Co. Validates Tech on Brines From Multi-National Customer

Lithos Group Ltd. (LITS:CBOE.CA;LITSF:OTCQB) announced it has validated impurity removal from raw field brines provided by a multi-national customer using its patent-pending AcQUA™ pretreatment technology.

The company said it's a "pivotal step" in its mission to eliminate the use of evaporation ponds to collect lithium, which is needed in large quantities to help fuel the new clean economy.

Elimination of magnesium and sulfates is a key component to direct lithium extraction at a meaningful industrial scale, the company said.

"The upstream impurity rejection results from our demonstration plant were in line with the high-performance expectations we set as a company," said Lithos Chief Executive Officer Scott Taylor. "We can now scale up this system for on-site field deployment rapidly while leveraging a proven supply chain and an existing modular system design."

DLE from lithium brines could "significantly" impact the industry and revolutionize production, capacity, timing, environmental impacts, and permit issues, Goldman Sachs analysts wrote in a research note.

DLE from lithium brines could "significantly" impact the industry and revolutionize production, capacity, timing, environmental impacts, and permit issues, Goldman Sachs analysts wrote in a research note.

"Much like shale did for oil, DLE has the potential to significantly increase the supply of lithium from brine projects, nearly doubling lithium production/yield (taking recoveries from 40-60% to 70-90%+) and improving project returns," the analysts wrote.

The technology vastly reduces land and water use of evaporating ponds, leading to additional sustainability and environmental social governance (ESG) benefits for companies using it.

"A number of proven DLE technologies are emerging and being tested at scale," the analysts noted. "Though the application of technologies used in DLE processes may be fairly new to the lithium industry, many are already utilized across other commodities."

Targets Achieved, Company Says

Lithos said it completed the conditioning and pretreatment of supersaturated field brines and successfully achieved its technical and operational targets.

These included lithium chloride recovery efficiency of at least 89%, greater than 99% magnesium rejection approaching rejection to non-detect, 100% sulfate rejection to non-detect, 100% boric acid rejection to non-detect, zero water usage, and zero chemical usage.

Technical Analyst Clive Maund has rated the stock a "Strong Buy for all timeframes."

"It is imperative to emphasize that AcQUA™ does not use chemicals, reagents, or fresh water to remove impurities," Taylor said. "This process delivers an optimal monovalent cation solution suitable for further concentration with DLE. One of the promised value propositions to DLE technology is the reinjection of lithium-deficient bines. This is most suitably performed with a brine processed by AcQUA™ — without reagents or chemicals."

Current brine operations destroy up to 2,500 acres of land, consume billions of gallons of water per year, produce hundreds of thousands of tons of carbon dioxide, and take up to two years to evaporate, Lithos said. Up to 80% of the initial resource is lost in the process, the company said.

The Catalyst: Contracts With Large Brine Producers

AcQUA™ uses an electro-pressure membrane process to optimize pre-treatment of the raw brines and rapidly concentrates lithium chloride with multiple Direct Lithium Extraction (DLE) techniques. The company said its systems are fully commercialized and operate in the field at scale, processing a feed of 30,000 barrels a day.

Operating margins are modeled at about 78%, and the company estimates the lifetime value of a customer could be more than US$100 million under licensing or sales business models.

Lithos said it's under contract with four of the largest lithium brine producers in the world, and after a previous US$1.3 million U.S. Department of Energy grant, it was pre-qualified for a US$30 million grant that it applied for in December.

The company has started a lab-scale pilot plant to conduct small-scale optimization of the technology with the aim of designing a field-based pilot plant to become operational at the end of the second quarter.

"LITS aims to achieve the milestones and necessary construction activities required to complete an operational commercial pre-treatment lithium production facility by Q4/24," noted analyst Ahmad Shaath of Beacon Securities on January 22.

Technical Analyst Clive Maund has rated the stock a "Strong Buy for all timeframes."

Last month, he wrote that there was a possibility of the company's stock "breaking out into a new bull market soon, and probably very soon."

"It will be very important because it will involve a breakout from the Pennant, a breakout above the third fanline of the Fan correction, and a breakout above the nearby quite strong resistance level shown all at about the same time," he noted. "It will thus have great technical significance and should mark the start of a major bull market in the stock."

The Catalyst: Market Shows Stable Growth

In addition to its importance to electric vehicle (EV) batteries, lithium is used to strengthen alloys, as a high-temperature lubricant, and as a drug to treat bipolar disorder.

The market for the metal is projected to grow from US$2.5 billion in 2023 to US$6.4 billion by 2028 at a compound annual growth rate (CAGR) of 20.4% from 2023 to 2028, according to a report by Markets and Markets.

"The market has observed stable growth throughout the study period and is expected to continue with the same trend during the forecast period," the report said. 

Much of the world's supply of the metal comes from South America's "Lithium Triangle," a vast area of salars (salt-encrusted depressions) at the intersection of Argentina, Bolivia, and Chile. 

Ownership and Share Structure

About 53% of Lithos is held by insiders and management, the company said. According to Reuters, this includes CEO Taylor with nearly 15% or 12 million shares, Independent Director Michael Westlake with 0.73% or 600,000 shares, and Independent Director Kevin McKenna with 0.05% or 40,000 shares.

About 16% of the company is held by strategic entities. The rest is retail.

Lithos has a market cap of CA$63.76 million with about 81.7 million shares outstanding. It trades in a 52-week range of CA$0.98 and CA$0.485.

Important Disclosures:

1. Lithos Group Ltd. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Lithos Group Ltd. 
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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Disclosures for Beacon, Jan. 22, 2024:

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