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Critical Elements - Lithium and Tantalum for the 21st Century

Critical Elements – Supplying Lithium and Tantalum for 21st Century Markets

Overview

Critical Elements (TSXV:CRE,OTCQX:CRECF,FWB:F12) is a Canadian resource exploration company focused on advancing its Rose Lithium-Tantalum Project in mining-friendly Quebec, Canada.

The Rose deposit, one of the largest conflict-free tantalum resources in the world, can supply multiple lithium markets because of its unique purity and its low production cost. The Rose deposit has an indicated resource of 26,500,000 tonnes containing 259,700 tonnes of lithium oxide and 9,514,317 pounds of tantalum pentoxide, and an inferred resource of 10,700,000 tonnes containing 92,020 tonnes of lithium oxide and 3,417,400 pounds of tantalum pentoxide.

Following a positive preliminary economic assessment (PEA), Critical Elements is now advancing through a feasibility study on the project. The company recently signed a collaboration agreement, that includes a take-or-pay offtake agreement, with German chemical company HELM AG for all production from the Rose deposit.

“We are the only lithium company with an offtake commitment from a large partner for 100 percent of production,” said Jean-Sébastien Lavallée, President and CEO of Critical Elements. “Our high-purity, low-contaminant spodumene concentrate will allow us to supply both the battery market and the glass and ceramics market. Our tantalum resource lends further diversification to the markets we can serve.”

Emerging as critically important resources for 21st century technology, lithium and tantalum are expected to see unprecedented demand in the near future. The battery-grade market represents approximately one-third of the total global end-use market for lithium, while the ceramic and glass market accounts for another one-third. Both of these markets have high entry barriers as end users expect high-purity, low-contaminant products.

Available supply for these markets has been limited due to recent mine closures that have left only one major low-iron spodumene source, the Greenbushes deposit in Australia. While supply for battery-grade lithium has been falling, demand has been growing and analysts predict double-digit growth over the next five years.

Tantalum is used in a wide variety of applications across the electronics, medicine, engineering and energy-generation industries. Nearly half of tantalum consumption comes from the electronics industry. Since 1995, the market for tantalum has experienced average yearly growth in demand of about eight to 12 percent. End users are facing increasing market pressure to secure conflict-free sources of tantalum, further tightening global supply.

Critical Elements is focused on developing supply for these markets at its Rose Lithium-Tantalum Project. The unique geological properties of this deposit give it the potential to supply multiple markets, including battery grade, ceramic and glass and tantalum.

Critical Elements has also partnering with other companies working lithium projects in Quebec, including the Lemare Project where a ed 1,312-foot drilling program to define a JORC Code-compliant resource is currently underway.

In June 2016, Critical Elements closed a private placement, raising $6,197,500. The corporation announced in June 2015 closure of a non-brokered private placement raising a total of $600,300.

Investment Highlights

  • Quebec is ranked 6th in the world for mining investments
  • 100 percent offtake product
  • Lowest market cap compared to peers
  • Higher lithium recoveries in concentration and carbonation compared to peers
  • Achieved 99.98 percent lithium carbonate electric vehicle battery grade
  • No uranium or thorium contaminants in the deposit
  • Low iron content of 0.13 percent iron oxide
  • High-demand tantalum byproduct compared to large potash supply from other lithium projects
  • PDA signed with Eastmain Cree Community
  • $300-million government tax credit for 2nd-3rd mineral transformation
  • Positive PEA shows an after-tax net NPV of C$279 million at an eight-percent discount rate
  • Feasibility study underway
  • Multiple JV partnerships in Quebec

Key Property: Rose Lithium-Tantalum Project

The Rose Lithium-Tantalum Project is located in the James Bay area of Quebec, Canada about 22 miles north of Nemiscau and 47 miles due south of Goldcorp’s Eleonore gold deposit. Excellent infrastructure is in place locally and regionally, including 100-ton capacity road access, an airport, a mining camp and a power line directly on the project property.

Critical Elements - Lithium and Tantalum for the 21st Century

The Rose Lithium-Tantalum Project is located in the Quebec Plan Nord designated area, where the government is fast-tracking the construction of new infrastructure, accelerating permitting and assisting with project financing. The project covers about 109 square miles of active mining titles in the northeastern part of the Archean Superior Province of the Canadian Shield craton and within the southern portion of the Middle and Lower Eastmain Greenstone Belt.

Resource Estimate

In July 2011, Critical Elements announced an updated NI 43-101 resource estimate of 26,500,000 tonnes of indicated resources containing 1.30 percent lithium oxide equivalent or 0.98 percent lithium oxide, and 9,514,317 pounds of tantalum pentoxide; and 10,700,000 tonnes of inferred resources containing 1.14 percent lithium oxide equivalent or 0.86 percent lithium oxide, and 3,417,400 pounds of tantalum pentoxide.

