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Western Lithium USA appears to be making moves, and the market is taking note. On Tuesday, the company announced that it produced high-grade lithium during the first trial run at its demonstration plant in Germany, and shares of the company shot up 30 percent.
As of 2:13 p.m. EST, shares of Western Lithium were up 30.77 percent, or 16 cents, trading at $0.68. Trading volume was more than 10 times the daily average for the company, at 1.32 million shares.
Western Lithium is currently commissioning a demonstration plant in Germany that has been designed to produce 72 kilograms per day of high-purity lithium carbonate, or 20 tonnes per year, if operated continuously. In its first trial run, the pilot plant produced 99.8 percent purity lithium carbonate, and initial results from the plant indicate that lithium extraction and brine concentration match up with design parameters established in the company’s technical report last spring.
Western Lithium has completed a prefeasibility study on the Stage I deposit at its Kings Valley property in Nevada, and has completed a mineral resource estimate for the Stage II deposit at the project.
As those following the company will know, most news from Western Lithium of late has concerned the company’s foray into Hectatone™ clay-based drilling additives for the oil and gas industries. The company announced the opening of its Hectatone™ organoclay plant in Fernley, Nevada in October, and reported its first order of the product on January 6. The product is used for “viscosity control, emulsion stability, fluid loss and solids suspension in oil based drilling fluids,” according to the company.
That said, with Tuesday’s announcement, it’s clear that the company hasn’t lost focus on the lithium side of things. “Over the past 18 months, Western Lithium has completed the permitting, construction, and first product sales of our Hectatone™ business,” said Western Lithium CEO Jay Chmelauskas in a statement, adding, “[t]he lithium market now appears ready for Western Lithium to accelerate the development of its Nevada lithium deposit as a new major supply source. Nevada is emerging as the world’s largest lithium battery manufacturing center and provides potential synergies for Western Lithium to establish its business locally and to become integrated with the global battery supply chain.”
To be sure, excitement surrounding Tesla Motors’ (NASDAQ:TSLA) plans to build a lithium-ion battery gigafactory still pervades the lithium market, and other juniors in the state, such as Lithium (OTCMKTS:LTUM) and Pure Energy Minerals (TSXV:PE), have similarly seen positive moves in share price over the past year. Lithium has gained 70 percent to reach $0.046, while Pure Energy has gained a whopping 650 percent over the same period and is up 42 percent year-to-date, at $0.30.
What’s more, Western Lithium isn’t just focused on producing lithium carbonate — the company is finalizing the design of a lithium hydroxide ciruit as well, and expects to begin pilot tests in 2015. That’s important as industry analysts have noted that hydroxide is increasingly finding favor as a cathode for lithium batteries over lithium carbonate.
For his part, David Talbot of Dundee Securities has expressed positivity about the results, stating in a research note that they help confirm the design parameters laid out in technical reports, de-risking the proposed flow sheet for Kings Valley. “While the news isn’t a surprise, this is the first time we are hearing of a battery grade purity product at demonstration scale,” he said. “With the world watching construction of Tesla’s Gigafactory in WLC’s backyard, and more recently digesting rumors of Apple developing an electric vehicle (or driverless car), Western Lithium has become one of the premier lithium investments.”
Speaking to the Hectatone™ clay side of things, Talbot added that Western Lithium may have seen pressure from the junior equity markets lately, in part from its exposure to the oil and gas industry through its organoclay business. However, he stressed that there is still a “strong interest” for the clay product, which has the potential to improve efficiencies for the space. Overall, he has given the company a “buy” rating and a target price of C$1.30.
Certainly, lithium investors may want to watch the company moving forward. In terms of what’s next, Western Lithium is planning to modify its plant based on initial results from the first trial run at the pilot plant. It expects to produce several tonnes of lithium products this year to provide samples for potential offtakes and to verify the selection of equipment for the plant.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.