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Thursday, June 17, 2010

Rick Mills: TNR Gold Spin Out International Lithium Corp. Looks Attractive TNR.v, CZX.v, LI.v, RM.v, LMR.v, WLC.v, CLQ.v, HAO.v, LIT.v, LAT.v, ORE.ax,




"Is There Life After Oil? We guess that actually Obama knows better than many others that there is NO More Cheap Oil Left. With Oil Spill in the headlines and late realisation about the scale of this catastrophe all dreams about cheap oil will vanish, but question remains open: what Obama will be able to chose? Are we grown up enough to push him to endorse new technologies and get off from the Oil addiction or we will witness the Crash of Empire fighting wars which will benefit only few and destroy lives of billions?"





Rick Mills was one of the first to cover the Lithium and REE story. He has wrote extensively about Lithium Canadian Junior market from early 2009 following TNR Gold, Rodinia Minerals, Western Lithium and other companies. In his Lithium ABC he described this investment opportunity of the century with necessary depth to understand basic risks, challengers and leverage provided by different Lithium market players. Now he is coming back to TNR Gold at the moment of International Lithium spin off and we think that it is an important step for the company to bring its story out. Results will speak later for themselves, with deals in Argentina and in Nevada with Asian Corporations asset portfolio of the company should get recognition in the coming months. Do not forget about all the risks connected with early stage play in exploration business, but project generation model described by Rick in his article can buffer some uncertainties while still providing upside to the successful projects. Company is very tightly held, management is concentrating on the business development and brings the story on the investment radar screens now - it is time to make a proper DD on this story.


We have a position in this company, please, do not consider anything as an investment advise, as usual, on this blog.


Ahead of the Herd


TNR Gold Spin Out ILC Looks Attractive

Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information


TNR Gold Corp (TSX.V:TNR) is a project generation company active in precious, base metals, Lithium, rare metals and rare earth elements (REEs).

Project generators, after finding and securing a property, do the initial mapping, sampling and maybe a small drill program. Upon making a discovery, basically finding something of interest, they turn it over to a joint venture partner who puts up the money and or its own shares to earn into the property over a number of years while investigating the discovery.

Yes the project generator’s shareholder’s eventual ownership of a discovery is diluted, BUT, their ownership in the prospect generating company is not diluted because there is very little dilution of the generators outstanding shares. This is because the exploration/development expenses are paid by the partner, not the generator.

A property ownership dilution business model is not as well liked as the much more common share dilution model.

But our prospect generator offers three other things that should be considered….

The project generator could take this approach time after time on different projects, at the same time, with relatively little dilution. Prospect generators do not have to concentrate limited resources and stretch themselves to cover one or two projects. And if one of their projects does go bust, well they always have a few more simmering on the front burners
If at first you don’t succeed try and try again, the same project may be joint ventured many times, each new company trying a different geological model and approach before success is ultimately achieved
Eventual possible spin outs of properties into new companies to achieve increased shareholder value
TNR Gold Corp already has many compelling reasons for it to be on investors radar screens, notably - 18 active projects in three groups:

Argentina gold/copper - High quality copper/gold projects in Argentina with $5 million spent on exploration over the last few years. Among the 5 active projects are El Salto (13,300 hectares) and El Tapau - both early stage projects that have potential for Au-Cu-Mo porphyry discoveries. El Salto has a 6 x 1.5km chargeability anomaly and El Tapau has three target areas - exploration includes grab sampling averaging 2.2g/t Au over 4.5km of strike length and limited drilling (including 82m @ 0.49% Cu). Both projects will be the targets of geophysics and follow up drilling.
Lithium and rare metal projects - TNR has nine early stage lithium brine and rare metal projects in all the right areas: Lithium brine in Argentina, lithium brines in Nevada, and rare metal/lithium pegmatites in Canada and Ireland.
Alaskan gold - TNR has 50% of Shotgun, a breccia-hosted Au target with a non 43-101compliant inferred resource of 980,000 oz Au grading 0.93g/t and having drill ready targets (In 2006 DDH 06-43 returned 210m of 1.29 g/t Au). The Iliamna Project lies less than 80k from the giant porphyry-hosted Pebble Deposit (18.8billion lbs Cu, 31.3million oz Au, 265 million lbs Molybdenum). Recent geochemical analysis and interpretation reveals geological similarities to the Pebble deposit and has identified targets previously unknown.
There's also Los Azules - one of the largest copper deposits in the world - TNR retains a 25 per-cent back-in right on the northern half of the property plus has 100% ownership of Escorpio IV. The Los Azules Cu-Au-Ag deposit contains a 43-101 inferred resource of 11.2 billion lbs Cu grading 0.55%, with a high grade core of 2.3 billion pounds grading 1% Cu. TNR served their back-in notice in April 2010. Minera Andes rejected the back-in notice and the validity of said back in notice and Escorpio IV ownership is the subject of a legal dispute. TNR has a C$5m loan facility that can be drawn down to support its legal claims.
But add in the imminent spinoff of its lithium properties into International Lithium TSX.v – ILC (and the eventual possible spinoff of its Alaskan properties into another newco) with the benefit of shares + warrants that have no hold period - initial share price of ILC is valuated at $0.25/share @ 60 million shares outstanding - and the case becomes, in this author’s opinion, more than compelling.

