- Large lithium clay deposit in Nevada - a mining hotspot
- US Gov't designated lithium as a 'critical mineral' of strategic importance in 2017
- Experienced management
What Cypress Development Corp (TSX-V:CYP, OTCQB:CYDVF) does:
Cypress Development Corp (TSX-V:CYP, OTCQB:CYDVF) says it is an "advanced stage" lithium company. The flagship project is its wholly-owned Clayton Valley lithium project in Nevada, USA, which spans over 5,000 acres between Reno and Las Vegas and is home to a large lithium clay deposit.
It also sits just east of Albemarle’s Silver Peak mine - North America’s only lithium brine operation, which has been in continuous operation since 1966.
The Clayton Valley project already has an indicated resource of 6.3 million tonnes of lithium carbonate equivalent (LCE) and a probable reserve of 1.28 tonnes.
The project was also the subject of a pre-feasibility study from March this year, which showed a net present value (NPV) of US$1.03 billion and an internal rate of return (IRR) of 25.8%, based on an LCE price of $9,500 per tonne.
The mine-life was pegged at over 40 years at 15,000 tonnes per day (tpd), while the capital cost of the project was put at US$493 million over two years.
The company has a market cap of around C$236 million.
How is it doing:
On October 13 this year, the company reported it had finished assembling its pilot plant for Clayton Valley at a metallurgical facility around 100 miles south of the project after starting to purchase items in March and work progressing through the summer.
According to the company, there are four main sections in the pilot plant: leaching, tailings handling, pregnant leach solution (PLS) treatment, and the Chemionex—Lionex DLE process area.
As previously reported, the company will use chloride-based leaching combined with the Chemionex—Lionex process for direct lithium extraction (DLE). The decision to use chloride-based leaching was based on results from an internal scoping study completed in January this year. However, a sulphate-based process remains a viable alternative as detailed in the project's pre-feasibility study, which was amended in March this year.
In September this year, the group said it had acquired 24 unpatented mining claims for 480 contiguous acres, which grow the company's land holdings in the Clayton Valley area to 6,558 acres in total. The new claims have no retained or underlying royalties.
And in May this year, Cypress Development signed a letter of intent (LOI) with a subsidiary of Nevada Sunrise Gold Corp over the purchase of water rights (entered formally in September). This allows for the use of 1,770 acre-feet per annum (AFA) for mining, milling, and domestic use, representing around 55% of the projected water needs for the project, noted the analysts. The company is paying cash and shares totaling US$3 million.
What the broker says:
Couloir Capital recently repeated a 'Buy' stance on the shares, noting the company had now successfully set up its pilot testing plant for the project and struck a purchase agreement for local water rights. The research house also lifted its fair value per share estimate on the company to C$4.04 each, from C$3.31 previously. The Couloir analysts said the completion of the pilot plant was a "major milestone" pushing the project towards the feasibility stage.
"With the results of the pilot testing program, we believe that CYP can significantly advance its understanding of the metallurgical characteristics of its project’s lithium-bearing clay deposit, which in turn should help CYP ascertain the feasibility of commercial-scale lithium extraction at the mine," said analysts.
"We believe that moving to the FS stage of the development cycle could materially unlock value currently tied up in uncertainty around the potential of Clayton Valley’s future cash flows."
Couloir also highlighted that the company's ongoing testing of lithium extraction through chloride leaching may "significantly reduce the forecasted water needs of the project," which may, in turn, reduce the firm's need to purchase additional water rights.
It may also be able to use saltwater in processing, according to management, which "would reduce fresh water needs and allow the company to exercise greater flexibility in water procurement", added analysts
Inflection points:
- News from pilot plant testing
- Lithium carbonate price moves
- Start of feasibility study work
What the boss says:
"The completion of the pilot plant represents a significant milestone and marks the culmination of months of work by Cypress, our consultants, and contractors," said CEO Bill Willoughby in the recent statement about the completion of the pilot plant assembly.
"The testing ahead will be one of the larger piloting efforts to extract lithium from clay in the world, and the only one based on a chloride approach to leaching. While the ultimate goal is to demonstrate the production of lithium hydroxide from our claystone resource on a larger scale, the results from the various areas within the plant, from leaching and tailings handling, to solution treatment and recycling, chemical usage and water balance, will provide the data necessary to carry the project forward to the feasibility level."
Contact the author at giles@proactiveinvestors.com