Zinc, Lithium and Uranium

Rejuvenating one mining camp, and establishing a new industry for Peru in another

Lithium and Uranium:

A new player enters Peru

On May 11th 2021, American Lithium (TSXV: LI) finalized a deal to acquire Plateau Energy Metals and its Peruvian assets – the Falchani lithium project and Macusani uranium project. Plateau had been hit with a double whammy in recent years, as a downturn in the lithium market coincided with legal issues relating to a number of its concessions. However, the acquisition promises to breathe new life into two projects that have the potential to diversify Peru’s mining industry into critical minerals required for the transition to a low-carbon economy. “With better access to capital, we believe these assets can move quickly through the development phase and create significant value for all stakeholders,” stated Simon Clarke, CEO of American Lithium.

Indeed, Falchani and Macusani will now have far better access to capital, considering American Lithium was the best performing mining stock on the TSXV in 2020, moving from under C$0.20 in early April 2020 to over C$4.00 in February 2021 to top the annual TSX Venture 50 list.

The company intends to replicate the success it has had at its TLC claystone deposit in Nevada, and to do this they have maintained the core of Plateau’s Peru-based team, including Laurence Stefan as president, COO and director, as well as over 15 people on the ground, including general manager Ulises Solis.

Elaborating on the company’s plans for Falchani, Clarke explained that a drilling campaign would take place to further expand the existing resource and to upgrade resource classification (moving inferred resources to measured and indicated). “Recent work has also identified at least two other key target areas to the west of the Falchani deposit that have the potential to be similar in size and scope to Falchani. We will be launching exploration drilling in these areas over the next several weeks,” he said, before commenting that work done in 2021 will help American Lithium position the project to move into the feasibility process in the first half of 2022.

Clarke also underlined that the company sees a lot of potential at Macusani, suggesting that the amount of third party interest they have received in the asset in the wake of the transaction is validation of its value. “Uranium is being more and more accepted as a key energy metal and Macusani is the fifth largest undeveloped uranium project on the planet,” he remarked, noting that there is scope to add additional resources through further expansion drilling at Macusani, which the company plans to do near-term.

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Clarke clarified that American Lithium was committed to utilizing Peruvian expertise to develop the projects, which he believes will help put Peru on the map in the area of energy metals and clean energy. Although the relationship between Peruvian politics and mining has been turbulent, the potential to create jobs and establish a previously untapped source of resources key to a green economy is a tantalizing prospect.

Zinc: The Cerro de Pasco situation

Situated 4,300 m above sea level in the Andes in central Peru, the city of Cerro de Pasco is built around a zinc, lead and silver mine, most recently operated by Volcan. Although mining had brought employment to the city for years, a legacy of mismanaged assets stemming back to when the military government nationalized the mine resulted in high levels of lead pollution contaminating the surrounding environment. Time Magazine listed Cerro de Pasco as one of the ten most polluted places on earth as health issues began to escalate for residents and wildlife.

In 2018, Cerro de Pasco Resources (CSE: CDPR) went public with the purpose of treating and reprocessing all the dumps, tailings, mining waste and material resources in the Cerro de Pasco region, and in November 2019, announced it would acquire Volcan’s Oxidos de Pasco asset for US$30 million. However, after several extensions pushed back the deal, CDPR decided not to extend the agreement at the end of October 2020.

Steven Zadka, CDPR’s executive chairman, revealed that the company is now looking at establishing a partnership instead. “There are legacy issues that belong to Volcan and Glencore that must be adequately understood and ring-fenced prior to any agreement,” he said, adding: “We continue to believe it would be advantageous to Cerro de Pasco for CDPR to reintegrate and operate the whole mine, as the asset would benefit from a new management team looking at the operation holistically.”

Expanding on the complexities of the situation, Zadka suggested that the economic, environmental and health issues need to be addressed together as one package instead of working piece by piece, as has been happening over the past 20 years. “All the water systems are connected, for instance, so the open-pit is hydrologically connected with the stockpile and the tailings.”

CDPR brought in Bernhard Dold as CTO in 2020, a leading expert on mine closure and acid mine drainage. “He has studied Cerro de Pasco and over 30 scientific publications on the region, and the consensus is that the health problems will not be fully resolved unless you reprocess waste and move people out of the most affected areas,” related Zadka, observing that a lot of people in Cerro de Pasco want to move, but there is currently no economic way for them to do so.

The company is now looking at partnerships that involve the government and external funds such as the multilateral agencies, and has not ruled out the possibility of purchasing further assets in Peru, as they have an operational team ready to work.

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Zadka lamented the amount of governmental changes in Peru, emphasizing the need for Peru to recover ground lost against peer mining countries, focusing on productivity and speed of regulatory processes to help bring prosperity to communities such as Cerro de Pasco. “There is an opportunity now to improve the health situation and economics in the region, but action must be taken, and a qualified neutral entity needs to take the lead,” he concluded.

Image courtesy of Ashim D’Silva on Unsplash