 Welcome back to the technology metal show. I'm Peter Clausi. As always, we're here with Jack Lifton, a critical metals supply chain expert. It kind of feels like forged in fire. It's Friday, October 30th. No Halloween tomorrow. And we are thrilled to have as our guest today, Mr. Waldo Perez, PhD from Neolithicum. Waldo, nice to meet you in what's passing for in person these days. Yes, thank you very much. Nice to meet you guys, Jack. I'm in St. Catharines, outside Niagara Falls, Ontario, Jackson, Michigan, outside Detroit. And I think you're down in Argentina, right? I am in Mendoza, Argentina, yes. Okay, so let's get right to it. I've been looking forward to this for a while. Neolithicum has a very advanced lithium project in Argentina. And just before we went to air, you were telling us about the plateau, 4,000 meters elevation, 60% of the world's salt brines for lithium are there. So tell us more about that, where your project is located. Well, when it comes to lithium, there are two places and two sources. The two places are South America, the Puna Plateau, which is Chile, Bolivia, Argentina, for brine resources. 60% of the lithium of the planet is located in an area that covers this plateau. It's about 4,000 meters elevation. It's about 4,000 kilometers in length. It's about 3,000 kilometers in width. And these are the solaris, right? These salt lakes are the solaris. Yeah, inside there you have solaris. And to be very clear, our objective here is to find a liquid, which is a hypersaline brine, that is trapped in rocks. And those rocks are mostly sodium chloride, but there is also sand and another type of porous rocks that trap this hypersaline liquid in close basing in the Puna Plateau. So this is actually what the exploration looks like. You explore for a liquid, not a solid, a liquid, okay? And you exploit a liquid that you actually extract using simply pumping technology. That is the same technology that you use in a farm, in a water well, or actually if you want to go a little bit of yon in an oil and gas. Jack, have you been on site to a solar? No. Me neither. So, but I, at one point in the early part of this century, I represented SQM in Detroit. Oh, interesting. Well, I will send you a few pictures, guys. And of course, please visit our website, Good website, Waldo, whoever designed it did good work for you. And actually, you will see plenty of pictures. It's a very dry area. There is literally no life, like quite literally. I mean, because the salt actually is a bad environment for life. I hadn't even thought of that. So it's not like some animal has evolved and adapted to be able to live in the solar. Yeah, some did, and they are bacteria basically. So the only living animal there is a bacteria. And by the way, scientists like to study those bacteria, because they think that they can mimic life out of the planet, like literally, like in Mars or in another. So they study those bacteria. And I guess it doesn't interfere with the mining of the lithium in any way. And they're pretty small. And just as a fun fact, they don't breathe oxygen. They actually live out of the exchange of salt with water. So they don't need oxygen to breathe. You know, I'm going to have to look that up later now. It's a fascinating topic. All right. So you said there's two places where they're found. One is in the water. Exactly. And the other is a rock. It's actually a mineral called spodumen. And that mineral is actually more common in the planet. Although the best spodumen in the world is found in Australia. So at the end of the day, there are two sources of lithium rocks, which is actually spodumen being mined in Australia, and brine, which is a liquid, which is being mined in Chile and Argentina. Okay. Now, from that, there is also something to consider that is not obvious to the general public. Spodumen can produce hydroxide. There are two final products for lithium. One is lithium hydroxide, and the other is lithium carbonate. So both are used in batteries. Lithium hydroxide are used with certain type of batteries, and carbonate is used in another type of battery. But one of them has a very short shelf life, right? It takes about 30 days, and then you have to use it or it deteriorates. Well, hydroxide is more subject to deterioration. So that's why you would see that most of the hydroxide is produced near the battery plants, just to make a definition. In Australia, people mined spodumen. They shipped the raw spodumen into China, and in China, the spodumen is processed and going into a battery. Now, of course, for the battery. This is Jack's area of expertise. Sorry, Waldo. Jack, I see you frowning a bit. I need to say something because I don't want our viewers to misunderstand. Here's an old man's story. My very first project as a chemical engineer will say was to find uses for lithium. I worked in a company, had a contract with a company called US Lithium, I think it was, and it was in North Carolina, and they were mining spodumen. In those days, we never heard of brine. So the viewing public has to understand that it's only in the last generation that brine has become... Waldo, is it the dominant source now of lithium, or is spodumen still ahead? Good question, Jack. This is what happened. North Carolina was the number one producer of lithium, and you probably know why it was used by the military to separate the lithium-6 isotope to build hydrogen bomb. And the problem was, and that's why probably you were hired to look for uses for lithium, is