This is the intro to a recent teaser pitch from the Angel Publishing folks…

“A Brand-New Extraction Technology Promises to Unlock 4.3 Million Tons of Lithium From an Oil Field in Northwest Alberta…

“And Turn This Calgary-Based Tech Startup Into an Energy Giant Inside of 24 Months.”

So you probably know, as a discerning Stock Gumshoe reader, that the word “promises” is carrying a lot of weight in that sentence. And that this isn’t necessarily like the hardcore “pinky promise” you make to your friends and family… maybe more like the promise of “satisfaction guaranteed!” from that used car dealership operating out of a tent on the vacant lot down the street.

But we’ll try to start out with an open mind, I promise. The major push here is for a new source of lithium, since everyone keeps telling us that we need more and more lithium for all these EV batteries that the world is demanding.

That has been a general theme for years, though it doesn’t mean that lithium is always seeing increasing demand and rising prices — it’s not necessarily in short supply in the ground, it’s just that mining or evaporation projects take money and time to build out, and sometimes the production capacity still exceeds the end market demand. In fact, over the past year, lithium prices have fallen by about 50%.

So what’s the promise from this teaser pitch? It’s about a new source for lithium, which has mostly been either mined from rock in a pretty traditional way (largely in Australia these days) or pumped out of and evaporated from lithium brines (mostly in the Andes mountains in South America)… here’s a bit of the ad, which is trying to sell us on Alex Koyfman’s Microcap Insider ($1,999 first year, 90-day refund period, renews at ?):

“One of the biggest lithium resources on the planet — big enough to supply global demand for three years and worth an estimated $322 billion — has been sitting around for decades, in plain view, with nobody able to lay a finger on it….

“For 40 years, a privately held energy company has been pumping its lifeblood — oil — on a massive property in northwest Alberta, Canada.

“In that time this company has pumped hundreds of millions of barrels of oil and, in the process, filled hundreds of wastewater ponds with brine…

“… it just might be the most lithium-rich resource known to man today.”

And apparently a “tech company” bought up the rights to that oil field and the brine, and wants to produce lithium from it for the battery industry.

“A small technology company based in Calgary, Alberta, has perfected a way to extract high-grade lithium directly from a source that, up until now, was the very antithesis of the cleantech movement.

“The result: ‘Black Lithium’….

“With their tech proven earlier this year, management at this development-stage company moved quickly to purchase the mineral rights to the oil company’s land as well as the surrounding areas… a total of 430,000 acres — or about 671 square miles — of Canadian tundra.”

OK, so there’s some kind of little Canadian tech company, and they’ve developed a technology that will let them separate out lithium from the leftover brine pools in this part of Canada. I have no idea whether that’s a unique resource, or there’s lithium brine in other oil field wastewater pools, too.

How ready for prime time might it be? Well, the ad says both that their tech was “proven this year” and that there are “just a few technical milestones standing between this tech company and full-scale production,” so I guess that’s still up for interpretation.

Other good news about this project, according to the ad? They say that it’s much faster than producing lithium via conventional means (I guess they probably mean the sun-driven evaporation that companies like Albemarle and SQM use in the Andes — production from those big evaporation pools usually takes 18 months or so — this process apparently takes only 1-2 months), and they also indicate that it’s very efficient (97%). They’re supposed to be preparing for commercial production now.

What does that mean in dollar terms? The pitch says that the company is worth “barely $20 million but could see a “100-220X gain” in market cap from full-scale production. Which for them means going from 20 cents to “as high as $44” in the next two years.

Koyfman gets into some more detail on what the real production might be like…

“Right now, this 671-square-mile property is home to 1,300 wells, whose brine ponds contain an estimated 99 billion barrels of lithium-bearing liquid at a concentration of 90–120 mg per liter — that comes out to an average of 19 grams, or about two-thirds of an ounce of lithium per barrel….

“When all the numbers are crunched and all factors are considered, this company estimates that it can employ its proprietary technology to extract approximately 20,000 tons of lithium per year at a cost of around $3,000 per ton.

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“At today’s lithium prices, that boils down to $1.44 billion of net profit per year, every year.”

