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Interview conducted by:
Walter Banks, Publisher, CEOCFOinterviews.com, Published – May 7, 2010
CEOCFO:
Mr. Brodkey, would you give us a little history on Pan American Lithium?
Mr. Brodkey: Pan American Lithium is a
relatively new company as we have only been in the market since December
2009. We are listed on the Toronto Stock Venture Exchange under the ticker
symbol PL and that is the TSX Venture Exchange. We are also Pink Sheeted in
the United States under PALTF, but we are seeking a full Bulletin Board
listing and that process is started and ongoing. Hopefully it will be
completed over the next several months.
CEOCFO: Are you one of the founders?
Mr. Brodkey: Yes I am. The company’s
original projects came in through a Vend-in that was completed in December
of 2009. The lithium projects that the company has are all located in the
country of Chile, South America and they are all relatively clustered and
close to one another in what as known the Chile Atacama Region III. That is
in an area of the country that is in the north part of Chile and it is about
700 kilometers north of the capital of Santiago. My partner in South
America, who’s name is Harold (Hal) Gardner has been a resident of Chile,
although he is a United States citizen. He has been a resident in Chile, in
Region III, for probably the last 20 to 25 years and he has been very busy
putting together very outstanding property packages in different
commodities. It just so happened that he had assembled this package of
prospective lithium properties consisting of these 9 different salars and it
became the subject of the Vend-in that I mentioned previously that was
completed in December of last year (2009). So I have been affiliated with
Hal Gardner and collectively with his group and we Vended those different
properties at the end of last year.
CEOCFO: Was Harold Gardner in Chile
prior to your partnership with him?
Mr. Brodkey: Yes. I have been working
with Harold Gardner for the last 3 to 4 years, but he has been very active
in Latin America for a very long time period before that. He has been on the
ground for about 25 years, which is well before most of the current mining
activity. In particular, Region III Chile has been historically difficult to
reach and underexplored. There wasn’t full-time air service into the capital
of Region III, which is a small city called Copiapo, until about 8 to 10
years ago. You could get to other parts of Chile, but typically to get to
Region III, you had to take a bus from Santiago, which was a half-day trip
and that was discouraging for mining companies. However, Harold Gardner
fought through all of that and really did a good job of being one of the
first pioneers of US citizens and US interests being active in the mining
industry in that part of Chile.
CEOCFO: What has changed; is it the
better access now?
Mr. Brodkey: Absolutely. There are
regularly scheduled flights into Copiapo. The area has been the subject of a
lot of exploration efforts from many different domestic and international
companies. However, that wasn’t the case until relatively recently; it was
probably one of the last regions in Chile prospected for mining that has
seen a rush of companies to come into play.
CEOCFO: What is your goal in Chile; is
it just exploration or is it development or partnering in the future or even
selling off when you get to a certain stage?
Mr. Brodkey: I can tell you quite
candidly, we want to be one of the first actual lithium projects built and
operating. We have got some very beneficial advantages that we think are
going to get Pan American Lithium to the point where it will be able to
realize its goal and be one of the first in production.
CEOCFO: So what is the vision for the
company?
Mr. Brodkey: Let me give you five or six
bullet points that summarize what the Pan American Lithium story is. First,
we have technically sound lithium projects, which are located in a very
stable mining friendly jurisdiction, which is Chile, which are very quick to
resource definition, to feasibility and ultimately, into production, headed
by a strong sophisticated management team with considerable Latin American
expertise. We will be in the lowest quartile of costs of lithium projects
worldwide. We project to be in that lowest quartile and as we become more
proficient in defining our projects, we will take on either strategic
off-take, marketing or investment partners that will ultimately seal the
deal for our company. We will have our production spoken for before we ever
turn the first spade of dirt on building the project.
CEOCFO: Where are you in the process at
this point in Chile?
Mr. Brodkey: I am happy to tell you that
we are very advanced. For a little bit of background, the lithium industry
has been proliferated over the last couple of years by a lot of smaller
companies, including ours. They have seen the opportunity and have spent
effort putting together properties and then, trying to make companies out of
those properties. The reality is that very few of these projects are
ultimately going to get built, even though there is a big demand for
lithium. You have to be one of the first ones down the line, in terms of
actually showing that you are going to go into production and having a real
project before the market is going to believe you. So getting back to your
inquiry, we are there. In terms of the first big milestone, the first big
step, we expect and as we have told the market already, that by the end of
this month we will have what is known as an inferred resource estimate done
on our first project. Physically our lead projects are different than almost
all of the other lithium brine projects. Just a little bit of background,
you find lithium in different forms in deposits the earth’s crust or in
waters. First, the highest cost projects are the hard rock projects, which
are typical mining projects, such as a gold, silver or copper mining
project. You have to crush rock and pull the metal out and there are lithium
projects like that, but compared to the other types of lithium available in
the world, they are very high on the cost curve. Then you have lithium in
forms such as muds and other minerals that are still going to be at least
mid to high cost projects. Lastly, you’ve got the lithium brine projects and
those are the lowest cost projects. Those will be the competitive projects
worldwide, and we are starting to see the analysts that are becoming active
in the lithium industry, recognize that the brine projects are the ones that
are really competitive and have the greatest chances of actually being
built.