that only like 6% of the lithium isotope using the hydrogen bomb out of the total lithium is actually the right isotope. So you have like 94% of lithium that you throw into the garbage and then you need somebody to look for uses for it. Wow. I think the first standing bubbles, as you know, Waldo, it was around 1980 that I think Panasonic introduced the lithium ion battery. I think it was 1983, I think, Jack. Well, I can tell you this. My group made a... We made a battery based on lithium chemistry in 1962. And Lithium Corporation of America, I think it was called, not U.S. Lithium Corporation of America, they decided that was not a good path to follow. There was no point to it. I've always been the cuss of technology. So was North Carolina also the source of the lithium for the medical industry? Yeah, yeah. North Carolina was the main producer back then because it wasn't like... Again, it was an element that the Russians were looking for because of the Cold War to build the hydrogen bomb. The U.S. had that. But what happened is that the Cold War went over and then there was no major uses for lithium. But what happened then was the telescope that they can use in glass. And Pyrex found out that if you put it in glass and ceramics, you can actually microwave them or put it in the oven. And that was the major issue. The major use of lithium until the year 2006, 2007 was actually the ceramics industry. Get out of here. Yeah, yeah. So it's only in the last, shall I say, 10 years that the battery first made it to this, to the telephones. And after getting into the smart phones and so on, it becomes so ubiquitous and also the technology became so powerful that we didn't realize but we started to depend on lithium batteries. Like when you are using a drone, when you are using all those appliances, tools that they are always running out of lithium batteries, all of them, because among other things, lithium batteries don't have a memory. Do you remember the first cell phones that they would tell you that you have to plug it in, but then you needed to take the energy out? Remember that, that you need to empty your telephone, otherwise you will kill your battery. And that's why, of course, that technology, nickel metalizer was totally useless. So let's talk battery configuration for a second. I was involved in the development of that battery. So in China, we have a company, BYD, who touts a formulation heavy on lithium with like 0.5% cobalt, but not a high energy density. Do they have any chance of expanding that? No, BYD, as you know, is one of the largest car makers in the world. They sell almost everything in China and they have a very strong battery, I mean, electric, I mean, lithium battery industry. They develop in December 2015 a new LFP battery, which is basically a battery without cobalt, without nickel. That is about 50% of the cost of the other batteries, which are made of hydroxide, and has about 80% of the range and energy density. So it is a great, shall I say, technological achievement. And nowadays, the Tesla battery, CITL, by the way, it's our partner in our project. I want to come back to CITL. Yeah, of course. They actually also created a similar battery. So let me put it like that. This battery is the battery for the cheap cars. If you need to make a $25,000 car, Tesla built in China is an LFP battery. LFP battery means it's a carbonate battery. That means it was made with rhyme, basically. Now, instead, the other batteries, like the high-density battery that takes cobalt and nickel, they are done with hydroxide. And you could do it with some carbonate converting to hydroxide or from the supplement using the hydroxide directly. So any of the two. Jack? No, I was going to say, look, we're all getting a good education on this, but we're not talking about Neolithic and Waldo's Company, which I... Look it back to that because... No, because, you know, I like broader settings. There's thousands of companies out there, but how you fit in the universe matters. And Neolithic fits in the universe in one way through its relationship with cattle, which is a very large battery manufacturer in China. Now, as I understand it, they've actually made an equity investment into Neolithic and as a shareholder. That's a pretty strong endorsement. This is a very strong endorsement and we are one of the few companies that has a relationship with a very large battery manufacturer. This is actually validation money and they are going to sit in our board. So it is very important. Now, our project was selected by CATL for some very specific reasons. It's the highest grade project in the world. If you go to independent analysts, Roskill is the lowest CAPEX, lowest OPEX, the lowest operational cost and the lowest need for capital to build the mine in the entire world. So it's really a very important project. It fits in the universe as the number one undeveloped project for leaping. Typical content in leaping parts per million of your brine. In the first ten years, our grade will be over a thousand milligrams per liter. That is in the first ten years. We get brine up to 1400 milligrams per liter, but the average production for the first ten years is going to be over a thousand milligrams per liter. And after 35 years of production, we will still be around 790 milligrams per liter, which is higher than current producing mines. So the grade of these projects is higher grade than some producing mines, like corals and so on. For the technically-minded, the amended