Mr. Thomas shares his views on lithium supply and demand, as well as his thoughts on the lithium sector as a whole. He also gives an update on AIS Resources as well as his outlook for the company. The Company’s primary focus is on their flagship Guayatayoc lithium brine project, and their Quinos salar Chiron project in Argentina.

Phillip Thomas is Chief Operating Officer and Geologist of AIS Resources Ltd  TSXV:AIS and OTCQB:AISSF
A.I.S Resources Limited a TSX-V listed investment issuer, was established in 1967 and is managed by experienced, highly qualified professionals who have a long track record of success in lithium exploration and production and the capital markets. Through their extensive business and scientific network, they identify and develop early stage projects worldwide that have strong potential for growth with the objective of providing significant returns for shareholders.

Phillip Thomas, BSc Geol, MBusM, MAIG, MAIMVA, (CMV) has spent the past 12 years exploring for lithium brines, building and operating lithium carbonate pilot and production plants, and building production and processing facilities. He has firsthand experience with the highly technical process of operating a lithium carbonate/lithium chloride plant at the Rincon salar. He was Chairman and CEO of Admiralty Resources from 2004 to 2008, where he and his team explored the Rincon and other salars and built the lithium carbonate processing facility which commenced operation in 2007. Upon the sale to the Sentient group in 2008, he resigned to pursue other lithium development opportunities. He and this team developed the Pozuelos salar producing an indicated and inferred resource, and putting in two production wells. They also put together a fully equipped lab and pilot plant in Salta to manage the extraction processes and phase chemistry including fractional crystallization, membranes and ion exchange processes. At Hombre Muerto salar they trenched, drilled and constructed lithium isobars. Most recently he’s been involved in exploring the Pocitos, Salinas Grandes and Guayatayoc salars. He is an experienced lithium brine Geologist both in the field and has written bankable feasibility studies and proven and probable reserve estimate statements. Has significant investment banking experience holding senior executive/director roles with Macquarie Bank, ABN-Amro, McIntosh Securities and actuaries Watson Wyatt.

What are your current views on the lithium industry? Can you please give your views on supply and demand issues, industry consolidation, and on current and future lithium pricing?
The current spot market for lithium carbonate above 99.2% is very strong. I saw a recent tender at $21,800 per tonne. As far as production goes, no-one has declared letting a procurement, engineering, construction contract (including us) so there is a lead time of approximately two years to reach production. There are processing technologies being experimented with at lab bench scale but it’s a long road to commercial production. To date no-one has proved a more streamlined solution being economically competitive than ion exchange and fractional crystallization which is what we have proved. Lithium Oxide production is expanding rapidly and this will probably be the next major source of lithium carbonate and lithium hydroxide, but at a price premium.  However there are nine gigafactories building six different types of battery technologies, and given this I expect the market to be in deficit for at least five years if not longer. In Norway 52% of new car sales were hybrids or EV and I think this is a trend that will permeate Europe. China also has its own incentives for hybrids and EV’s. High electric density batteries are absolutely required for these cars and the best technology to date is the cobalt manganese lithium battery. The 27,000 electric buses in China use a lower grade battery but they are also big consumers of lithium carbonate to build these batteries. Carbon/Iron batteries were developed on the lab bench recently and they promise to drop the price, and increase electric density. However, this will take quite a few years but it’s a trend.

Glencore, commissioned CRU to conduct research into what 30 million sales of EVs by 2030 would mean. “As early as 2020, forecast EV related metal demand is becoming material, requiring an additional circa 390,000 tonnes of copper, circa 85,000 tonnes of nickel and 24,000 tonnes of cobalt,’’ Glencore’s investor presentation said. That implies more than 100,000 tonnes of lithium carbonate at a high grade will be required annually.

The industry will consolidate very quickly as in Argentina not many junior explorers have the skill, expertise and processing skill to produce lithium carbonate or lithium hydroxide at a low price. The are no phase chemistry diagrams for lithium, sodium, magnesium, calcium that have been published that operate in a high saline environment. This is a major hurdle. In Chile it is at the behest of the government policy and what protection mechanisms the politicians put in place to protect SQM. Lithium was considered a strategic metal in Chile and the government has held production licences very closely. I don’t think this situation will be resolved in a commercial sense for quite a few years. I have worked in Chile since 2004 and have a sense of the politics.