All of our projects are brine projects, and what I can tell you about our
brine projects is that our lead project is a surface lake, and the name of
the lake is Laguna Verde. It is over 15 square kilometers on the surface and
has a mean depth of over 30 meters, so it holds a lot of fluid. There are
very few lakes that hold lithium brines. The brines also contain, besides
lithium, other light metals. The typical light metal suite is lithium,
potassium, calcium, magnesium and sometimes boron. Most if not all of those
products are generally commercialized from the brines, not just lithium, but
also the other co-products. However, the uniqueness of Pan American Lithium
is pretty understandable when you look at what we have. We have this big
surface lake, which is easy to get to and lends itself to very quick
resource definition. All of the other projects that we are aware of, all of
our competitors’ projects are known as sub-surface brine projects and
thinking about what it looks like and visualizing it, they have sort of a
moonscape. You have a crusty surface, and my analogy is the Bonneville Salt
Flats, because people in the US generally know what that looks like. That is
where they take out the high speed cars and set world speed records for jet
powered cars. It looks like moonscape and that is what the surface is of
most of the other competitor brine projects. The brines are underneath the
surface. All of our competitors have to drill down and do exploration like a
typical mining project. They need to put in a series of wells, test the
wells, and understand the formation that hosts the brines, which is again
sub-surface. They have to know how thick is it, how porous and how permeable
the formation is, and conduct a host of other exploration activities. So
there is a significant timeline and a significant cost in exploring those
projects, and our competitors have no choice but to spend that time, effort
and money to determine what they have. Contrast that with what Pan American
Lithium has; we have a lake. It was simple, we took a boat out on the lake,
and we measured the depth. We took samples on the surface, we have taken
samples at various depths in the lake, and that translates into a resource
estimate. So as we have told the market, at the end of this month, we will
have the resource estimate. We will be the first company we think that is a
Toronto Stock Venture Exchange company that will have a resource estimate
published for a brine project and we are miles ahead of everybody else.
CEOCFO: Would you educate us on the
value of lithium today and where the lithium market is going?
Mr. Brodkey: Most of the prognosticators
expect that it is growing and it is growing dramatically. The current
consumption of lithium carbonate equivalent, and that is generally the
measurement that everybody uses, is 85,000 tonnes per year. The actual
consumption of lithium carbonate or lithium products are across a fairly
wide spectrum of industries including the ceramics industry and lubricants.
However, the largest sector that is growing for lithium demand today is the
battery sector, and that is what gets all of the headlines and what gets
people excited. Lithium is being used because of its high storage capacity,
low weight to power ratio and other technical features. Lithium as it is
used in battery storage make it the element of choice for new battery
applications. The battery sector inside the lithium space is growing at rate
of 25% to 30% a year. Most people agree that the 85,000 tonnes per year is
going to become significantly more in terms of worldwide demand. We
generally use a rule of thumb, in that it is probably going to be 250,000
tonnes of lithium carbonate demand by the year 2015, which is only five
years away from now. So there is going to be a big explosion in demand, and
companies that get in and do what Pan American is trying to do, which is to
be first in the market, lowest quartile on cost, with off-take or on
marketing partners that will speak for your production; those are the ones
that are going to be successful. We are dedicated to moving down the road
quicker than anybody else and attempting to try to get into actual
production faster than our competitors, so that we can help meet this demand
that has clearly been identified.
CEOCFO: So it is sort of a right time
and right place for Pan American Lithium.
Mr. Brodkey: Absolutely!
CEOCFO: What is going on in Baja
California, Mexico for you?
Mr. Brodkey: Pan American Lithium has an
option to acquire an interest in an existing project. It doesn’t produce
lithium yet, but with the right application of energy and technology, we
will be able to. The situation is a follows. Since about 1970, the Mexican
government has operated a geothermal electricity facility, a big geothermal
power plant in Mexicali, which sits on the border, between Baja California,
Mexico and the United States state of California. It is however, on the
Mexican side and they have been tapping a fairly significant geothermal well
field. The power plant has been in operation for over forty years and it
happens to be the second largest geothermal facility in the world. It makes
about 720 megawatts of power from deep geothermal wells and it is being
expanded. They are looking at putting in a fifth unit; I think the
feasibility has been done, they are just awarding the contract to expand by
another 100 megawatts, so the total capacity of the plant will be 820
megawatts of power, which is pretty significant. The Mexican government
agency, which is the CFE (Comision Federal de Electricidad) has sunk over $1
billion and probably closer to $2 billion worth of costs in drilling the
wells that have been utilized and putting in all of the infrastructure from
these wells, which are 3 to 4 miles deep. This should give you a sense of
what is going on there today and how much has been invested by the Mexican
government in getting this power plant up and keeping it up and running.
