Analyst: Timing Perfect for Nevada Lithium Project

Source: Streetwise Reports   12/07/2022

Rover Metals Corp. is making the jump from gold to lithium and critical elements. One analyst said the timing is perfect.

The timing of Rover Metals Corp. (ROVR:TSX.V; ROVMF:OTCQB; 4X0:FSE) move from gold to lithium and critical elements is perfect, an analyst said, as other projects near its new Let’s Go Lithium project in Nevada are “ripe for consolidation.”

Let’s Go Lithium is estimated to hold lithium-bearing clay mineralization similar to other advanced-stage deposits held in the state by Cypress Development Corp. (CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE), American Lithium Corp. (LIACF:US-OTC; LI:TSX.V; 5LA1:FSE), and Noram Lithium Corp. (NRM:TSX.V).

Economic studies on Cypress’ and Noram’s projects have returned “robust economics,” according to Sid Rajeev, head of research for Fundamental Research Corp.

“We believe miners/battery manufacturers are actively monitoring juniors for M&A, as they are constantly seeking long-term stable sources of lithium for EV (electric vehicle) batteries,” Rajeev wrote in a note on December 1, 2022.

Rover Chief Executive Officer and Director Judson Culter said the company was open to such transactions.

“The battery producers want mines being built ASAP,” Culter told Streetwise Reports. “The bigger the resource companies are, the easier it will be for them to capitalize and build refineries.”

The World Needs More Lithium

According to Benchmark Mineral Intelligence, the deficit between lithium demand and production and highly probable and probable lithium projects will be over 3.5 million tonnes (Mt) by 2040. The world needs lithium and other critical elements like copper to help fuel the move to green energy. Lithium — a soft, silvery metal with highly reactive and flammable properties — is a major component of EV batteries. It’s also used to strengthen alloys, as a high-temperature lubricant, and as a drug to treat bipolar disorder.

One out of five vehicles sold worldwide could be an EV in less than two years, and Ford and General Motors have set a goal of achieving 40–50% of their sales from EVs in the U.S. by 2030.

To qualify for tax credits under new U.S. laws, a significant percentage of batteries and minerals in batteries must come from the U.S. or Canada, a regional trade-treaty country.

China only has less than a quarter of the world’s lithium resources but controlled about two-thirds of the world’s lithium processing and refining capacity in 2021, Rystad Energy said.

The Catalyst: Lithium

Rover has signed a definitive agreement to option a 100% ownership interest in the Let’s Go Lithium project. It’s located in Nevada’s southwest lithium jurisdiction near Albemarle Corp.’s (ALB:NYSE) Silver Peak mine, which is the only lithium-producing mine in North America.

The company plans to convert the project into an NI 43-101-compliant resource within two years and plans to conduct a drill program. Rajeev said that “delineating a lithium resource is a faster and cheaper process vs. mainstream metals such as gold [and] copper.”

Unlike other metals, lithium is deposited in “a vast amount close to the surface,” Culter said. “In gold and copper, you typically have to chase shoots or veins of the high-grade (ore), which are narrow (and go) to great depths. These are very tricky to follow below the surface.”

The climate and energy package recently passed in the United States is bringing new urgency to the production of electric vehicle (EV) metals and minerals like lithium. Rover officials said they want to be positioned to take advantage of that.

Rover last summer announced it had also closed on a deal involving the Indian Mountain Lake copper and zinc project in the Northwest Territories. It had verified high-grade lithium surface samples at Let’s Go Lithium of 780 parts per million lithium (ppm Li), 910 ppm Li, and 710 ppm Li.

Further analysis of samples using handheld laser-induced breakdown spectroscopy found results of 1,218 ppm Li, 778 ppm Li, and 724 ppm Li.

Culter said the company is readying a US$200,000 reverse-circulation drill program to follow up on those high-grade samples. That exploration money will also be the company’s required earn-in to a 100% ownership of the project.

Rajeev said Fundamental was maintaining its Buy rating on Rover.

The later-stage greenfields lithium project includes hydro power lines, direct road access, and a nearby town with a readily available workforce, the company said.

There have been four historical water wells drilled on the project that logged the claystone orebody as being close to surface, with an average thickness of over 300 feet across the approximate 6,000 acres of the property. Because of that, the project is district-scale in nature, Culter said.

Cypress is producing a feasibility study looking at the commercial viability of producing lithium carbonate for EV batteries from Nevada claystone like at Let’s Go Lithium.

Albemarle Corp.’s Silver Peak mine in Nevada is the only lithium-producing mine in North America, but it uses a water-intensive process to get at lithium-bearing brine deposits in an area that’s seeing record droughts. The claystone method uses acids to process lithium-bearing clay.

Rajeev said Fundamental was maintaining its Buy rating on Rover but adjusting its fair value estimate for its share price from CA$1.14 down to CA$0.56. It was CA$0.10 per share on Tuesday afternoon.

Ownership and Share Structure

Culter and family members own about 2 million shares of Rover, and directors Keith Minty and Louis Covello own about 360,000 and about 50,000, respectively. There are no institutional shareholders, and the rest are retail.

Rover’s market cap is CA$2.63 million, and it has 26.3 million shares outstanding, 24.9 million of them free-floating. It trades in a 52-week range of CA$0.39 and CA$0.06.

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( Companies Mentioned: ALB:NYSE, LIACF:US-OTC; LI:TSX.V; 5LA1:FSE, CYP:TSX.V; CYDVF:OTCQB; C1Z1:FSE, NRM:TSX.V, ROVR:TSX.V; ROVMF:OTCQB; 4X0:FSE, )