What is AIS Resources currently working on in regards to your flagship Guayatayoc lithium project and what stage are you at? When do you expect to announce a compliant resource estimate and complete your BFS? Please include any off-take partner discussions.
As you know we have two projects Guayatayoc and Chiron. Guayatayoc is waiting for the final UGAMP meeting in early first quarter 2018, and then we expect our drilling permit to be issued, the first one ever issued in Jujuy province we think. Dr Solar who is head of the Mines department has been very helpful. The government has been working closely with all 23 provinces to ensure the Macri goals of developing Argentinas natural resources is achieved.  Morales who is the Govenor of Jujuy is also keen to see progress quickly to encourage employment and revenues. We have some superb 2D seismic data and interpretation from Dr Steinmetz PhD thesis from 1995 till recent analysis. Then we have Steinmetz and Galli’s work in 2015 which ties in the stratigraphic, tectonic, basin development and dating information in Guayatayoc and Salinas Grandes. So once we get our drilling permit we will produce an inferred and indicated mineral resource statement, and once production testing is completed a measured mineral resource statement followed by a proven and probable reserve statement and the banking feasibility study. A US$2m budget has been set for this work including drilling and the VES seismic work which needs to be completed.

At Chiron we have our seismic and drilling permits so we will be starting seismic on 10th January and probably 8 drill holes of about 3,200 metres in total and then produce a inferred and indicated mineral resource estimate.

Regarding takeoff contracts we have been having discussions with a number of parties in China, Taiwan, Japan, Korea and Europe. One party has been to Guayatayoc and inspected the property and our laboratory facilities. We also have been producing samples and have a a few kilos of greater than 99.2% and 99.6% Lithium Carbonate. Later in the year we will target the LPF6 producers, the gigafactories and others. We have been approached by a number of brokers as well. To fund the project we have designed a virtual equity style contract which will enable us to use the credit of the takeoff contract with the debt/equity piece. The cost of the 8,000 tonne per annum project is estimated at “C Class” to be just under US$100m.

What do you see as the main catalysts for AIS Resources going forward, and where do you see your company being in one and in five years? What are your production targets (I read a target of 8,000tpa LCE) for Guayatayoc? Can investors expect to see a higher target going forward, perhaps 16-20,000tpa?
We have a detailed Gantt chart month by month in our presentation, but we expect over the next twelve months to get to the point of having a Proven and Probable mineral reserve statement, a bankable feasibility study, completed engineering, procurement and construction contracts and drawings and permitting to complete pond construction. In 2019 we expect construction to be completed and the brines in some of the ponds ready to process in the commissioning stage. Depending on the grade of lithium brines we pump, which is set at about 300ppm at the moment we will get 8,000 tonnes a year.  If we get 400ppm we will get close to 11,000 tonnes a year. For this we need to pump about 700 litres of brine per minute which should be easy out of three production wells that are close to 200 metres deep. That’s just 233 litres per well per minute. All you need to do is dig a 2 metre deep hole and the brine fills it in 10-15 minutes, so we expect the hydrostatic pressure to be much greater at depth.

In five years we will hopefully have our clients requesting 20-25,000 tonnes a year and we would have expanded the processing foot print. The nice thing about our process is its modular and easily expandable. The plant footprint will be built to 16,000 tonnes but we will only put 8,000 tonne of processing gear in. That’s our concept at this stage but its going to be an interesting 12 months.

Do you think AIS Resources is currently fairly valued, undervalued or overvalued by the market? Where do you see your company and the stock price being in 5 years?
Being a Certified Mineral Valuer and having twelve years experience as a stockbroker and fund manager I’m not sure where to start. Its clear we have some risks in terms of permitting and locating drill holes on Guayatayoc to produce 700 litres per minute of brine. This risk is a hydrogeological risk, because we know the brine is there. It’s a matter of locating the best production holes. So say we get it totally wrong and have to drill another 14 holes its going to be a $700,000 risk. However given the huge amount of data we have and more than 20 man years studying the basin this is unlikely to eventuate. My view is the market hasn’t priced in our ability to develop the project quickly. So we are lagging other explorers.

You don’t have to be a maths genius to work out that if we have 100 million shares on issue and an economic value of $60 million, and a margin contribution of $100,000,000 at $10,000 per tonne (being $1 per share) using a price earnings index of 10 times you get $10 per share. However there are much more rigorous methods of computing the lower and upper quartile share market ranges and I would encourage your readers to go to www.aimva.com.au to look at some of the data and methods on this website of the Australasian Institute of Mineral Valuers and Appraisers.

