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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 Rincon or Olaroz will be needed every four years.
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