Lithium, potash, boron

The Olaroz Lithium Project consists of 7,600 hectares of tenements (cateo's) over a salar (salt lake) known to contain high values of lithium in brine. The project is located in the Jujuy Province in the elevated and arid Puna region in the north - western part of the country and is well served by infrastructure with access by sealed road and nearby high voltage electricity, gas pipelines and rail.

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Prospectivity and Exploration Target

Unlike most exploration targets, the mineral value occurs in solution. Lithium is concentrated in the salt brines and exploitation requires a detailed understanding of brine chemistry and porosity/permeability over the deposit. This is obtained by drilling, sampling of the brines and pumping tests together with associated processing test work. If viable, the deposit would be mined by pumping out the dissolved lithium from a depth of up to 60 metres for processing on site into final or intermediate products. The effective porosity has been assumed to be 8-10% at this stage.

Indicative lithium grades based on sampling by government agencies is relatively high at 0.09% and this compares favourably with other possible brine sources of lithium.

The Rincon Salar, currently being developed by Admiralty Resources Ltd, is located nearby. Admiralty Resources Ltd have recently reported reserves of 1,400,000 tonnes of lithium and 55,000,000 tonnes of potash (allowing for recovery figures of 75% and 70% respectively) with a reported value based on the 2006 lithium carbonate price of US$44,700,000,000.

Olaroz is in the same vicinity as Rincon and has a similar geological model. Although smaller in area, it has higher indicative lithium grades. The Company considers Olaroz has significant potential and is a very large exploration target. Minnelex Pty Ltd, the Company's independent geological consultant suggests the exploration target is potentially in excess of 325,000 tonnes of contained lithium (>1,700,000 tonnes of lithium carbonate) based on 10% porosity. It is geologically reasonable to assume that the Rincon geological model will have similarities at Olaroz. If Olaroz has as high an effective porosity as Rincon, Minnelex considers the exploration target could be 3 to 4 times the size. There is also potential for other products such as potash and borates.

The Lithium Market

Lithium is sold as brines, compounds or mineral concentrates. For many years, the majority of lithium compounds and minerals were used in the production of ceramics, glass and primary aluminium production. More recently growth in lithium battery use has resulted in batteries gaining market share and perhaps soon becoming the leading end use of lithium. The main markets for lithium products produced by Sociedad Quimica Minera de Chile (SQM), the worlds largest producer, are ceramics and glass (21%), batteries (20%), lubricating greases (17%), pharmaceuticals and polymers (9%), air conditioning (7%), primary aluminium production (5%), and other (20%).

The lithium market has been growing at 4-5% per annum and this is forecast to continue. Current demand of approximately 80,000 tonnes per annum of lithium carbonate equivalent is forecast to rise to nearly 100,000 tonnes per annum in 2010. Growth in the United States demand for lithium has been greater, with a 79% increase since 2003. This growth has been caused by increased consumption in all end uses except aluminium production and in particular in the area of battery production.

With increased demand, prices have also been rising. Based on US customs declarations, lithium carbonate prices have increased by 59% from 2005 to 2006. Prices for lithium have reportedly increased from US$2,750 to US$5,500/t in 2006 due to increased demand for batteries. The journal Industrial Minerals reported lithium carbonate prices of US$6,000/t in 2006.

At current growth rates in the demand for lithium, a new project the size of Olaroz will be needed every four years.