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Kaiser Watch February 3, 2023: The Eye of the Hurricane

Posted: Feb 3, 2023JK: Kaiser Watch February 3, 2023 with Jim Goddard and John Kaiser
Published: Feb 3, 2023KRO: Kaiser Watch February 3, 2023: The Eye of the Hurricane
Kaiser Watch is a weekly 15-30 minute audio show produced by KaiserResearch.com with Jim Goddard and John Kaiser discussing the junior resource sector. The show has three parts: the first is a general topic, the second discusses developments involving the KRO Favorites which as of January 1, 2022 are no longer exclusive to KRO members, and the third is a peek inside the members only KRO Bottom-Fish Workshop. KRO is transitioning into a Do-It-Yourself research platform that covers all Canadian and Australian resource listings and which also features a Bottom-Fish Workshop where John Kaiser highlights juniors with solvable "missing pieces". Companies that graduate from the Workshop may become part of the Annual Favorites collection whose profiles and related commentary are unrestricted for non-members. Visit the KRO Favorites Dashboard for quick access to all the unrestricted Favorites related content. KRO is not sponsored or compensated directly or indirectly by public companies. The business model is based solely on membership fees in the form of a USD $450 Annual Individual Membership that at some point will increase substantially to reflect KRO's shift to a research platform. However, when the change happens active members will be grandfathered to renew indefinitely at the current rate provided they maintain a continuous paid membership. Kaiser Watch is available at Kaiser Research YouTube and as a Podcast downloadable from KaiserResearch.com. Each episode will be made available through the publication of a Kaiser Media Watch blog report which will provide links to specific questions and include supplementary graphics. All episodes will be archived at Kaiser Watch.

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Kaiser Watch February 3, 2023: The Eye of the Hurricane
Jim (0:00:00): What was the Metals Investor Forum in Vancouver like last week?

I was very surprised on Friday January 27 when I showed up at the Metals Investor Forum by the largest attendance I have ever seen since MIF started up in 2015. Joe Mazumdar spoke to a full house and I do recommend watching his presentation Year of the Tiger: Started with a Roar..." because it provides an excellent description of what happened in 2022. Oddly, he didn't mention the word "lithium" once, and "critical minerals" only twice, even though one of his companies, Azimut, had doubled that week after coming out of the closet and confessing that some of its properties in the James Bay region had lithium potential. In fact, Jean-Marc Lulin devoted only one slide and less than a minute to Azimut's lithium potential - he is much more excited about James Bay's nickel potential. His stock managed to go down on Monday while James Bay lithium stocks generally moved higher.

I thought maybe the best ever attendance was due to the Roundup that week, a technical conference where apparently 5,000 delegates participated, and the subsequent retail Vancouver Resource Investment Conference on Jan 29-30 where apparently about 4,500 investors showed up compared to the dismal 2,000 in May 2022. But the MIF turnout on Saturday was just as strong and I also spoke to a full house. I've collected the Youtube links to the presentations and backstage interviews for my group in KRO Blog Comment Feb 2, 2023 which also includes a link to the pdf for my presentation. At the start of my talk I asked the audience for a show of hands from those who thought we were still in a bear market. Only a couple hands went up. So I asked who thought we were in a bull market. Again only a couple hands went up. It was then that I realized we are in the eye of a hurricane transitioning from a horrible decade long bear market into a bull market that may rage the rest of the decade. The big test will come a month from now in Toronto at MIF March 3-4, 2023 ahead of the PDAC conference March 5-8.

People sense that something different is happening in the junior resource sector, and the theme of my talk, "Implications of Geopolitics and the Energy Transition for Resource Juniors", is that the drivers are very high level and will not change any time soon. One is the climate change policy goals for zero net emissions by 2050 which the car industry has already embraced on a scale from which there is no turning back. The other is the rising geopolitical tension between autocracies like China-Russia and democracies like the United States and Europe, which the rest of the world wondering whose side to take. The fracturing of a globalized economy will have an enduring impact on gold demand as the central banks of autocracies develop ways to avoid settling trade in US dollars and converting trade surpluses into US debt instruments. But it also risks disrupting security of supply assumptions for raw materials, some of which require new supply to make 2030 electric vehicle goals a reality. Efforts to dial back the China-America tension were dealt a blow by the Chinese "weather" balloon fiasco, and Russia's determination to conquer Ukraine and make its people part of Russia's slave culture will escalate the democracy-autocracy showdown.