Could you please comment on AIS Resources other lithium projects such as Vilama and Quinos Salar, and any other acquisition and your processing plant plans?
We were very excited when we sampled Vilama because of the great values of lithium on the surface, good ratios of lithium to magnesium, the flat terrain, the absence of wild life and the proximity to the volcanic chain that runs along the Argentina/Chile/Bolivia border which is about 5 kilometres away. It was initially a struggle breathing at 4,500 metres but we got used to it. The salar is located close to another salar but the road needs extensive refurbishment on the Argentina side between it and Susques a major town about 100km away.  On the Chile side the government is actively renovating the road which we saw when we last visited. At this stage we have our hands full with Chiron (Quinos salar) and Guayatayoc so we will complete the seismic then the drilling at Chiron. Then we will be able to estimate how much brine we can contribute to the Guayatayoc plant. Guayatayoc has gas, 240v and 415v electricity, labour only 30km away and existing fresh water spring 3 km from the road.

Would you like to add anything that you think investors should know about AIS Resources?
Our team is working hard on permitting, exploration, mineral brine estimates, feasibility studies, phase chemistry and processing technology all at once. We are not doing it in a sequential manner. Therefore I think we are way in front of most junior explorers as they haven’t started some of the pieces we have already completed as they are approaching it as sequential process like a copper mine. The talent we have on board have deep experience, highly educated, and have got their hands dirty doing the work two or three times,  which counts for a lot. There are countless examples of explorers claiming processes that didn’t work, or copying patents that don’t work in a commercial setting. The fact lithium can change its valency in different chemical settings is one small example of some of the issues to contend with. Many business development/investor relations people have no concept of the difficulty and complexity and unless you have been in the CEO role you tend to underestimate the challenges.

Our lithium production will be tailored to the market we can dominate, and the grade is as important as the lack of deleterious impurities and we will focus on this. Back in 2007 we did an ISO17045 audit and held certification for ISO and we will do this again. Dr Carlos Sorentino, our chemical engineer has made a significant contribution and I believe he is one of the very few people who truly understand this business at the level required to produce successfully. Having access to a laboratory, and pilot plant has made our task much easier and saved us many months of testing.

Investors can view the latest company presentation here.

Disclosure: I am/we are long AIS Resources (TSXV:AIS). I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.

Article Summary
The JORC 2016 resource report quotes – “Samples collected at Guayatayoc and Vilama have lithium and boron values in the range that would be considered exceptionally commercial.” Guayatayoc appears to have excellent chemistry with very low magnesium to lithium ratios. AIS Resources market cap is about 4x lower than peers at a similar stage.

AIS Resources (TSXV:AIS – OTCQB:AISSF) – Price = CAD 1.28, USD 1.03
AIS Resources is a Canadian junior lithium explorer and developer fast tracking towards production at their 100% owned flagship Guayatayoc salar in Argentina. Highly experienced COO and Geologist for AIS Resources Phillip Thomas says that “Guayatayoc is in the best 5 Argentina salars that can supply the world” with lithium. He also says he has explored all 52 of Argentina’s salars and he recognizes the key importance of having a favorable brine chemistry (particularly being low in magnesium).

AIS Resources has bought options to buy into their lithium brine concessions in Argentina, and is currently completing assessment of these tenements towards a BFS by mid to late 2018. They have already built a pilot plant and a chemistry lab, so are already quite advanced.

AIS Resources’ Lithium Projects in the Triangle
AIS Resources are optioned to 100% own several lithium projects in Argentina:

• Guayatayoc (Jujuy Province) – 2,725 hectares.
• Guayatayoc III (Jujuy Province) – 2,500 hectares.
• Vilama (Jujuy Province) – 2,500 hectares.
• Quinos Salar (“Chiron project”) (Salta Province) – 10,500 hectares

Note: AIS Resources state – “The option requires a “$4.5 Million USD payment to purchase 3 concessions by Oct 2018 – $600 per hectare.” The transaction structure permits the final evaluation of the concessions to be completed before final payment is made. No stock issuance, no staged payments or royalties to vendors. The transaction does not dilute shareholders and allows the company to evaluate the concessions prior to purchase.”

Note: Guayatayoc has a mining permit. A drilling permit was expected by Dec. 2017.

Infrastructure and Access
Guayatayoc is located north of Salinas Grandes and about 269km by road from the City of Salta. The western boundary of the concession is approximately 3km from the road. From Salta there is a train to the port. There is also a railway crossing from Northern Argentina to Chile that passes approximately 80km south of the Guayatayoc project.

A gas pipeline runs across the top and the bottom of the concession area. There is a terminus about 5km from the turnoff on the road to Guayatayoc. There are 240V and 345Kva lines within 3km of the project. The roads are in very good condition and sealed nearly all the way to Salta after the first 46 km. There are numerous freshwater springs on the hills surrounding the Guayatayoc concessions. The Pistrani works camp is also close by that provides heavy engineering support and services. The closest petrol station and supplies are located at Purmamarca (population about 2,000 plus about 500 tourists) which is 85km south or approximately 1.5 hours’ drive.