Critical Elements - Lithium and Tantalum for the 21st Century

In August 2016, Critical Elements announced a discovery of pegmatite and high levels of lithium at the Helico-South zone that traced over more than 2,297 feet on surface returns up to 3.04 percent lithium oxide and 248 ppm tantalum pentoxide from six grab samples averaging 1.61 percent lithium oxide and 142 ppm tantalum pentoxide. Samples were collected during a project camp upgrading for future work as part of a planned feasibility study and drilling on the property. Two showings located south of the Helico showing, Helico Sud, and south of the Lac Eli-Ouest showing, Lac Eli-Sud, identified high-grade zones in the Helico Sud pegmatite.

PEA

A 2011 PEA for the Rose lithium-tantalum project was completed in November 2011. Financial analysis was based on price forecasts of US$118 per pound for tantalum pentoxide contained in a tantalite concentrate and US$6,000 per tonne for lithium carbonate. The parameters for the PEA include a 1.5-million-tonne-per-year open-pit mine, a 4,600-tonne-per-day capacity concentrator and a lithium bicarbonation plant. Highlights from the PEA include:

  • An after-tax IRR of 25 percent
  • An after-tax NPV of C$279 million at an 8-percent discount rate
  • A payback period of 4.1 years
  • A mine life of 17 years
  • Estimated capital cost of C$268.6 million
  • Operating costs of C$67.65 per tonne of ore milled
  • Ongoing capital investments of C$36.8 million

Excellent recoveries and battery-grade purity

Intensive metallurgical testing and flow sheet optimization work has shown that the Rose Lithium-Tantalum project demonstrates a significant advantage over other known lithium deposits based on its ability to produce premium-purity lithium carbonate at a low cost

Critical Elements - Lithium and Tantalum for the 21st Century

Source: Roskill Market Outlook to 2017, 2013, Production costs for 2012

During flotation testing, recoveries reached up to 91.9 percent lithium with a concentration grade of 6.43 percent lithium; recoveries averaged 90.88 percent with a concentration grade of 6.2 percent lithium.

Results from recent hydrometallurgical testing have shown an overall recovery rate of up to 96 percent with an overall purity of 99.8 percent—surpassing the requirements for battery-grade lithium carbonate. The high purity percentage is due in large part to the use of a sodium carbonate alkaline process rather than the industry-standard sulfuric acid process. The sodium carbonate alkaline process poses a much lower environmental risk and is much more successful in dissolving impurities at the leaching stage. The lithium concentrate has a low iron content of 0.13 percent iron oxide.

Tantalum by-product more economical than potash

Most of the world’s supply of lithium comes from deposits with a significant potash co-product. The Rose deposit, however, possesses a unique combination of tantalum and lithium mineralization. The tantalum found in the Rose deposit gives the project additional byproduct diversification and makes it one of the few economic, conflict-free, industrial-scale tantalum sources in the world.

The most recently reported metallurgical results for tantalum at the Rose deposit show tantalite magnetic recoveries as high as 84 percent with an average of 77.6 percent, up significantly from the 50 percent recoveries reported in the 2011 PEA. Recent tantalum mine closures in Canada, Mozambique and Australia are creating a major shortage of supply from which Critical Elements expects to benefit.

Offtake agreement and feasibility study

Critical Elements announced in June 2016 it has entered into an agreement with German chemical company HELM AG to provide up to $4.5 million in feasibility study funding for the Rose Lithium-Tantalum Project. Under the take- or pay-offtake agreement, HELM has the exclusive right to purchase all produced products including spodumene concentrate, lithium chemicals, mica and tantalum concentrate. HELM has agreed to assist Critical Elements and provide technical support in preparing and completing the feasibility study, as well as providing logistical and sales support for distribution and sale of future mineral products generated through the project.

Critical Elements has agreed to grant HELM an option to acquire an ownership interest of up to 25 percent in the project by paying for a portion of mine construction costs.

“This financing is a significant step forward for Critical, as we are now fully funded to complete our bankable feasibility study,” said Lavallée.

Closing of First Drawdown

In order to fund its feasibility study on the Rose Lithium-Tantalum Project, Critical Elements announced it has closed the transaction for its first five-year-term $1.5 million drawdown under the credit facility agreement with HELM.

Joint-Venture Partnerships

Lemare Lithium Project

Critical Elements and Platypus Minerals Ltd. (ASX:PLP) announced in September 2016 that drilling has begun on the 43-square-mile Lemare Lithium Project, located in Quebec’s James Bay area, a district containing several advanced-stage lithium deposits. The planned 1,312-foot drilling program will investigate the mineralogy, dimensions and extent of the Lemare spodumene pegmatite to define a JORC Code-compliant resource. The first stage involves mapping, prospecting and about 6,562 feet of diamond drilling across the known 656-foot strike of the pegmatite and its extensions.

