Rodinia Lithium gives up costly Nevada claims

When the Nevada office of the U.S. Bureau of Land Management raised its annual mining claim fees last year by 700%, from US$140 per claim to US$1,120 — at a time capital markets were even more challenging for miners — juniors like Rodinia Lithium (TSXV: RM) faced some tough choices.

As a result, Rodinia has decided against renewing the 1,012 claims that make up its Clayton Valley project, which the company has described as the only lithium brine source in North America, and where it started exploration in 2009. The company says Clayton Valley contains at least five lithium-brine aquifers, with grades ranging from 180 to 420 parts per million lithium.

Rodinia will conserve cash instead, and focus on its wholly owned Salar de Diablillos lithium project in Argentina. The decision, president and CEO William Randall said in prepared remarks, “was not easy,” and was reached only “after a significant amount of effort to find creative, alternative solutions.”

He added that “at the end of the day, our exploration work did not support the continued expenditures for the claims in a challenging capital-markets environment, and we believe our financial resources can provide better returns if deployed to advance Diablillos.”

Rodinia has also entered agreements to satisfy a $597,185 debt by issuing 5.3 million common shares at 11¢ per share, and says programs are in place to cut corporate expenses and preserve resources “for value-driving investments.” The preservation programs include not taking management fees and avoiding non-arm’s length compensation and advisory fees.

The company has spent $12 million on acquiring and advancing Salar de Diablillos, and plans to advance the lithium-potash project in Salta province to feasibility.

The project, 145 km southwest of the city of Salta, has an inferred recoverable brine resource of 530,000 tonnes lithium metal, 5.9 million tonnes potassium and 615,000 tonnes boron, which is equivalent to 2.8 million tonnes lithium-carbonate equivalent and 11.2 million tonnes potash.

In November 2011, the company completed a preliminary economic assessment of Diablillos. The PEA looked at two production scenarios. The first outlined an operation producing 15,000 tonnes lithium carbonate per year and 51,000 tonnes potash per year, yielding a 34% pre-tax internal rate of return (IRR) and a US$561-million pre-tax net present value (NPV) at an 8% discount rate. The second scenario envisioned producing 25,000 tonnes lithium carbonate a year and 85,000 tonnes potash. Under this model the project could generate a pre-tax NPV of US$964 million and a 36% pre-tax IRR. 

Rodinia owns the rights to explore and harvest the lithium-bearing brines within the mining leases owned by Borax Argentina, as well as the rights to another three mining leases and two exploration leases on the Salar.

Analysts at Salman Partners have a “speculative buy” rating on the stock and a 23¢-per-share price target.

At press time Rodinia was trading at a 52-week low of 6¢ per share. Its 52-week high is 21¢ per share.