That’s an absurdly high number for a “$20 million company”, of course, though it’s lower than the “$322 billion” number he uses in the headline tease — apparently that even crazier number is just the estimate of the total size of their lithium resource, multiplied by the current market price of lithium… though calculations might be different now. Looks to me like lithium prices are around $30,000 per tonne right now, so I’d calculate 4.3 million tons of lithium carbonate as being worth “only” about $129 billion, not $322 billion, but I guess we don’t have to pick that nit when we’re dealing with a tiny little company.

And Koyfman thinks that this company will be valued at 3X those net profits at some point, which would lead to a market cap between $2.2 and $4.5 billion.

Again, all ludicrous numbers if we’re talking about a company with a market cap of $20 million which probably hasn’t actually sold anything yet. And he also points out that there is one somewhat comparable company in the US, with a demonstration plant in place, and that their project, with a property that’s about a third the size of his “secret” stock, is valued at $750 million in the stock market today, so that’s one hopeful catalyst (that’s Standard Lithium (SLI), which has dipped down to about $580 million more recently).

That’s still pretty close to the ballpark for Standard Lithium, by the way — they currently have a market cap closer to $500 million, but it was around $750 million about a month ago, and has been in a range from roughly $500 million to a billion dollars over the past year or so.

Which means the timing must be pretty close to when Alex Koyfman put this spiel together, though the ad is undated (we started seeing it for the first time a few weeks ago)… but the odd thing is that the most obvious match for the “big picture” is nowhere near 20 cents, much of what he’s talking about is a great match for E3 Lithium (ETL.V, EEMMF), but that’s NOT the company he’s teasing… instead, sez the Thinkolator, we’re being teased about a pilot project that’s quite a bit north of E3’s project, the focus of the tease is actually the Rainbow Lake lithium project, close to 1,000km north of E3 Lithium’s project (which is down between Edmonton and Calgary).

And who owns the Rainbow Lake project? That’s Volt Lithium (VLT.V in Canada, VLTLF OTC in the US), which also, coincidentally enough, claims a resource of 4.3 million tons of lithium in the NI 43-101 resource estimate they released in May. And whaddya know, the share price of Volt Lithium is about 20 cents (in US$, at least).

So what’s going on with Volt Lithium now? Well, they are claiming that their successful pilot project gives them a path to commercial production as soon as the second half of 2024, which is far faster than the also ambitious E3 is hoping for (they are looking to begin permitting and financing next year and hope for commercial production in 2026)… so either Volt’s project is a lot easier to permit or build, or there’s some gulf of optimism that they’ve vaulted faster than their larger competitors.

This is how they summarize their plan…

“Our strategy is to generate value for shareholders by leveraging management’s hydrocarbon experience and existing infrastructure to extract lithium deposits from existing wells, thereby reducing capital costs, lowering risks and supporting the world’s clean energy transition.”

Which I guess must be the reason for the speed, if they’re using existing wells instead of drilling new wells into the brine reservoirs like E3 is planning to do (no, they’re not really using “brine ponds” — that brine water is not generally kept at the surface after oil is produced and the water is separated, it’s reinjected into the earth). This is the “milestones” image they use on their website, which is a further match for the tease (Koyfman lifted the image for his presentation, too):

Which means that they’re in the “analyze pilot results” stage of the project right now, and are planning to do their preliminary economic assessment after that. If this were a mining or oil production project, that would still put them years away, because they’d have to raise the money and do the mine construction and raise a ton of capital for that work, but apparently Volt Lithium believes they can scale up their pilot plant much more quickly and start selling lithium hydroxide in a year or so.

I am absolutely not an expert on this stuff, and maybe their strategy or design will be faster than the other DLE brine lithium production hopefuls in North America, but my first assumption with any kind of junior resource company like this is that they’re being wildly optimistic. Standard Lithium’s plant near the Arkansas/Louisiana border, by comparison, published a preliminary economic estimate four years ago, is just about to publish a financial feasibility study, and it looks like they plan to raise capital and begin construction in 2025 and maybe start production in 2027, which seems more rational for a fairly large commercial lithium production project.