Initial channel sampling completed by Monarques Resources in 2012 from six trenches cut across the pegmatite returned up to 39 feet at 1.96 percent lithium oxide, and averaged about 34 feet at 1.44 percent lithium oxide.

The Lemare project is secured by a February 2016 option agreement by Critical Elements and Platypus subsidiary Lepidico Ltd., in which Platypus earns up to 75 percent of the project. To earn an initial 50 percent interest, Platypus is to fund $800,000 for exploration costs by the end of 2016, and invest an additional $1.2 million by the end of 2017. Platypus may then earn a further 25 percent interest in Lemare by paying $2.5 million to Critical Elements and completing a definitive feasibility study and environmental study by June 2020.

Duval Lithium Project

In September 2016, Critical Elements and Natan Resources Ltd. (TSX-V:NRL) announced the launch of the first phase of an exploration program on the Duval Lithium Project in the Northern Quebec Nemaska Lithium Whabouchi area. The project is contiguous to and along strike with Nemaska’s Whabouchi project, which recently encountered a new lithium-bearing zone in the southwestern end of the planned pit area.

Critical Elements and Natan have contracted Val-d’Or, Quebec-based Consul-Teck Exploration Inc. as project operator. Initial exploration consists of a detailed mapping and sampling program over a grid covering the entire property. While there has been no historic Lithium-focused exploration on the Duval property, the continuation along strike and onto similar geological property as Whabouchi shows potential to locate lithium. An updated NI 43-101 report will be completed for the property following Phase One.

Valiquette and Amiral Lithium Properties–Ionic Power Corp.

Critical Elements and Ionic Power Corp. entered into an option agreement in July 2016 to explore Valiquette and Amiral lithium properties in Quebec, giving Ionic the right to acquire up to 75 percent interest in both projects, located southwest of the Nemaska Lithium Whabouchi deposit. Ionic will earn interest in Valiquette and Amiral through a farm-in arrangement, including exclusive right and option to acquire by July 2018 an initial 50 percent earned interest in the properties by issuing $180,000 of common shares to Critical Elements, paying $37,500 and by funding $1 million in exploration costs. Once this first option is exercised, Ionic will have the exclusive right and option to increase its interest in the property to 75 percent by paying Critical Elements an additional $600,000, providing $1.5 million for further exploration expenses and delivering an NI 43-101 compliant resource estimate on the property.

“This option agreement with Ionic will allow the Valiquette and Amiral properties to be explored in detail for a lithium pegmatite discovery,” said Lavallée. “Critical Elements is currently focused on the development of its Rose Lithium-Tantalum Project. With Ionic farming into the Valiquette and Amiral projects, shareholders of both companies will be able to benefit from successful exploration of a highly prospective project.”

The Valiquette property, measuring about eight miles in a southwest-northeast direction contiguous southwest to the Duval main block, is made up of 104 claims covering about 13,747 acres. Accessible by a Hydro-Quebec gravel road to the Lac des Montagnes and by boat, the Valiquette project offers strong lithium potential in a well-established area.

The helicopter-accessible Amiral property, located about 50 miles northeast of the Nemiscau airport, is made up of eight claims covering about 1,048 acres.

Bourier Lithium Property – Lomiko Metals Inc.

Critical Elements and Lomiko Metals Inc. (TSX-V:LMR) entered into an option agreement in April 2016 to explore Quebec’s Bourier Lithium Property for the electric vehicle market. The farm-in arrangement gives Lomiko the option to acquire up to a 70 percent interest in the Bourier project. Critical Elements has granted Lomiko the exclusive right and option to acquire an initial 49 percent earned interest on the property by issuing five million common shares of Lomiko to Critical Elements, paying $10,000, and funding $750,000 for exploration on the property by the end of 2017. Once the first option is exercised, Lomiko will have the exclusive right and option to increase its interest in the property to 70 percent by paying Critical Elements an additional $250,000, spending a further $1.25 million on exploration, and completing an NI 43-101 compliant resource estimate on the property by the end of 2018.

Management

Jean-Sébastien Lavallée—Chief Executive Officer

Jean-Sébastien Lavallée, P. Geo., is the president and chief executive officer of Critical Elements, a Canadian mining exploration company since 2009. He has been also active in mining exploration since 1994. He is the vice-president of Consul-Teck Exploration, a consulting firm in Val-d’Or founded in 2003 that specializes in mining exploration in northern areas. Most of the firm’s mandates involve the generation and execution of projects in remote areas. Lavallée has worked as a geologist for many companies, including Eloro Resources, Uracan Resources, Agnico-Eagle Mines, Noranda Minerals, Champion Minerals, Matamec Explorations and Atlanta Gold. Having been responsible for the planning and execution of many exploration programs in recent years, Lavallée has acquired solid experience in exploration project development.