One of my subscribers sat in on all the other MIF presentations and reported that not one of my peers mentioned lithium. But there was a lot of blather about silver which I don't understand. Demand for silver has no major new usage drivers such as electric vehicles are creating for lithium which will be a market worth $100-$200 billion by 2030. Compare that with silver whose production value in 2021 was worth about $19.4 billion compared to $18 billion for lithium, which will be double that in 2022 while silver's will be unchanged. Some talk about the "Great Reset" as a conspiracy by corporate elites to use ESG concepts to establish an autocracy which they spin as "socialist" rather than "totalitarian". This type of apocalytpic discourse and doting on silver is not going to attract the Millennial and Gen-Z generations to the resource junior sector. You can catch all the talks at the Metals Investor Forum YouTube Channel.

Lithium Supply History

Silver Supply History
Jim (0:06:53): How are your 2023 Favorites doing so far this year?

The 2023 Favorites are up 20.1% as of February 3, 2023 which is better than the 2022 Favorites did in January last year. Last year's Favorties peaked at 32.8% in April 2022 before ending up down 41.9% and finishing the year dopwn 36%. But even that group has recovered somewhat and is now down only 16.6% from the start of 2022. The best performer so far has been Brunswick Exploration Inc which is up 64.2%, followed by Century Lithium Corp which is up 51.7%. Not surprisingly, both are lithium juniors.

KRO 2023 Favorites Index

KRO 2023 Favorites Performance February 3, 2023

KRO 2022 Favorites Index
Jim (0:10:01): Any new developments in the lithium sector?

Claystone projects in Nevada received a boost when the Department of Energy offered a $700 million loan to Ioneer conditional on securing a permit for its Rhyolite Ridge project which is being opposed because a rare buckwheat species grows on the property. This past week GM made a $650 million equity financing offer to Lithium America's for its Thacker Pass project, also conditional on securing a permit which is being blocked by Indigenous objections. That a car maker like GM would move to the very top of the stream to secure a domestic source of lithium for its EV fleet is an amazing development which makes me wonder if it is GM that is the secret 9.9% strategic investor in FPX Nickel Corp.

The most important lithium development this week is the James Bay region turning into a full-blown Great Canadian area play for its lithium potential. We have not seen a Great Canadian Area Play since the 1990's when Dia Met discovered the Ekati kimberlite cluster in Canada's Arctic, and in 1995 when Diamond Field's discovered the Voisey's Bay nickel-copper deposit in Labrador. It's kind of ironic that open pit mining of the Ovoid ends this year. In 1992 the entire Slave Craton ended up being staked, and that was before online staking. That was an area the size of Switzerland. The James Bay region has similar scale and will end up being staked wall to wall even though 90% of the ground is not prospective for LCT enriched pegmatites. Juniors like Azimut who have toiled for decades in the James Bay region are discovering their claims have lithium potential. This makes sense because the sort of geology prospective for base and precious metals tends to adjoin geology prospective for pegmatites.

My KRO members are having a lot of fun during this early erupting stage of the Great Canadian Area Play. One of them managed to track down a 2007 technical report Virginia Mines did for its Poste Lemoyne Extension project which Brunswick has optioned 90% from Osisko and calls the Plex project. The technical report indicates that the basalt hosted Orfee gold zone adjoins a large outcropping pegmatite at least 2 km long and up to 300 m wide. In fact, drilling of the Orfee zone had to pass through pegmatite which was never assayed because back them lithium deposits were worthless. This is the same host geology as the Corvette trend which Patriot Battery Metals acquired from Osisko and where about 100 holes have delineated a tonnage footprint of at least 50 million tonnes for the CV5 pegmatite cluster. The northeastern end of this pegmatite continues under a lake, possibly another 2 km to the CV4 pegmatite outcrop on the northern shore. Hole 93 reported on January 30 for the northeastern limit of this body yielded excellent intervals. If Brunswick can get access to the Orfee core and confirm that this pegmatite is LCT type, it could start permitting right now to begin drilling in June after spring thaw.