It is an interesting idea — instead of buying up the rights to a resource (wastewater and salty aquifers) and trying to produce the lithium on their own, which is what other companies seem to be doing, my understanding is that they’re just trying to tie in to existing production by their partner, Cabot Energy, and essentially take the brine that they were planning to reinject into the reservoir and just add a step, putting it through their “brine treatment” and then “proprietary DLE Li extraction technology” to extract the lithium and then reinject the brine into whatever underground formation Cabot was going to use anyway for its waste water. But that’s also more complex and means they’d have to be part of an oil company’s production planning instead of just using some of the infrastructure that they no longer need — I would imagine that they’ll end up having to pump up the brine and produce it themselves to turn this into anything larger, but that’s just a guess on my part (again, I’m not an expert).

And to be clear, that’s not the Cabot Oil & Gas company you might be familiar with — that firm merged with Cimarex and is now called Coterra Energy (CTRA), it’s got nothing to do with this deal or project. The company Volt Lithium has partnered with is a far smaller operation owned by a UK company, which I think went bankrupt a few years ago and is now owned by High Power Petroleum, which is private and doesn’t say much about its plans (it is part of the I-Pulse family of companies controlled by Robert Friedland, who usually attracts attention among natural resources investors). I have not seen the specifics of the Cabot Energy/Volt Lithium partnership deal, it’s usually described as a way to get access to infrastructure at low cost for Volt, but if there are public details they’re hiding in the filings somewhere — there does not seem to be any active partnership being developed at this point, so I would guess that the “permanent pilot” project they’re planning would use existing wells but otherwise be independent of any oil production Cabot Energy is working on at the moment.

The story really started to evolve back in May, as they were changing their name and issuing their press release about their successful pilot project results and their “unprecedented breakthrough” (in a simulated environment). That’s when they promised to work on the preliminary economic analysis, and begin plans to build the “permanent pilot plant” at Rainbow Lake which would be used to optimize their process and prove it works in the real world.

This is a very promotional company, which is not terribly uncommon for Vancouver’s junior resource companies — they have ginned up a lot of paid-for coverage at places like StreetWise to get the word out, but they have also gotten a little coverage otherwise in their short life (Volt Lithium was bought by Allied Copper less than a year ago, effectively a reverse merger since the copper assets were then canceled or put up for sale), here’s a little piece of a CIM Magazine story that touches on several of the lithium brine projects that are envisioned or underway in Western Canada:

“‘I think people need to understand it takes a long time to build a mine,’ said Matthew Dreis, a research and development senior analyst with Prairie Lithium. ‘With the lithium industry, to build a mine and develop the minerals, it’s an average time of about 10 years. But we’re talking about a demand for lithium that will increase around 500 per cent by 2030. So we have to provide a lot of production in the next decade extremely fast.’

“Extracting lithium from brine in western Canada could come in just a couple of years. Alex Wylie, founder of Volt Lithium and now president of Allied Copper, which acquired Volt in December 2022, believes that lithium-brine mining can be modelled after the conventional oil industry. His company is exploring in the Rainbow Lake oil fields in Alberta and developing a lithium extraction technology that can be added as a second step to current oil extraction.

“‘As an oil and gas person, the way I look at it is I need a single well… If I can get a single well that produces oil and I know there’s a reservoir below, I can expand with more wells, but I have to have the oil first. I want to get the oil to the surface, process it and show it works. Well, we’re doing the same thing with lithium,’ he said.”

Will it work? I don’t know. Maybe. Apparently there are some huge salt water aquifers in Western Canada that could create a substantial lithium extraction industry if these technologies end up being proven out as commercially viable. The key for Volt, at least in terms of getting started with a little production without requiring a massive capital outlay, seems to be the partnership with Cabot Energy, this is from Volt’s website:

“Volt intends to ‘highgrade’ the asset base, initially targeting regions with concentrations between 101 and 121 mg/L to optimize returns & cash flow

“Volt is uniquely able to access existing infrastructure due to agreements with Cabot Energy Inc., which reduces the CAPEX required to access water volumes for a commercial lithium operation.

• $100MM invested to date in facilities, wells and pipelines.
• 3 multi-well batteries with significant water-handling capacity from existing producing oil wells.
• Rail road access for transportation upon commercialization.”

As for the “proprietary lithium extraction technology” and what it might cost? I didn’t see anything useful about that — they did say that their pilot project found that the cost should be under C$4,000/tonne for the higher-concentration lithium reservoirs (they simulated 121 mg/l, which is the highest concentration they found in the Musket aquifer — averages for the three aquifers tested ranged from 40-92mg/l), using their IES-300 technology to recover up to 90% of the lithium from these oilfield brines, and that they think the cost can come down as they get more efficient with using the chemicals and reagents required for the processing.

