Drilling results for hole PGMW17-04b at Pastos Grandes have shown yet further depth of lithium brine. The hole bottomed in brine at a depth of 564m, over 150m deeper than the deepest prior drilling so far. Grades were significantly better than prior drill holes with a continuous interval from 93.5m to 475m grading an average 535mg/l. Potassium values range from 4,906 mg/L to 6,148 mg/L and average 5,610 mg/L over the 381.5m intersection. Similar to magnesium, the sulphate/lithium ratio is also lower in this region, averaging 17.4 compared to an average of approximately 22.1 in holes PGMW16-01 and 02. The sediments continue to be highly permeable gravels and sands to the bottom of the hole.
Two rigs are operating and a third will be added in coming days. Two more holes currently underway are expected to TD this week. An upgraded resource estimate will be deferred until later in calendar Q3 or early Q4 2017 given the far better than expected depths and grades of brine being encountered. We suspect management wants to get a better idea of just how much bigger this resource might be.
The smaller surface area of the Pastos Grandes basin is proving to be highly deceptive as to the actual lithium volumes and grades within it. Looking to the longer term this would increase the scale of annual LCE output and significantly increase the potential mine life.
We re-iterate our SPEC BUY recommendation.
Petra Diamonds (PDL LN) has announced that it is likely to significantly miss its production targets by 8-9% owing to slow progress at its expanding projects. Prior full year guidance had been 4.4mncts. Revenue is therefore expected to be lower, also by 8-9%, and there will consequently be a negative effect on earnings for FY 2017.
This announcement follows a series of soft trading updates by PDL, however, given the company is at the target run rate of 5mnctpa FY 2018 production guidance remains unchanged. The announcement also indicates that PDL may technically break its debt covenants relating to financial ratios but believes that this can be resolved with its lenders.