Orocobre will take a 31% stake in Advantage Lithium
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me this afternoon is President and CEO of Advantage Lithium (TSX-V: AAL)(OTC: AVLIF), Mr. David Sidoo.
David, thank you for joining me this Friday.
David Sidoo: Gerardo, thanks for having me on. Really appreciate it. Listen, Happy Thanksgiving to you and all your subscribers.
Gerardo Del Real: Thank you so much. Really appreciate it. Same to you. Now, obviously you're coming on on a Friday and I know you're busy so, again, I want to thank you for your time but you had some pretty game-changing news here that was released on the 23rd of November; a couple of days back. The headline reads, "Advantage Lithium and Orocobre to Create Argentina's Premier Lithium Explorer," and I got to say, there's a lot to like in the deal here. So I wanted to give you the opportunity to come on and, hopefully, talk to everybody about the benefits of the deal and how you were able to put it together.
David Sidoo: That's fantastic. Thank you for giving us the opportunity. You know, Orocobre is, as you mentioned, one of the three or four in the world that actually produce lithium and only two of the companies that produce in Argentina. We're very proud to be partnering with them. It is a true partnership. They're one of the largest lithium producers in Argentina.
We're getting an unrivaled portfolio of assets, here, Gerardo. We're getting a highly advanced project in Cauchari and we're getting some other assets that are strategic as well that Orocobre has done some work on. What's very important is that these assets that we've acquired, there's six of them, sit inside salars. They are not on the edges, they're not on the periphery, they're not grassroots- they're actually in the middle of salars and that's very, very important. They're near infrastructure, which Orocobre has developed over the last decade. Roads, gas pipelines, power. They've got great government relations, great local investment in the local community. So permitting isn't an issue. We've dovetailed into a lot of work that Orocobre has put in over the last decade or so.
The other factor on these assets that we've picked up, that they call exploration, you know, they picked them up in 2007, 2006, 2008. So this isn't something that they just jumped into. They've done geophysics, they've done some work in seismic on these many, many years ago, so these are quite strategic assets for us. To give us the opportunity to monetize those assets and be their exploration arm, we're very proud of that and it says a lot about Advantage Lithium's team that we were able to put together.
The terms of the deal is that they're going to own 31% of our company. They are not going to take any cash in the deal. They took all stock, which is a testament to their ability to want to work with us long term. Management of Advantage Lithium insiders at Orocobre will enter into a pooling agreement to tie those shares up and give us a chance to develop this company. I think that was a major point that I wanted to make to your listeners, that we're here to develop this asset, not in here for a stock play.
Secondly, Orocobre has given us the voting rights on those shares, so the team that we have at Advantage Lithium is going to be there long term. It's quite strategic from that point of view as well. Now, Orocobre, they've done the deal with us, you were mentioning, "Why us?" There was a lot of people trying to date them. They had some of the junior companies that we've all followed here on the TSX that have just incubated themselves over the last year, year and a half. They also had the Japanese and the Chinese giving them an all cash offer, but what they wanted to do was take their exploration assets and build value into them and how they would do that would be with a group of people who have done it before, taken assets from exploration to exploitation, pre-feasibility and development. Ross McElroy, the people at Fission Energy, myself and American Oil & Gas, when I founded that company, have proven that we've done that over our careers.
We've raised enough capital for those companies to be able to build their business model and we've also created great community relations in the assets that we've developed over time. And very important to these guys is we've run a proper treasury, where we haven't paid ourselves exorbitant amount of salaries and fly around in private planes. That was important to them.
Lastly and more importantly, we're laser focused as a group when we work on a deal. For, although, we may lend our names to a few companies as board members, just to some of our friends, but we work on the deals 100% and they were impressed with that.
Gerardo Del Real: That's fantastic.
David Sidoo: So we're pretty excited about that.
