Financier Stephen Dattels banks on lithium

Many people in the industry will remember Stephen Dattels as the founder of UraMin, a company he set up in 2005 to develop uranium properties in Africa, and which he sold in 2007 to Areva for $2.5 billion in cash. The legendary top-of-the-market deal made Dattels, his partner Michael Beck and their shareholders very rich.

But the mining financier has hit other home runs since kicking off his career in mining at Barrick Gold (TSX: ABX; NYSE: ABX), where he was one of the company’s key executives — and reportedly Peter Munk’s protégé — from 1982 to 1987.

A few of his other success stories include cofounding Emerging Metals in 2007, which became a significant investor in Kalahari Minerals, and whose stake was sold in 2010 to Itochu Corp. for £33 million. (In 2011, Emerging Metals picked up iron ore interests in Sierra Leone and Cameroon, and changed its name to West African Minerals [LON: WAFM].) He also cofounded Oriel Resources with Russian mining entrepreneur Sergey Kurzin, with nickel and chrome assets in Kazakhstan, which was later sold to the Mechel Steel Group for $1.5 billion.

Now Dattels is banking on lithium, and, with longtime business partner Beck, has founded LSC Lithium (TSXV: LSC), which has quietly acquired lithium brine projects in northern Argentina since 2015, and today holds or has under option a 2,700 sq. km land package of prospective lithium salars in the Lithium Triangle. The area straddles Argentina, Chile and Bolivia, and hosts the world’s most abundant lithium brine deposits.

The company’s four flagship properties consist of Salar Rio Grande in southwestern Salta province; Salar Pastos Grandes, also in Salta; the Salar Salinas Grandes in both Salta and Jujuy provinces; and Salar Jama in Jujuy. The company also has an option on the Pozuelos salar in Salta.

Facilities at Enirgi Group’s Rincon lithium project in Salta province, Argentina, where the company is building a demonstration plant for its Direct Xtraction lithium processing technology. LSC Lithium envisions possibly sending brine from its properties to a future plant and Rincon. Credit: LSC Lithium.

In July 2016, LSC Lithium entered into a strategic collaboration with Enirgi Group Corp., a privately held corporation with six divisions. Its resource division holds lead and silver assets in the U.S. and Australia, and the firm operates a used lead-acid battery recycling plant as part of its power storage business unit. The firm’s chemical division, which produces sodium bicarbonate in Colorado, is also developing the lithium assets in Argentina.

Enirgi, which is wholly owned by the Sentient Group — an independent private equity firm specializing in the global resources industry, with more than US$2.7 billion in resource assets under management — wants to build a global lithium business. It owns the Salar del Rincon project in Salta and is building a demonstration plant there to test a technology that could dramatically lower the time it takes to process brines into lithium carbonate products.

The technology — called Direct Xtraction Process (DXP) — was developed in cooperation with the Australian Nuclear Science and Technology Organization (Ansto) in Australia, where Enirgi’s pilot plant at the Ansto facility showed recoveries in the range of 75–85%. Enirgi is now building a new demonstration plant in Argentina at its Salar del Rincon, which it expects to commission in the first half of 2017. If the pilot plant works well at high altitudes, the company intends to build a commercial-scale plant that could process 50,000 tonnes per year as early as 2019.

“We’ve been developing our own technology over the last three years and have sunk $240 million acquiring all the property and delivering what we think will be a game changer,” said Wayne Richardson, who is president and CEO of both Enirgi Group and now LSC Lithium.

“The standard process of producing lithium takes a year, from extraction of the brine through the evaporation pond system into a plant and into the bag,” he says in a telephone interview from Brisbane, Australia. “In our process, it comes out of the brine, into the plant and into the bag in under 24 hours.

“We did all of our development work under the auspices of Ansto, with them looking over our shoulder to make sure we weren’t drinking our own Kool-Aid,” he says. “Now we’re actually putting it on the site, and have invested $30 million on building a demonstration plant.”

Richardson says that DXP is “disruptive technology” that involves producing lithium carbonate directly from unconcentrated raw brine in less than a day. The technology not only eliminates the need for mega-evaporation pond infrastructure, he says, but it also lowers dependency on external reagents that would otherwise have to be shipped to site, and lowers a project’s environmental footprint. The process is also amenable to production of lithium hydroxide.

Under the cooperation plan between the two companies, Enirgi Group agreed to assign all of its non-Rincon lithium properties, or salars, to LSC Lithium in exchange for an 18.2% equity stake in the junior, and pledged management and board support to oversee LSC Lithium’s development. Under the partnership, LSC Lithium will have exclusive access to Enirgi’s DXP technology, which it says will minimize capex and opex requirements because it doesn’t need expensive solar evaporation ponds on its properties. Under the agreement, LSC Lithium will ship brine to a regional processing facility for final production.

Dattels sits on LSC Lithium’s board and holds 7 million shares in the company. Shares last traded at $1.37 apiece, with 84.7 million shares outstanding.

“The opportunity emerged for us to create, in partnership with Stephen Dattels and others, a real exploration arm,” Richardson says. “So we have put our foot on other salars through LSC, and LSC gives us extra feedstock for the plant … LSC really does give us that extra footprint to expand well beyond 50,000 tonnes per year … altogether, between Enirgi and LSC, we have our foot on 560,000 hectares [5,600 sq. km] of property, and we have a significant team of over 100 people in Argentina. We have technology, which is a game changer, and we sit today with the capacity not only to deliver substantial new and sustainable supply to the market — but it’s expandable and very scalable.”

Workers at the Pozuelos lithium project in Argentina’s Salta province. Credit: LSC Lithium.

When pressed for details on how the DXP technology works, Richardson would only say how Enirgi got to the point of developing it. “Enirgi has a brine extraction plant in the U.S. for baking soda, so that’s the reference point,” he said. “We doubled the footprint of our soda operation in North America through a $35-million operation. We extract 250,000 tonnes of baking soda from what is the world’s largest naturally occurring nacholite. It’s like a soft rock … a compacted dirt. And it’s a solid bed. You drill through hot water and it turns into a brine, and then you extract the brine and clean it out and dry it out. So because we have these operating companies and run real businesses, it means our engineers are used to building things, and this gives them a leg up in terms of developing our DXP business.”

As for lithium demand, Richardson says it’s only going up, given rising demand for lithium-consuming products such as consumer electronics, electric and hybrid vehicles, grid storage and batteries. In a presentation, LSC Lithium cites November 2016 statistics from Morningstar that forecast demand for lithium will grow 16% annually from 175,000 tonnes in 2015 to 775,000 tonnes in 2025.

“We have a whole generation of 13- to 40-year-olds who expect to drive electric vehicles,” he says, “and in places like China they don’t have a choice. They’ve got to do something about pollution.”

As of Feb. 27, LSC Lithium had cash and equivalents of $34.5 million and no debt.