Grandich's Blog

A new company that I am quite interested in is Rodinia Minerals Inc. (TSX.V: RM).  Rodinia is a Canadian mineral exploration company with a primary focus on lithium exploration and development in North and South America.  Demand for lithium carbonate is anticipated to rise dramatically as the shift to lithium products, such as lithium-ion batteries, glass ceramics, greases and pharmaceuticals, occurs.   I believe Rodinia is very well positioned to take advantage of this increase in demand and I would like to share three main reasons why I like this company so much: 

1. This junior lithium company has a strategy that appears to set them apart from the others – focus on becoming a low-cost producer of lithium now; don’t rely on the price of lithium carbonate to become economic.  The company would then only have further upside if and when the lithium carbonate price takes off. 
2. Location, location, location!  The company’s flagship property, Clayton Valley, is located in the geopolitically safe and mining friendly Nevada jurisdiction.  It is in close proximity to U.S. auto plants and other lithium-ion battery developers.  Oh, and did I mention that the Clayton Valley property surrounds the only producing lithium operation in North America?
3. Finally, the company’s management team is ripe with mining, lithium, and capital markets experience, and is supported by Forbes & Manhattan Inc., a leading resource-focused merchant bank with a successful track record with exploration companies and in building assets.

Rodinia’s management team, not unlike many other lithium focused teams, believes that the lithium bonanza is only just starting as the forecasted demand for lithium far outweighs the known availability.  And, with lithium-ion batteries becoming increasingly important in the automobile industry’s plans to reduce the use of fossil fuels, the green-car revolution could make lithium one of the planet’s most strategic commodities.  But management isn’t going to sit around and wait for the auto industry to drive up the price of lithium – they will focus on becoming a reliable, low-cost producer for the current market, and will enjoy the additional upside if and when it comes.

 Unlike most of its competitors, Rodinia is primarily focused on lithium-brine, which is a water saturated product.  Rather than get into all the technical stuff, I’ll sum up why this is important.  There are two proven ways to obtain lithium carbonate, (which is the product that goes into the batteries and is anticipated to skyrocket in price as more and more hybrid vehicles hit the road), hard rock and lithium brine.  The majority of junior lithium companies focus on hard rock mining, which employs the traditional methods of dig, crush and blast.  From there the rocks must be upgraded to lithium carbonate.  Lithium in brines, however, is already in lithium carbonate form.  The brines are pumped out of the earth, not mined, and the lithium carbonate is precipitated out (evaporated) using nature.  It is always far more affordable to pump a liquid out of the ground and use nature than it is to dig, crush and blast hard rocks.  As evidence, the 3 largest current producers of lithium carbonate globally, all diversified chemicals companies, focus exclusively on lithium-brine production. In fact, upgrading hard-rock lithium minerals to lithium carbonate has not yet been proven to be economic outside of China, where producers have access to cheap power, labor and less stringent environmental regulations.

(Lithium-brine evaporation pond)

Rodinia’s flagship property is Clayton Valley, located in Nevada, USA.  The project has a significant footprint including 50,440 acres surrounding the only lithium producing operation in North America – the Chemetall Foote, Silver Peak mine.

(Rodinia’s property boundary outlined in red.  Chemetall Foote operation in black hash marks.)

Rodinia previously completed a 3-hole drill program on the property, and is about to commence an additional drill program to firm up their understanding of the geology and lead to a resource calculation.  Additional geophysical studies are also being conducted.  With the results from the drill and geophysics program, management expects to be able to announce a resource estimate and file a NI 43-101 compliant resource report towards the end of Q1, beginning of Q2, 2010.  Once the resource estimate is complete, the company should be able to show why they are one of the leaders in this field!

Additional Upside from Growing Project Pipeline

Rodinia’s second lithium-brine project is the Salar de Salinas Grandes, located in Argentina.  Previously completed studies on the brine chemistry at Salinas Grandes not only showed lithium in excess of 400 parts per million with a reported magnesium-to-lithium ration of 3.75 but it also revealed brines starting at depths between 0.2 meters and 3.0 meters from surface.  This project represents a great opportunity to mine quality brines at low costs – with the brines so close to the surface, this project is anticipated to come on line quickly behind Clayton Valley and can represent very economic production.

Rodinia is also actively discussing other acquisitions in South America.  While a timeline for acquisition announcements is not available, management’s experience and the support from Forbes & Manhattan, suggests that the company is very likely to remain active in the acquisition game.

While the lithium brine projects appear to give Rodinia a huge advantage in the current market, I think it is worthwhile to mention the company’s hard rock project in Manitoba, Canada.  The Strider Project has a historical resource of 4,305,000 tonnes grading 1.3% Li₂O and if and when the price of lithium rises sharply, as is anticipated, this project can attract significant interest. Strider looks to have all the same advantages as the better-promoted hard-rock lithium projects in Quebec, Canada. The project can benefit from low-cost power, existing infrastructure, highly supportive provincial government and access to a mining workforce.

Qualified and Experienced Leadership Team

In order to execute on the lithium strategy, Rodinia has assembled a new management team ready to take this company to the next level. This new team combines the qualifications and experience of mining exploration, development and production, with the expertise of the capital markets, including investment banking and project finance.  David Stein, the new President and CEO, started his career in mining exploration before moving into the investment banking world where he spent the last nine years as a mining equities research analyst and recently a member of the executive committee at Cormark Securities Inc. and its predecessor Sprott Securities Inc.  Mr. Stein is no stranger to exploration plays and has contacts at many of the top mining focused institutional accounts globally. 

A key member of Mr. Stein’s new team is William Randall, the Vice President Exploration.  Mr. Randall is a skilled and qualified professional geologist with extensive experience in management of mineral exploration and production, including previous experience with lithium projects in South America.  Mr. Stein and Mr. Randall’s knowledge, contacts and experience in the exploration industry, especially with respect to lithium, are an invaluable asset to Rodinia, and one of the reasons, I believe, that this company is truly one to watch as they have great potential at their door.

Forbes & Manhattan Inc., a private merchant bank operating in Canada, the U.S. and Western Europe, fully supports the company as evidenced by the new Executive Chairman of Rodinia, Stan Bharti, who is the President and CEO of Forbes.  Mr. Bharti and his team comprise approximately 100 professionals trained in mining, geology, engineering, finance and the like.  Over the past several years, the Forbes team has raised more than $3 billion and has been instrumental in the successes of mining companies Dessert Sun Mining, Consolidated Thompson, and First Uranium. 

Bottom Line

Rodinia Minerals is a company in all the right geographical locations, with a foothold in a commodity that could prove to be the next strategic metal – lithium.  The company’s game plan of putting together a pipline of high quality, low-cost lithium brine projects, all with a high potential for production, show that they are not only ready, but capable, of taking full advantage of the current lithium market.  The quality of Rodinia’s projects, teamed up with the added value of an experienced management team and support from a successful resource focused merchant bank, gives this company a superb chance for great success, especially considering the looming lithium bonanza!