Despite a rocky week which saw gold plummet $50 and cool off the resource juniors, the animal spirits surged back into the lithium juniors and pushed PMET to a new high amid speculation that Australian lithium producers like Mineral Resources were contemplating a run at PMET. And we know that Rio Tinto, which already has lithium brine production and the stalled Jadar project in Serbia, is eyeing the James Bay region which is also known for its reservoirs that produce clean energy in the form of hydro-electricity. PMET currently has a $2 billion market cap. If lithium is going to be a $100-$200 billion market by 2030, how much is too much for a premptive cash bid by Rio Tinto in a jurisdiction where it already operates the Alcan aluminum smelters and iron mines? The Corvette property tracks 50 km of prospective pegmatite geology. Can anybody imagine what would happen to the all the other James Bay juniors if Patriot Battery becomes the target for a hostile takeover battle?

Geology will be important in a way that it was not for the diamond play on the Slave Craton because kimberlites originate in the mantle, pick up their diamond payload near the base of the lithosphere, and can erupt anywhere. You find diamond pipes by till sampling vast regions for indicator minerals that have been dragged from the exposed source by glaciers. So any junior could end up with a major discovery. The same does not apply to LCT pegmatites which evolve within granitoid intrusions and migrate to their margins during which fractionation causes lithium enrichment. Where a recent arrival in the James Bay region could still get lucky is when the geology has been poorly and on closer inspection the junior discovers its claims cover prospective geology. Most juniors will not be in a position to drill targets until Q4 of 2023, but during the early stages of a Great Canadian Area Play the smallest shred of evidence will be magnified by a market looking through a 90% full glass.

In terms of where the James Bay Lithium Area Play is today in comparison to the 1990's Diamond Boom, we are in February 1993 jus ahead of the April 1993 explosion when Dia Met and BHP delivered new evidence supporting the Ekati discovery, and Rio Tinto, which had farmed into the DHK land package south of Ekati, discovered the large Tli Kwi Cho pipe with micro diamond counts comparable to those reported by Dia Met. This refuted claims by Chuck Fipke that he "got it all", and although Tli Kwi Cho turned into a bust, a year later Rio Tinto and Aber had discovered the Diavik cluster which became a world class mine.

The Canadian diamond boom spread well beyond the Slave craton into other parts of Canada, and even the world because third world frontiers opened up in the wake of the collapse of the Soviet Union. The annual rough diamond market was worth $8 billion in 1993 and three decades later has only grown to $14 billion. The annual value of lithium supply was $200 million in 2005, was worth $30 billion in 2022, and, even if lithium carbonate prices decline into the $10-$15/lb range, will be a $100-$200 billion market in 2030-2040, with only half the required supply so far identified. This has to happen unless governments are prepared to give up policy goals of replacing fossil fuel burning ICE cars with lithium ion battery powered EVs. While Quebec's James Bay region will emerge as a major lithium mining district, other parts of Canada will also see lithium deposits delineated and possibly developed. Lithium Mania 2.0 is thus not just about the James Bay Lithium Area Play, but about the broader hunt for the missing half of future lithium enriched pegmatite supply, whose extraction, unlike "direct lithium extraction" technologies for brines which remain to be commercialized, is well understood.

Patriot Battery Metals Corp (PMET-V)

Unrated Spec Value
Corvette Canada - Quebec 3-Discovery Delineation Li
Brunswick Exploration Inc (BRW-V)

Fair Spec Value
Plex Canada - Quebec 2-Target Drilling Li

James Bay Regional Map 2007

Geology of PMET's Corvette Trend

Geology of Brunswick's Plex Trend

Note large unassayed pegmatite next to Orfee Gold Zone at Plex

Where we are in the James Bay Area Play compared to 1990s Diamond Boom
Disclosure: JK owns shares of Brunswick Expl; Brunswick Expl is a Fair Spec Value rated Favorite

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