Could the UK become self-sufficient in lithium production?
That’s one of a host of questions that the trailblazing company Cornish Lithium Ltd is setting out to answer, as it looks to set drill rigs turning within a month or so on a patch of its extensive mineral concessions just outside of Redruth.
The question itself may be hyperbolic, but it’s not just investors and mining industry specialists who are asking it.
It’s government too.
The immediate context is of course Brexit, but the wider backdrop is the transportation and power storage revolution that is gathering pace around the world, and which looks to become one of the most economically significant events since the widespread adoption of the internal combustion engine.
The UK government’s response hasn’t exactly hit the front pages of the tabloids yet, but there is a clear policy, and it’s one that goes a long way towards helping Cornish Lithium meet its goals too.
The clearest evidence lies in the Faraday Battery Challenge Fund, a consortium brought together by the government to advance British interests in the new-generation battery space.
As part of this initiative a consortium called Li4UK was formed earlier this year whose members include the Natural History Museum, the specialist geological consultant Wardell Armstrong, and Cornish Lithium itself.
This consortium has received funding from the Faraday Battery Challenge to investigate the possibility of establishing a lithium industry in the UK and just over £350,000 of government cash is being pumped into the consortium, to be split between each of the participants according to their responsibilities. It may not be an earth-shattering sum, but there could be plenty more where that came from.
Already, in September of this year, the government has said that it will make available £1bn to British scientists seeking to tackle global warming. If the electric vehicle industry, and by extension the lithium extraction business don’t fall under that heading, it’s hard to know what would.
So, almost uniquely in the mining industry at the moment, Cornish Lithium finds itself at the centre of a perfect storm.
It’s established significant potential for both brines and hard rock lithium mineralisation on its ground, it’s already secured one form of government endorsement and could yet secure more and, broadly speaking, it’s got the field to itself. At the very least it has first mover advantage, having tied up the exploration rights to more Cornish ground than any other miner in the past couple of hundred years. And on a best-case scenario it could become a lynchpin in the British economy’s future efforts to go carbon neutral.
With all this in mind, it’s perhaps not surprising that a recent fundraising undertaken by the company was a considerable success in spite of the significant mining industry headwinds that were prevailing at the time, not the least of which was the spectacular fall from grace of another erstwhile British champion, Sirius Minerals (LON:SXX).
But Jeremy Wrathall, Cornish Lithium’s founder and chief executive, has too much mining industry and financial market experience to be deflected by the travails of another company, or indeed of his whole sector.
Not for him the vagaries of the Aim market, where short-sellers batter share prices with inexorable regularity ahead of any mooted fundraising, where the Nominated Advisor structure emasculates directors, where liquidity can be non-existent, regulations overbearing, and where precious little value has been created in the mining sector for several years now.
With that litany of negatives, why on earth would you list your company on Aim?
And he has no regrets whatsoever.
Instead, in a trailblazing move as far as the UK mining sector is concerned, he chose to raise money for further exploration and evaluation work on the Cornish land portfolio via a crowdfunding platform.
“We wanted £1mln and we raised £1.4mln,” he says.
That in itself should raise eyebrows in the junior mining sector. True, oversubscribed fundraisings aren’t exactly a novelty in the sector, but they have been relatively rare over the past few years. What’s more, raising money from as wide an investment base as Cornish Lithium has done would have been nigh on impossible had it taken the conventional route of sourcing funds through a broker.
One of the attractions of the crowdfunding platform used, Crowdcube, is that investors can come in for as little as £10 each. Now, that may not pay for a whole lot of drilling to access lithium-bearing brines around a kilometre below the surface, but what it does buy is local participation.
Indeed, it’s arguable whether the greater benefit of crowdfunding is that it keeps the company away from the Aim market, or that it allows the local community the chance to participate in a meaningful way in everything the company is doing.
Of course Wrathall, as an old market lag, knows fine well that for any funding to succeed you have to secure some significant sized cornerstone investors, and this he duly did at the outset of the process, and with several names that are well-known in the mining sector what’s more.
But he knows too that even when the money’s in the bank, for a project to succeed it’s always going to need local support. And so, the recent fundraising saw investors coming in for every conceivable range of amounts from £10 up to £100,000.
A total of 1,200 investors came into the company, and unlike with an Aim-listed vehicle, none of them are going to be selling on lack of newsflow or an unexpected set of drill results. Indeed, Wrathall is confident that once the current round of drilling is complete, he’ll be able to go back to his “addressable crowd” and secure further finance for more work.
True, the valuations that he’ll be putting on the company will be subjective, but in crowdfunding as in any other market, there still has to be a willing buyer for every willing seller, and if Cornish Lithium hits what it hopes to hit in its upcoming drilling campaign, there’s likely to be considerable further interest generated.
“The focus is on the brines,” says Wrathall, as it’s his work on brine showings in old Cornish mines that really set this company going in the first place.
So, two wells will be drilled targeting the brines in November, using a drill rig that’s coming over from Ireland shortly.
“These drill holes are truly exploratory,” he continues.
“They’re research holes. We want to drill into the areas where historically they found lithium. We’re drilling underneath the old mines here.”
He is confident that the drilling will hit the structures he’s hoping to hit, partly because of the meticulous data gathering that Cornish Lithium has undertaken using the Leapfrog data package amongst other things, but also partly because the company’s understanding of the local geology was recently put to the test when a geothermal well was drilled nearby.
“We predicted the geology in that geothermal well correctly,” says Wrathall. Maybe it’s not definitive, but it bodes well.
It bodes well too for the 40 holes the company plans to drill into its hard rock lithium project.
But that’s another story.