Advantage Lithium (TSX-V: AAL) shared his insights on and knowledge of the most promising region of Argentina with Gerardo. Now, we're sharing them with you.

To your wealth,

Nick Hodge Signature

Nick Hodge
Publisher, Outsider Club


Gerardo Del Real: This is Gerardo Del Real with The Outsider Club. Joining me today is President and CEO of Advantage Lithium (TSX-V: AAL)(OTC: AVLIF), Mr. David Sidoo. David, thank you for joining me today.

David Sidoo: Great. We're in beautiful Argentina, eh, Gerardo?

Gerardo Del Real: We are in beautiful Argentina. Yes sir, it's been a long day, but a very productive one. I want to thank you in advance for the opportunity to attend the site visit. I must say that the presentations today by Lithium Americas, Orocobre, and Advantage Lithium were very, very well attended. There were groups from Goldman Sachs, Black Rock, amongst others, and so I want to thank you for having us out.

David Sidoo: No, it's been great. It's actually, probably, more well attended more than we thought it was going to be. We've got bankers all from Canadian East, Core-Mark, National Bank, G&P, Cannacord, great, great representation from Canada, and also from the United States. We had Citibank and Morgan Stanley down there, Deutsche Bank from Europe. So many, many, many hot guys that were actually involved in the industry, understand the industry, know about it. They're not going to come in there and start asking you, "What is lithium?" Which is quite refreshing.

Gerardo Del Real: Right.

David Sidoo: They've done their homework, and it was a crowd, I would say, that's probably one of the most sophisticated lithium crowds I've ever seen.

Gerardo Del Real: I agree. One takeaway, one main takeaway from the presentations today, the Q&A session after your presentation was lengthy, and the substance of the questions was very, very, very intriguing to me. Can you speak a bit to some of the questions, and then just kind of your feel for why you think people were so eager to get more familiar with the Advantage story?

David Sidoo: Well, I think the story that we told there today, we really gave a value proposition to some of these serious investors that are looking at the lithium space, to look at young juniors that are in the exploration stage. What we did was we differentiated ourselves from some of the other exploration companies in terms of enterprise value and market cap. We showed them how much lower we were than some of the other companies that didn't have as good of assets, and as good of press releases, and drill program, and drill results over the last little while.

That was important for us to reiterate that, and also sort of just let us unveil the technical team that we put together. I really believe those guys have done a tremendous job in the last four months, five months in the field. It was difficult weather conditions here, and they did a phenomenal job. Today, we had a great press release come out in the northwest, and that was great timing for us, too, just before the site visit and our presentation.

Gerardo Del Real: Agreed. Let's talk about that press release. It was absolutely fantastic. I mentioned the stock having a good run. We're clearly in a lithium bull, and I personally feel that the next 12 months will really differentiate the lithium juniors that are serious about creating billion-dollar companies, and the lithium juniors that just want to exist for the sole purpose of actually having the name lithium attached to them. Can we talk about the press release a bit?

David Sidoo: Sure, sure. Our goal is to become an independent lithium producer, Gerardo. That's the key. That's what our number one goal is. Today we announced in the northwest sector over the alluvial fan there, where no one's drilled before, we had two holes that we drilled, hole number 7 and hole number 16, and we intersected some really nice strong brine rates over 600 milligrams per liter. The brine density there, too, was quite good, which leads us to believe that the flow rates are going to be excellent there also. What that does is, our first goal was to expand the southeast zone in both width and depth, laterally and in depth, and now that we found another zone in the northwest, we're quite excited about that, and we're going to put another hole up there and probably deepen some of the other ones and see what our total scope of our resource might be in early 2018.

Gerardo Del Real: Excellent. Now, you mentioned the southeast, and using a gold analogy, can we talk about grade and consistency in that part compared to your partner?

David Sidoo: Yeah, you know what? That's a good question, actually, that our neighbor, Lithium Americas/SQM, we've actually almost identical sort of results on the grade lithium that we have and the flow rates, and also some of the press announcements Orocobre made several years ago.

Gerardo Del Real: Correct.

David Sidoo: They had the similar type of results. I think the main thing to understand here is that that whole basin in Cauchari's been de-risked by all the drilling that's been done by Orocobre and LAC and SQM, and we continue to put out results similar to what they did, so it's not whether we're going to have a resource, Gerardo, it's just how big it's going to be.

Gerardo Del Real: Excellent. Now, you're starting from a small base. You have a small resource at the time. This site visit hasn't been this well attended because of that small resource. Can you talk a bit about the publicly stated goal of the resource here come 2018?

David Sidoo: Yeah. We're quite optimistic about it. We're not promoters. We don't come out there and start waving our arms around. From a geological standpoint, and the hydrologists that we hired that understand this basin, that have worked in this basin before, Miguel Peral, Murray Brooker, Callum Grant, very important people. Andy Robb, we just brought on. It's their understanding and feeling that this 500,000 tonnes that we have we'll probably either triple or quadruple it in the next four to six months. So we're hoping to start initiating our scoping study in early 2018, and have a new reserve and resource by the first quarter of 2018.

Gerardo Del Real: Excellent. Now, to use another gold analogy, the step outs that you've commenced on now, I think the last one was 2 1/2 kilometers away...

David Sidoo: Yes.