pre-feasibility study on the Quadrubratus project came out May 7, 2019 and is available at the website and lays out all of this technical data. Aftertax NPV 8% and a 50% IRR. Yeah, the IRR is amazing. It's actually difficult to find a mining project with an internal rate of return of 50%, with a payback of less than two years. And you may wonder, well, how come? How come the numbers are so good? And the answer is the following. A very low operational cost give us very large margins and a very low need for CAPEX to put this project in production, okay, allow us to repay our debt and be out there making money very soon. So this is the secret. In nature, these two aspects, low operational cost and low capital need are usually opposite. Usually, you need a big CAPEX to act on low operational cost and so on. So it's very rare. But this project is quite unique. This project is not like the other salars. By the way, since 2008... Hang on. You can't make a statement like that and run away from it. Why is this project unique? Well, there are obviously geological reasons behind that that we can go in. But again, the chemistry of this project is unique because of the grade. It's extremely high grade. And it has very low impurities. When I talk about impurities, I'm not talking about impurities of the final product, which at the end of the day, your final product is a manufactured product. I'm talking about the impurities in the ore. In the same way that, for example, if you are, just to say, in the gold business, arsenic is not good because it's toxic and you need to get rid of. So the higher the arsenic, the more problems you have in metallurgy. For iron, silica is bad. Except in Nevada where they love the arsenic. Well, okay. But then in zinc selenium is a bad word too. But in lithium, the bad words are magnesium and sulfate. Those two elements sequester the lithium from the brand and basically precipitates in a clay that basically is untreatable. In other words, you can't take the lithium out of it. And that for that reason, the lower the magnesium and the lower the sulfate, the easier the project is to be get in production. Well, our project happens to be the lowest sulfate and magnesium project in the world. Has lower contents of magnesium and sulfate that current producing mines. And that's why our operational cost is going to be lower than that. And that makes you unique. Go ahead, Jack. I've been hearing for years that the problem with Bolivian brines is that they're too high in magnesium. And yet these brines are all interconnected. Are they not in this region? No, no, no. They are not interconnected. No, no, no. Actually, they are exactly the opposite. They are all not connected. Think of them as glass. Think of them like you have a table one guy has a glass of coke. The other has a glass of wine. And the other has a glass of whiskey. They are not connected. And actually the chemistry of one is different. Now, what controls the chemistry of the solar? Well, think this is actually the lowest part of the plateau. The lowest elevation. So it's everything that's rolled into it. It's a catch basin. It's a catch basin. We call it a garbage can. It collects everything that is in that basin. So in your basin, for whichever geological reason you have more magnesium, you have more sulfites end up in the solar. In your basin, there is no such elements because the rocks around have very low content of that. Then you have a different content. So this is what's controlling the solar chemistry, the surrounding ground. So then I have a related unrelated question. Earlier today, Jack and I were talking about something called quantum space, which is a solid state battery research that's going into a SPAC in the United States. And their metric is one times cash flow in 2027. Any thoughts on solid state batteries? Well, they are the future. Solid state batteries is what's coming next. Now I don't know how long it will take, but this is what's coming next. And only solid state batteries like an airplane to fly. And that is going to be the next thing, the revolution. Now we're talking, look, in 2008, 2009, we were talking about the revolution of batteries for this, for phones, for laptops, because everything was a lithium battery. Now in 2020, we are talking on the revolution of lithium for cars because cars are going to be dominantly electric. And in 10 years from now, 2030, 35, I hope to be retired, but we will be talking about the lithium in airplanes and those are going to be solid state batteries for sure. Let me break up the love test by asking you a question you may not want to ask. Have you determined or has your new investor mentioned what they would like from you? The market for battery electric vehicles, no matter what we like to sugar coat it in the West, is not growing that fast. It's still a minor thing. It really is. I'm in Detroit and I can tell you that the number of battery electric vehicles sold in this country in the last year is maybe 3-4% of the number of internal combustion engines. Okay, it doesn't matter what you think about the future. We buy our groceries with money we make now. Okay, so my question is, China is way ahead of the world in this. It's my understanding that the next five-year plan, I believe it's the 14th, which will be issued in just a few days, is going to mandate 20% or more of all cars sold in China in 2025 be BEVs, which means China will then be the largest market in the world for lithium-ion batteries for vehicles. Now, what