The meeting date is June 22, 2010 for shareholder approval of the previously announced (April 27, 2009) spin-out of TNR's lithium and rare metal assets into its wholly-owned subsidiary - International Lithium Corp. TSX.v - ILC. TNR shareholders of record on the date of the spin-out, planned for July 2010, will receive one share and one fully tradeable warrant of International Lithium Corp. for every 4 shares of TNR held.

TNR Gold will transfer the following properties into ILC:

Mariana
Forgan Lake
Niemi Lake
Mavis Lake
Moose 2
Fish Lake Valley
Mud Lake
Sarcobatus Flats
Leinster (Ireland)
The parent company and shareholders should retain ~87% of ILC, and there will be a C$2.5m IPO. The year one exploration budget will be in the range of C$1m-$1.5m.

ILC’s initial focus will be on the Mariana project. ILC will have a 100% ownership option on 120 sq km covering the entire salar. A resource estimate could follow drilling in 2010 (currently there is a three hole drilling program, out of a total 20 hole program, underway).

ILC will also advance brine projects covering 5,285 hectares in the area of Clayton Valley, Nevada which is home to North America’s currently only producing Li mine. Chemetall-Foote’s Clayton Valley operation has been producing lithium brine since 1967 and ILC will have three active lithium brine projects in this area.

The pegmatite projects for lithium and the rare metals (e.g. tantalum, niobium and the REE’s) include the Moose project located in Canada’s North West Territory (NWT). Moose is a past high-grade producer of Li and Ta (some of the highest grades of Tantalum in Canadian pegmatites were found here - also 2.07 wt% Li20 over 6.7m.

TNR’s Mavis Lake Project has returned channel samples which include 5.3m grading 1.24% Li2O. Sampling has recently extended the litho-geochemical anomaly by 1.1k and significant potential exists on the property for additional discoveries.

International Lithium Corp. TSX.v - ILC Highlights

Ownership by insiders and background success of the group – Mr. Klip and his UK investor group holds 40%+ while management and other insiders hold 10%
Institutional ownership – RAB, Toqueville, NovaGold/Barrick, Pinetree Capital – another 15%
$1.6 million in cash looking to raise $2.5M in the IPO
Aligned incentives – insiders and management have significant stake - Initial ownership by TNR/Management – over 50%
Quality 100% owned project with reasonable property payments because ILC was an early first mover
Technical group – ILC has expertise from early stage brine/pegmatite specialists – John Harrop has done 43-101 for several Nevada juniors and is one of the local experts on brines. Production advisor T.Currin was past FMC advisor on brine circuits optimization and operated a private lithium producer in Nevada
Diversified project portfolio – brines for quick development to production, pegmatites for exposure to rare metals
"International Lithium will bring a great deal of additional value to existing and potential TNR shareholders because they get to participate in a company poised to capitalize on the growing demand for lithium and rare metals, while still retaining their exposure to our high quality portfolio of precious and base metal assets through TNR." TNR CEO Gary Schellenberg


Corporate structure’s TNR & ILC


TNR Gold Corp. TSX.v - TNR


Shares Issued: 120,567,641
Options: 10,090,000
Warrants: 26,259,829
Fully Diluted: 156,917,470
Cash: $1.6 M
Debt: $0
Insider/Mgmt: 52%
Institutional: 15%

International Lithium TSX.v - ILC

Shares Issued: 60,000,000
Fully Diluted: 120,000,000
Cash: $2.5 M
Debt: $0
Share ownership: TNR 30%, TNR insider/managements: 26%


Lithium

The world’s future energy course is being charted today because of the ramifications of peak oil and a need to reduce our carbon footprints.


A whole new industry - a global wide automotive and industrial lithium-ion battery industry - is going to be built. As a result of lithium-ion battery demand for hybrid-electric and electric cars the increase in demand for lithium carbonate is expected to increase four-fold by 2017.

