E3 Lithium starts drilling Alberta’s first lithium evaluation well; welcomes Imperial Oil as investor

E3 Lithium (TSXV: ETMC; US-OTC: EEMMF) has started drilling a brine production well — which it says is Alberta’s first — for evaluating lithium in its Clearwater project.

The well, located east of the town of Olds, will provide the company with data such as brine chemistry, lithium concentrations and the reservoir characteristics of the project, which E3 plans to use to upgrade its resource estimate and complete a prefeasibility study (PFS).

“We are very excited about drilling and completing the first well in Alberta specifically targeting lithium,” E3 CEO Chris Doornbos said in a press release on June 24.  

The company received the licence to drill the “first of its kind” well in Alberta in early June. E3 considers the well as the next step towards its path of “commercializing and producing high quality, EV-ready lithium.”

E3 Lithium, which changed its name from E3 Metals in May,  owns properties within the Alberta Lithium permit area that in southern Alberta that lie over the Leduc Aquifer, a dolomitized ancient reef complex that spans hundreds of square kilometres and is over 200 metres thick. Lithium-enriched brine will be sourced from the aquifer.

The Clearwater, Exshaw West and Rocky properties are estimated to contain about 7 million tonnes of Lithium Carbonate Equivalent (LCE) in the inferred category.

The Clearwater project, which forms 12% of E3’s permit area, has an average lithium grade of 74.6 mg/l for 2.2 million tonnes of LCE. A preliminary economic assessment completed in 2020 estimates the Clearwater project might produce about 20,000 tonnes of lithium hydroxide per year. The initial capital cost has been pegged at US$602 million.

At an 8% discount rate, the project carries an after-tax net present value of US$820 million, with a 27% internal rate of return.

Drilling operations at the project are expected to be completed by mid-July, after which a service rig will be moved onsite to start testing the formation to verify brine chemistry and flow rates, the company said.

Imperial investment

Yesterday, E3 Lithium entered into a deal with Imperial Oil (TSX: IMO) to advance a lithium-extraction pilot in Alberta and explore the redevelopment of the Leduc oil field into a potential new leading source of lithium.

The pilot will support E3 Lithium’s Clearwater project, which will draw lithium from under the Leduc oil field, Imperial’s historic discovery that first launched major oil and gas development in Western Canada, the company said. 

This pilot project includes the drilling of Alberta’s first lithium evaluation well.

Under the agreement, E3 Lithium will continue to operate the Clearwater project with technical and development support from Imperial in areas such as water and reservoir management. The agreement also includes access for the company to freehold lands in the area, which are managed by Imperial.

Imperial will invest $6.4 million into E3 Lithium at a pre-paid price of $1.86 per warrant and the issuance of approximately 3.4 million warrants. Each warrant provides the holder with the option to exercise it for one common share of E3 Lithium.

At press time in Toronto, shares of E3 Lithium reached their highest value in two months, $2.84, up 30¢ or 11.8%, within a 52-week trading range of $1.59 and $3.49.