Dr. Steffen Haber—President 

Dr. Haber was President and Chief Executive Officer of Rockwood Lithium GmbH when Chemetall GmbH was legally split off in 2012. From 2011 to 2012, he was Managing Director of Chemetall GmbH and since 2007 President of Chemetall’s Lithium business. Prior to joining Chemetall GmbH, Dr. Haber worked in different executive positions for Sanofi-Aventis SA and its predecessor companies, in France. Dr. Haber completed his doctorate in organic chemistry at the University of Kaiserslautern, Germany, in 1991 and added one year as a Post-Doc at Ecole Polytechnique in Paris. In 1997, Dr. Haber earned his Bachelor of Science in Management from the International School of Management in San Diego, in the United States. Dr. Haber is a fellow of the International Directors Program of INSEAD.

Jean-François Meilleur—Vice-President

Jean-François Meilleur is presently president and co-owner of Paradox Public Relations. His accomplishments include playing a key role in raising funds for many projects. Meilleur holds a Bachelor’s degree from the HEC business school (Hautes Études Commerciales) in Montreal, with a specialization in marketing and finance. He previously worked as a trader at Swiftrade, and has extensive knowledge of financial markets.

Nathalie Laurin—Secretary and Chief Financial Officer

Nathalie Laurin has more than 25 years of experience in administration and accounting. During her career, she has held a range of jobs that have gained her experience in the financial industry, project management and in the natural resource sector. She has been self-employed since 2006, handling bookkeeping, audit file preparation and management of legal, regulatory and administrative matters. 

Richard Saint-Jean—Director

Richard Saint-Jean is a metallurgist technician with over 20 years of mining experience. He is currently the general director for BlackRock Metals, a private iron ore mining company. Previously, Saint-Jean was mill manager for the Troilus open-pit gold/copper mine in Chibougamau, where he worked for over 14 years. He has worked on four mill startups: Meston Resources, the Graphicor mine, the Cambior mine and the Troilus mine. At Troilus, he participated in the two mill expansions as well as the closure plan. Saint-Jean has worked closely with First Nations, including the Cree communities, for over 15 years. 

Jean-Raymond Lavallée—Director

Jean-Raymond Lavallée has more than 30 years of experience in mining exploration, and has been a contractor, consultant and manager for several mining companies, such as Louvem, Soquem, James-Bay Development, Sullivan Consolidated, Cache Explorations, Parquet Resources, Dumont Nickel, Westminer Canada, Baribec Management, Exploration Ojibway and others. He was also controller for Mines Expert during the construction of the Doyon mine. Lavallée is currently president of Consul-Teck Exploration, a consulting firm of Val-d’Or founded in 2003 that specializes in mining exploration in northern areas.

Marc Simpson—Director

Marc Simpson is president and chief executive officer of Uracan Resources. Simpson has worked in the mining and exploration industry for over 23 years. He has worked for junior, mid-tier and senior mining companies on projects both in Canada and worldwide, including Bema Gold (sold to Kinross for C$3.5 billion in 2007), B2Gold and Echo Bay Mines. Simpson has been involved in exploration and mining projects, from grassroots exploration through to mine development and production. He obtained his B.Sc. in geology from the University of Manitoba and is a member of the Association of Professional Engineers and Geoscientists of British Columbia and the Association of Professional Engineers and Geoscientists of the Province of Manitoba.

Matthew Lauriston Starnes—Director

Matthew Lauriston Starnes is a lawyer with over 17 years of experience and the capacity to work in all areas of law, including civil law, common law, contract negotiation and drafting, arbitration, taxes and permits and government relations. Starnes is currently legal counsel for Sumitomo’s Mineral Resources Division in Tokyo, Japan. Among other things, he was responsible for negotiating the joint-venture agreement with a Canadian partner, the financing agreement with Japanese lenders and the offtake and distribution agreements with Japanese and other worldwide buyers for the Sierra Gorda project in Chile.

He was also responsible for negotiating power, railway, port and transportation infrastructure agreements and helping the proponents establish good governance procedures for the project. He is also part of the team for the Ambatovy project in Madagascar, where he participated in preparing for completion, settlement negotiation with Korean contractors and sits on a number of committees. Prior to joining Sumitomo, he also was the general counsel and deputy chief executive officer for the Ambatovy project. Starnes has also practiced as a corporate lawyer with major law firms in Montreal.

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