Lithium-ion batteries have become the rechargeable battery of choice in cell phones, computers, hybrid-electric cars and electric cars. Chrysler, Dodge, Ford, GM, Mercedes-Benz, Mitsubishi, Nissan, Saturn, Tesla and Toyota have all announced plans to build lithium-ion battery powered cars.

Demand for lithium powered vehicles is expected to increase fivefold by 2012. The worldwide market for lithium batteries is estimated at over $4 billion per year.
Lithium carbonate is also an important industrial chemical:

It forms low-melting fluxes with silica and other materials
Glasses derived from lithium carbonate are useful in ovenware
Cement sets more rapidly when prepared with lithium carbonate, and is useful for tile adhesives
When added to aluminum trifluoride, it forms LiF which gives a superior electrolyte for the processing of aluminum
Lithium carbonate can be used in a type of carbon dioxide sensor.
Demand today is in the range of 120,000 tonnes of lithium carbonate equivalent (LCE) annually. Lithium is not traded publicly - and is usually distributed in a chemical form such as lithium carbonate (Li2CO3) - instead it’s sold directly to end users for a negotiated price per tonne of Lithium carbonate (Li2CO3).

Production figures are often quoted in lithium carbonate equivalent quantities. By weight approximately 18.8% of lithium carbonate is lithium. Therefore 1kg of lithium is the equivalent of 5.3 kg of lithium carbonate.

“We are projecting 40% Li demand increase by 2014, with batteries accounting for 34% of use, the largest single end-use segment.” Jon Hykawy, analyst Byron Capital Markets

Lithium-ion batteries are quickly becoming the most prevalent type of battery used in everything from laptops to cell phones to hybrid and fully electric cars to short term power storage devices for wind and solar generated power. At present, 39 per cent of lithium-ion batteries are produced in Japan, 39 per cent in China and 20 per cent in South Korea.

“With forecast 10% to 20% penetration rates by 2020 for pure and hybrid electric vehicles, we expect an incremental increase in demand of 286,000 tonnes of lithium carbonate equivalent, significantly outstripping current supply.” Canaccord Adams analyst, Eric Zaunscherb
“Our electric vehicle investment is not one-car innovation, it is a new way of looking at our industry. This is the beginning of the story.” Carlos Ghosn, Nissan chief executive officer

Rare Earth Elements (REE)

REEs comprise 16 chemical elements which are uniquely able to retain their physical properties at high temperatures. REEs are used for everything from:

Nickel metal hydride batteries
Fibre-optic telecom cables
Military hardware
Solar panels
Wind turbines
Compact fluorescent lighting
Mobile phones
Computers
Manufacturing of super conductors and high energy magnets
Petroleum refining
REEs are an integral piece of the green technology industry – they help to improve energy efficiency in magnets, batteries, glass and computers.
Rare earth elements are as abundant as nickel or tin in the Earth’s crust but economic concentrations are extremely rare - hence the name.

China - the largest producer of rare earth elements - supplies more than 90 per cent of the global market. But China has recently been cutting back exports, and promises further cutbacks, to ensure it has enough rare earths for its own use.

One online source this author found said the following – “demand grew from about 85,000 tonnes, or about $500-million (U.S.) in 2003, to 124,000 tonnes or $1.25-billion in 2008. By 2015, demand is estimated to be 200,000 tonnes or US$2.3-billion.” The Industrial Minerals Company of Australia predicts global demand will grow from about 112,000 tonnes in 2008 to approximately 180,000 tonnes by 2015.

Either set of numbers you care to use leaves plenty of room for potential, new, western based suppliers.

"We've been doing quite a lot of research on rare earths and lithium in particular, and have developed a diverse rare metals project portfolio. We didn't feel we needed to be restricted geographically or deposit type so our first acquisitions were primarily pegmatites in Canada followed by application for a large pegmatite belt that was available from the Irish government. Our real goal was to have a diversified portfolio of world-class lithium and rare metals properties off both brines and pegmatites which will allow us to become a serious rare earth and lithium explorer.” TNR CEO Gary Schellenberg

Conclusion

After the spin-out, TNR Gold will remain committed to advancing its portfolio of gold and copper projects in Argentina and through its wholly owned subsidiary, Bristol Exploration, continue exploring it’s two, prospective for gold and copper, properties in Alaska. TNR and ILC should be on every investor’s radar screens.

Are they on yours?

Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com

If you're interested in the junior resource market and would like to learn more please come and visit us at aheadoftheherd.com

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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald and Financial Sense.

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard Mills does not own shares in any company mentioned in this report. TNR Gold is an advertiser on aheadoftheherd.com

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