percentage of what you're going to produce do you plan to sell in China versus the rest of the world? I'm just asking because I think it's a regional market, a regional market. Okay, two points about your statement. Yes, China is going to be number one and Europe is going to be number two. 160 vehicles next year are going to be sold electric and the penetration in some countries like Norway is actually 70% today. I understand that. Remember, I've been to USA. We're always on top. We sometimes have to flip the chart, okay? No, that's true. However, the state of California, for example, in the U.S., have put very stringent lots for CO2 emissions. So I agree that today we are in 3%, 4%. I personally agree with Roskill prediction that they say that the market is going to be 30% electric. That is 30% of the vehicles of the world are going to be electric by 2030. So when they say vehicles, do they mean cars, motorcycles, trucks, 18-wheelers, or only cars? Well, I appreciate Roskill and all that, but they are just analysts. They use a pencil. You are actually in the business on the ground. What is your opinion of the penetration of lithium-ion batteries, BEVs into the marketplace in the next 10 years? What I was trying to tell you, just to finish my sentence, is Roskill is saying that the penetration of electric cars in 2030 is going to be 30%. Elon Musk is saying that it's going to be doable that just following the ThetaWatt factory he plans to build in the U.S. So I fully agree that the final number is uncertain. It's very clear that the number is growing, and I have been in this business, lithium, I mean for over 10 years, 12 years, 13 years now, and I have seen the growth of the industry. I have seen, and I discover, as I say, lithium America's Kauchari project. I was the founder of that company, and now that company is in construction. I have seen a recovery go from discovery to construction now. So the industry is clearly maturing. Very clearly it is growing, and today, and this is very important, today the market is in equilibrium. So right now supply and demand are there, prices depending technical or battery grade are around 7,000 to 10,000. But let me tell you something. In one month in China, the prices of lithium increased 17%. That is no minor point. And this is important for the small investor to know, because this is coming, and because this is coming, CATL come and does the business with us. Otherwise, what a $60 billion Chinese company want to do having a board of directors in a company like us, which has a $100 million market cap? Which brings me to my next question, Waldo. When are you in production? Yeah, we are scheduled to be in production having finance next year in the year 2022. So at the end of 2022, if we finance next year, we should be at the end of 2022, that is 2022, 2023, we should be in production, okay? Of course, we still need to complete our deal with CATL. We are just to have a clear view of what's ahead of us. In the next six months, we will complete our feasibility study. As I say, we do it in conjunction with CATL to have a certification of the final product, which is going to be battery-graded in carbonate that they can take. And with that, we basically construct construction. So we can start construction next year. And with that, it takes two years to build the mine and basically start production. Okay, Jack? Is there any thought of building batteries in Argentina? No, look, just as a business for us. Honestly, I don't know CATL. CATL have their own plans. Sorry. Just generally. I don't mean your company. I mean, is there any movement in, I'll say this, in South America to have a domestic battery-powered electric vehicle industry. Total domestic. Today, BYD is building electric buses in Argentina. That's actually the largest hub for electric buses. Right now, they are importing the batteries, but this is very important. And in Brazil also, there is a plan for a plant to start battery. Let me tell you something. South America has a very strong automotive industry. Very strong. As a matter of fact, Argentina builds almost a million cars a year and Brazil like 6 million cars a year. So it's big. Let me make a point. I spent many years as an automotive supplier visiting auto plants in Brazil, in Argentina. I'm aware of what you're... The largest Ford plant I ever saw in my life was in Sao Paulo. Oh, yeah. So you needed a bus to get from one part to another. And the question is, it seems to me it would make sense for somebody to vertically integrate. You have the... You have the scientists and engineers. You have the demand. So I assume... Look, to be an internationalist, I assume the Chinese will do this and that they're already underway. And I also... Wouldn't it be just to buy one and build one? I'm sorry. These are just to buy, then build. Rather than vertically integrate yourself, have the different industries and then have one consolidator. Thinking is that maybe CATL is thinking they could make batteries in Argentina. They'll have a supplier locked up of lithium. And there's a big market down there. Yeah. I think that eventually, to be clear, we don't have discussions like that. And very clearly, CATL is a battery business and we are not into the battery business. So it's their business. But we will be an important supplier. And something very, very important for us is to consider that CATL, a $60 billion company, has set aside a $2 billion fund to... Would they call improve the supply chain of the raw material. And