Gerardo Del Real: ...from the main zone, and you had excellent results there. Can we talk a bit about the exploration upside? Is that going to play a part in 2018 alongside or concurrently with the resource estimate that you're looking to advance?

David Sidoo: Yes. We're going to drill another hole or two in the northwest to build that resource out a bit more, finish the holes that we have in the southeast that we have permitted, and then, the focus is Cauchari and build that resource. But there are also some exploration assets that we have that we'll start focusing on as well. I think primarily that Antofalla asset that we have in Catamarca, that we own the northern part of it, northern part of that salar, and Albemarle owns the southern part of it. We've applied for environmental permit and some drilling permits, and we'll see how that goes in the second quarter of 2018.

Gerardo Del Real: Excellent. Now, one of the key differentiators with Advantage Lithium, for one, you're cashed out. You have approximately $15 million Canadian in the bank, but you also have a partner that has the kind of expertise that most juniors would absolutely die to have. Can you talk a little bit about the strategic importance of your JV partner at Cauchari?

David Sidoo: Sure. Another great question. I think that elevated us a little bit from a like exploration, sort of a tweener kind of company, are they really serious about being in the lithium industry? The deal we did in Orocobre, we completed at the end of March of this year. Brought two senior members from Orocobre on our board. They're the first independent lithium producer in the last 10 years that's come into the marketplace, so they've done a great job. Their stocks have had a market cap of $1.3 billion. They've put together sound technical people.

Miguel Peral and his whole entire exploration team was part of a management team that discovered the Salar de Olaroz, and we've inherited their entire team, Miguel. We have 30 employees now. We hit the ground running in May. We'll have finished five rotary holes and four to five diamond holes, so we're excited about our path to production eventually, and the speed at which we're doing it. I mean, we're really cutting a lot of time out, and that's primarily due to the experience that Orocobre has had in that basin.

Gerardo Del Real: You know, you mentioned the deal with Orocobre, and I think an interesting part of the deal that maybe is overlooked oftentimes is there was an agreement in place there, and they obviously were forward looking, that any production that came out of the Cauchari Project they would have first rights on. Can we talk about that a bit? I thought that was important.

David Sidoo: Yeah, you know, that's there to kind of protect us in a way and protect them. I think if they have the excess capacity, Gerardo, we'll be happy to deliver the brine to our partner's facility. And if they don't have the excess capacity, there's opportunities that more money's being invested in that basin now with other companies, SQM and LAC, I mean, they're commissioning to build a standalone facility as well. I believe that's going to be finished in 2019, late 2019, early 2020, so there's options for us.

The thing is, working with Richard Seville at Orocobre, he's a practical person. They own a third of our company. He sits on our board. He's going to do what's best for the shareholders of Advantage Lithium. And so am I.

Gerardo Del Real: Excellent. Can we speak a bit about the lithium bull? It's a very real bull market in lithium. The demand is absolutely there. There's definitely a bottleneck as far as supply goes right now. How does Advantage Lithium look to tap into that here in the next couple of years? What's the map look like?

David Sidoo: Well, it all changed. The lithium market sort of quieted down for about three months there, Gerardo, and then what happened is the Chinese came out and said that in the next year, year and a half, 10% of all vehicles in China have to be electric vehicles, and there is a mad scramble for access to quality brine that's going to come out of Cauchari.

You've seen a lot of big investments. You've seen the Chinese who invest in Lithium Americas with Ganfeng. We've seen other companies do larger deals. I think, once we build our resource out here in early 2018, we're going to be in a position to entertain those types of opportunities with some large battery-making companies looking at an offtake agreement potentially, again, as a goal to be a standalone independent lithium producer in Cauchari.

Gerardo Del Real: Excellent. A lot of rumors, as there always are...

David Sidoo: Oh, yeah.

Gerardo Del Real: ...for writing potential deals. Do you think that'll be the last of the deals that are done here, some of the recent ones? Do you think there's more in the pipeline?

David Sidoo: Yeah, I think there's more. There's a junior miner out there that I'm pretty close to, another Vancouver company. I think they're look at doing something with the Chinese as well. And really, China is the marketplace for this.

Gerardo Del Real: Absolutely.

David Sidoo: You visit some of these Chinese battery-making companies and they have very little supply of lithium, and they're aggressively looking for companies that are in either development, pre-production, and some companies in exploration. So I think, again, I'd reiterate to the investors, once we get that scoping study and new resource defined, it's going to be a game-changer for us, and then we will be able to decide what path we take.

Gerardo Del Real: Excellent. You have the people, you have the cash, you have exploration upside, you got a great head start on a resource that you're looking to put economics to. What can we expect in the next six to 12 months, David?

David Sidoo: You know what? I think an opportunity for Advantage to go to the next level. I think people are starting to take notice of us, our volume every day, as you notice, Gerardo, has picked up. That's not retail buying that's coming in. It's strategic. It looks like institutional buying. I think, in the next six to 12 months, you're going to see a lot of action in Cauchari. And as we build that resource, it's going to give us much more credibility and many more options to do what we want. So that's a good position to be in for us.

Gerardo Del Real: Excellent. Well, we're happy to have brought it to Outsider Club subscribers early on, and I still think it's early days. I want to thank you for your time.

David Sidoo: Thanks a lot. I really appreciate it.

Gerardo Del Real: Thank you very much.

David Sidoo: Good to have you here.

Gerardo Del Real: Thank you.


For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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