Our situation is really a very nice one, and very beneficial for a lithium
company like ours. The power plant has drilled these deep wells, and they
pump fluids from beneath the surface through these wells. When, the brines
come to the surface, they represent two fractions, first, the steam fraction
which is siphoned off, goes to the power plant, runs through their boilers
and heat exchangers, and produces electricity. The cooler liquid fraction
contains the brines, which are not used by the power plant at all. They are
simply sent out to evaporation ponds that the power plant has built and are
used for disposal. However, that is our feedstock, so the beauty of the
situation becomes pretty apparent. We are investigating the final financial,
legal and other details, to earn a piece of this project and get the lithium
and the other metals from these brines. Should we decide to exercise the
option we would be getting the benefit of this incredible amount of sunk
investment in the existing infrastructure of the power plant. Pan Am would
essentially receive, cost free to us, the brines containing the lithium,
potassium and other elements that we are going to be able to process. So we
are saving billions of dollars of capital expenditure on infrastructure,
because somebody else has already paid for it and we don’t even have to
pump. This leaves us with dramatically reduced operating costs because we
will be able to take these solutions in the evaporation ponds. From that
point forward, it is our responsibility to design these optimal processes to
recover the lithium and the other metals. It is similar to the lakes in
Chile. In fact, we have projects in both Chile and Mexico, where there is
virtually no exploration risk because nothing needs to be done. Somebody
else has already done it or there isn’t any exploration to be undertaken
because of the nature of the project. That is the story of Mexico and Chile.
CEOCFO: Do you have the financing in
place to continue to grow you company or will you have to go to the street
to raise more funds?
Mr. Brodkey: The answer to that is
twofold. First, our exploration is done, so we won’t have to spend any money
on that, but yes, we will be moving immediately into feasibility in Chile.
Then if we obtain the Mexican project,
depending upon the financial arrangements with our partners in Mexico, we
are more likely to be in a carried position, where we won’t have to spend
any money at all to take that project forward. We will have a carried
interest all the way through feasibility, the building of facilities,
commissioning and actual production. So probably with the way things are
working in Mexico, we won’t need any capital. However, Chile is different,
as we will need money to commence our scoping, chemistry phase process
design, and feasibility. Therefore, yes, we are considering different
sources of funding, whether it be the street, some private placements
through institutional investors that we have relationships with or
potentially through strategic off-take partners. The answer is we are
embarking upon additional fund raising as we speak today.
CEOCFO: In closing, address potential
investors and why they should consider Pan American Lithium?
Mr. Brodkey: Pan American Lithium has
projects that are going to be quicker and very cost competitive with the
other lithium projects among the junior companies that have been announced.
The investor and the analysts should start to hopefully understand the real
distinctions between projects that Pan American Lithium has, which are real
projects, versus a lot of the other noise that have been announced from
other people that have similar brines projects. I’m not even talking about
the hard rock projects and the mud projects for lithium, because those are
high cost and the most people are discounting them already today. However,
among the brines projects, we are in a highly favorable jurisdiction, which
is Chile, while most of our competitors are in Argentina or Bolivia. You
really need to start to analyze closely all of the factors that make up a
project, including rates of return, fiscal regime, royalties, taxes, the
realities of permitting, water rights, etc. and look at the whole package of
the issues that surround lithium brine projects. As people start to educate
themselves, they are going to start to understand the realities and
advantages of advancing projects in a very mining friendly, mining favorable
jurisdiction like Chile. Chile has a long, storied rich history of
supporting the mining industry, good mining laws and good laws on titles and
tenure and permitting and the whole nine yards. That is where our projects
are located.
Even beyond that, our projects have advantages built in; we have lakes
rather than underground projects that our competitors have to spend tons of
exploration money and time on. At our lead lake, we are ready to go to tell
the world very shortly the quantity of lithium contained in that lake.
Immediately thereafter, we are on to scoping, feasibility, process and
design. Our competitors are going to lag, and they have to lag because with
underground projects they don’t have the ability to access their projects
like we do in our lake. So if you take the totality of the circumstances,
being in Chile, verses being in Argentina or Bolivia, and having a very
pro-mining regime, pro-mining in the sense of not just on tenure and
ownership, but very favorable on tax and investment and royalties, compared
to the other places, people will start to see the differences between Pan
American Lithium’s projects and the projects of our competitors. When they
look at everything in a total light, they will conclude that we have real
projects and have strong financial returns associated with them—projects
that are going to be built. In addition, we are going to be quickest into
the markets. So that is what I hope that most investors would take away from
this discussion.
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Andrew
Brodkey