within that $2 billion fund, a very small portion of that is us. And this is very important. They recognize that this supply chain, shall I say, need to be improved. And think about this. CATL has doubled battery production for five years in a row. Every year, they double production. This is an amazing achievement. This, I think you need to go back in industry. You need to get back to Henry Ford to see something like that. Doubling production every year for five years in a row. That means that they are doubling the lithium consumption too. And this is when it comes for us. Believe me, no automotive company, no battery maker want to be in mining. They are different business. Let's get it clear. When a car manufacturer needs copper, they don't buy a copper mine. They don't need to do that. They just go to the market and get the best. But they recognize, they know very well that every now and then there is some critical element. That's why these are called critical elements. That they require to be in production. And they also need to be in specs. It's not only to be in production, production and in specs for them to be able to produce what they need to produce. And that is when this sound works very well. So Crystal Ball looking forward, Waldo. What's the next big piece of news coming out of Neolithio? Well, look, the next thing that is going to come up very soon is that we close our deal with CATL. What I mean by closing is that we already signed all the paper. But the Chinese government has to provide the approval which is a standard procedure. This is going to happen imminently. It's a matter of very short time. So with that they will incorporate the board member and we will consolidate we are already working of course. We will consolidate the technical team and that technical team will actually go ahead with producing the definitive feasibility study. There's going to be also information about the size that we will produce because our project is planned to produce 20,000 tons of lithium carbonate per year. But our resource, our reserve can sustain that for 35 years. So we could also increase the size of the project and we will also be updating our resource reserve estimation because there are resources and reserves that were not included in the previous estimation that was published last year. So all that is coming together during the next six months along with the final environmental permit sorry which is construction permit. So the construction permit comes along with the financing from the from the authorities of the province. So all that is going to be happening in the next six months. And again with a very important wind tail tail wind you say. Because the lithium prices are increasing significantly and remember the last time lithium prices increases it went into a frenzy of lithium and right now we are in the front runner into this race with a very strong financial partner with a pre-feasibility finish that proved that is the best project in the world for development and then the final feasibility coming along with our financial partner. So we are going to be the next new lithium producers there is no questions about that. If you were to be producing lithium in 2022 and prices do not go up will you be profitable? Hang on, rephrase the question profits is accounting with G&A and allocations will you be cash flow positive? Yes, okay. Let's put it like that and I will be selling today at the great $10,000 at home. So I am extremely profitable today as a matter of fact I can even play the game shall I be too much to lower prices and send the others to market actually. The price that SQM is producing in neighboring Chile they sell in Europe their product somewhere around $9,500 Oh, for them they don't publish but they are quoted they are quoted to be by again analysts around $3,200 so similar to ours You will be comparable to today's lowest cost producer is what I am saying or even better. They are today's lowest cost volume producer of lithium you are saying you will be at least that good maybe better. Exactly that's exactly what I am saying and by the way we have less taxes than they have they have a very severe taxation in Chile and we have a much easier taxation in Argentina so from the pure cost we are going to be similar and I am hoping a little bit but it is irrelevant a little bit doesn't matter so it is really rounding error but from taxation it is a significant difference it is much cheaper in Argentina Alright guys, final thoughts we have been doing this for about 40 minutes I have learned a lot and it has been fun I haven't had to wear my mask I picked up a mask that reads it is going to be okay and it is going to be okay someday we will all be in the same room Of course, we have not done speaking extemporaneously for an hour and a quarter, 10 miles from here so the air in my area is quite warm Well gentlemen it has been great speaking to both of you I did learn a lot I do think from my perspective that Neolithicum is undervalued in the market and it is a story that needs to be told loudly and broadly so Waldo, congratulations this is just the latest in a long string of achievements in the mining world I look forward to you getting thumped into the mining hall of fame someday Thank you Jack I really appreciate this opportunity to get to people visit our website Neolithicum.ca there is a lot more information there we are in all the media too we want to see how you are progressing Absolutely I will be here Thank you very much