So the near-term financials, at least as the company apparently envisions them and has publicly talked about them, in the absence of a formal Preliminary Economic Analysis (PEA) or a Feasibility Study, sound impressive. Which makes sense, I suppose, they wouldn’t be talking them up if they weren’t impressive. This is a quote from one of the articles that Volt apparently sponsored at StreetWise:

“According to Michael Ballinger of GGM Advisory Inc., energy companies are on the rise. The analyst specifically highlighted Volt Lithium as his top holding in the non-PM space and an opportunity that investors should look out for.

“He commented that ‘the company expects to produce 1,000 tons of lithium hydroxide by the end of June 2025, which is CA$42 million in revenue against < CA$3.5 million in costs, with CA$38.5 million falling out of the equation as pre-tax earnings.'"

Assuming that the commercialization of the project does go that well, which seems absurdly lucrative and hypothetical, they would presumably need to raise a bunch more money to get to that point. They announced a capital raise of about C$6.8 million in early August, and that will lead to issuing at least 26 million shares (plus 13 million 2-year warrants at 33 cents), so there should be about 125 million shares outstanding now, and presumably more to come as they begin to actually do some work (how much? We can’t even really guess at the capital required, because they haven’t made any real economic analysis available to investors).

What’s the technology in use? And is it ready for commercial production? I have no idea — it’s clearly not “optimized” yet, but they did test the separation technology in their pilot project (in a lab, presumably). They have also talked recently about R&D partnerships with a couple of different University of Alberta labs to “advance” their efforts to “achieve commercial and economic extraction of lithium from produced water,” which makes it sound less like a commercial project and more like an ongoing R&D project, but that could just be my ignorance speaking. Back in January, the technology they were talking up was called IES-200, but now they’ve updated that to IES-300. Whatever that means.

There are a lot of direct lithium extraction (DLE) projects apparently underway now, including in the large salar production areas, so this is not necessarily a new thing — it’s not news to the world that it would be nice to be able to extract lithium from brine quickly instead of waiting for the sun to evaporate the water — but what Volt’s specific “proprietary” version of this extraction might be, and whether it’s any different than other technologies being tested, I don’t really know (there’s a a nice publication from Goldman Sachs that summarizes a lot of these DLE projects around the world, including a couple of the Canadian ones, though Volt wasn’t specifically mentioned).

From my quick look at this Volt Lithium project, I’d be worried that the financial details are very sketchy and the disclosures are quite limited, including any details about their deal with Cabot Energy. The good news seems to be that they’re trying to move fast to get started, the bad news is that they’ll presumably need to continually raise cash to try to scale up their pilot project and expand beyond the pilot, and we have yet to see a real economic assessment of what that would look like. The lithium seems to be there, and companies are getting more interested in trying to find new ways to produce lithium from brines that are not in the high desert areas where salar evaporation pools are effective, but they’re certainly not going to go instantly from developing a separation technique to producing thousands of tonnes of lithium for battery producers — it will take a lot of time and money to leap forward like that.

The stock might become a speculative darling, one never knows, and there are a slew of other large and small lithium brine companies working on other DLE projects around the world (including E3 Lithium (ETL.V, EEMMF) and Standard Lithium (SLI) in North America, among others — both of those are also highly speculative but much larger than Volt Lithium), but if you’re thinking about it as a real economic project, not as a bet that other investors will think it looks shiny and exciting in a few months, you’ve probably got plenty of time to be patient, watch them raise more money and complete an economic analysis, and see how their technology and their strategy work in their planned real-world pilot plant at Rainbow Lake. Interesting idea, but the combination of limited information about their partnerships and their technology and their economic plan, along with hugely ambitious claims of speedy commercialization, makes me cautious.

That’s just what I think, though — with your money, it’s your call to make. Think Volt Lithium is an exciting opportunity in potential development of Western Canada’s lithium-rich aquifers? Think larger or more established DLE projects are more interesting as battery makers plan to consume dramatically more lithium in the future? Worried that it’s all pretty sketchy while lithium prices are falling? Let us know with a comment below.