Gerardo Del Real: Well, that's a big deal. You had mentioned Ross McElroy and I understand Mr. Callum Grant will also be working closely with Orocobre's in-country team. I know there's strategic benefits there, obviously.
David Sidoo: Cauchari has 470,000 tonnes of lithium carbonate equivalent and we're going to form two teams. One team that's going to be an exploration team and one team a development team. Callum Grant, he's got broad experience from exploration to production, with focus on South America and Argentina, in particular. Callum's project expertise and exploration and engineering development, project management, economics related to industrial commodities, including lithium potash in brine. He lives part time in Buenos Aires. He's worked with Enirgi. He's worked with some of the major companies there before, so he'll be heading up both of those teams.
Miquel Peral, who is Orocobre's geologist, who put all these assets together, actually, back in 2007-2008, he will come on our board of directors as well. He'll head up the geological team with Callum, and he's local in Salta. He owns 15% equity in this deal and he's a very, very successful person. He was part of the discovery team for the salar in Olaroz and the Salar in Incahuasi and the one at Rincon. So he's very, very well versed there. We've got a phenomenal team to work with.
Gerardo Del Real: Excellent. Excellent. So the exploration potential, obviously, you mentioned that they consider it exploration but Cauchari is an advanced stage property and I understand that that's going to be the focus on the development side, correct?
David Sidoo: Correct. It is. As I mentioned, it has an inferred resource of 470,000 tonnes of lithium carbonate equivalent and its exploration target is about up to 5.6 million tonnes. And that's not a number just picked out of the sky. That's a number that's been validated by drilling deeper in Orocobre's Olaroz property where they've drilled deeper there and SQM, also, has drilled deeper and they've hit lithium anywhere from grades from 250-300 ppm. So that's a proven, sort of a, model and this Cauchari salar sits on the same salar that Orocobre's main asset in Olaroz is. So we believe that those numbers are attainable, so that's not a number we picked out of the sky. We're going to do a five hole drill program, as I mentioned. We've permitted for that and that's going to start in early January, to start developing that resource. Once we do that, we'll do some pump testing, some more geophysics and over the next 12-36 months, we're going to prove-up that resource and spend up to $7 million U.S. of the capital that we raised just on Cauchari.
Gerardo Del Real: Excellent. Excellent. Now, simultaneously, you're also raising anywhere between $15 million to $25 million U.S., if I'm not mistaken. Is that correct?
David Sidoo: Yes. Yes. We're doing a minimum of $15 U.S. and a maximum of $25 and that money, once we have that raised, which we're getting great response right now from institutions, is enough to fund us for the next three to four years on all our projects: Argentina and Nevada and Mexico. So we won't have to go to the markets to raise any more money and I believe that within a three year period, we will have a resource defined at Cauchari that we can bank.
Gerardo Del Real: Excellent. Excellent. Well, David, just to recap, Orocobre will now own over 31% of Advantage Lithium, there is a share lockup post-closing, which I absolutely love because it signals to myself and shareholders, I believe, that this is a long term play. This isn't a stock flip. This isn't one of those stories where you're going to get in and raise some money and turn it around and dump all the stock. So I love that you did that.
The exploration potential in the region is world class. Congratulations to you on what looks like an excellent partnership and it's going to be great to see the story develop.
David Sidoo: I just want to leave one last comment. When you look at the metrics of what people were paying for moose pasture and fringe properties, they were paying between $1,000-$2,000/hectare. This deal with Orocobre is under $500/hectare and that's very significant. We did a great deal for the shareholders of Advantage Lithium and we've got a phenomenal shareholder, a great partner coming on our board of directors bringing a lot of value. So, if I was a shareholder of Advantage Lithium, I'd be very happy today.
Gerardo Del Real: Excellent. David, thank you so much for your time.
David Sidoo: Thanks Gerardo. Thanks for having me on again. We'll keep you up to date on our developments. Lots of news coming in the next several months.
Gerardo Del Real: Appreciate it.