Laguna Vilama is situated on a road that leads into Bolivia, and has minimal infrastructure, being located approximately 170km from Susques. Susques is the nearest town and supplies of gas, food and labor would need to be trucked in or out.

Train Route from Salta to Antofagasta Chile

Guayatayoc resource and chemistry – Northern Argentina

• The JORC 2016 resource report (not yet NI43-101 compliant) quotes – “Samples collected at Guayatayoc and Vilama have lithium and boron values in the range that would be considered exceptionally commercial along with very high relative potassium grades. The magnesium to lithium ratio is very low at Guayatayoc.”
• The project has advanced quickly due to acquiring a 2013 PhD study and 2015 follow up paper completed by Dr. Romina Steinmetz, which saved a lot of exploration cost and time (~2-3 years).
• Previous exploration on the property has returned lithium grades between 200 ppm and 800 ppm of lithium.
• The magnesium to lithium ratios are less than 4 to 1, excellent for low cost processing.
• Due to favorable brine chemistry (minimal deleterious elements), the company has been able to achieve excellent recoveries of 78% lithium carbonate.
• Significant boron and potassium are present and can be valuable by-products.

Phil Thomas, COO of AIS Resources Interview About AIS Resources

Some results from the JORC 2016 report (not NI43-101 compliant)
The results below highlight Guayatayoc to have lithium grade samples from 260-910mg/L, and exceptionally low magnesium to lithium ratios. By contrast Vilama has lithium grades from 52-820mg/L and much higher magnesium to lithium ratios. My interpretation from this very small sample is that Guayatayoc looks more favorable at this stage, but would need further testing. Source

AIS Resources Sample Analysis Results

Guayatayoc and Guayatayoc III  Tennements – Source

Company Strategy
AIS President and CEO Marc Enright-Morin recently stated – “Ultimately, as we focus on economies of scale, our goal is to have one central processing facility handle concentrated brine from Guayatayoc and one or more other nearby properties.”

Management

• President, CEO, Director – Marc Enright-Morin is a successful mining and investment banking executive based in Vancouver. He has assisted various public and private companies raise capital through numerous institutions throughout North America, Europe and Austral-Asia. He has over 15 years experience in the public and private markets with extensive network of investment banking contacts, all instrumental in the management and development of junior companies. He has assisted various companies to go public through RTOs and IPOs, and has served as an officer and director to a number of publicly traded mining companies. His primary focus is the resource sector – with seven years spent acquiring, researching, drilling and raising capital specifically for lithium opportunities.

• COO, Director, Project Director/Geologist – Phillip Thomas, BSc Geol, MBusM, MAIG, MAIMVA, (CMV) has spent the past 12 years exploring for lithium brines, building and operating pilot plants for production, and building production and processing facilities. He has firsthand experience with the highly technical process of operating a lithium carbonate / lithium chloride plant at the Rincon salar. He was Chairman and CEO of Admiralty Resources from 2004 to 2008, where he and his team explored and built the lithium carbonate processing facility which commenced operation in 2007. Upon the sale to the Sentient group in 2008, he resigned to pursue other lithium development opportunities. He and this team developed the Pozuelos salar producing an indicated and inferred resource, and putting in two production wells. At Hombre Muerto salar they trenched, drilled and constructed the lithium isobars, including putting together a fully equipped lab and pilot plant in Salta to manage the extraction processes and phase chemistry including fractional crystallization, membranes and ion exchange processes. Most recently he’s been involved in exploring the Pocitos, Salinas Grandes and Guayatayoc salars. He is an experienced Geologist both in the field and has written bankable feasibility studies and proven and probable resource estimate statements. Has significant investment banking experience holding senior executive/director roles with Macquarie Bank, ABN-Amro, McIntosh Securities and actuaries Watson Wyatt.

• Chief Chemical Engineer – Dr. Carlos Sorentino is a highly experienced lithium developer. From 1996 to 2001, he prepared detailed engineering and bankable feasibility study for exploitation of the Salar del Rio Grande.

From 2004 to 2008, he developed the basic and detail engineering and directed the establishment of a pilot plant for a lithium project in the Salar of Rincon, in Salta, Argentina. Recently, he formulated a detailed business plan for the exploitation of lithium in the Salar of Pozuelos.

Valuation
AIS Resources currently has a market cap of CAD 62m, with a very tight register of just 48.18 million shares outstanding (added to this is ~1.2m warrants as of November 2017).

AIS Resources market cap is about 4x lower than peers at a similar stage

	Current market cap (Jan 2018)
AIS Resources	CAD 62m
LSC Lithium [TSXV:LSC] (OTC:LSSCF)	CAD 230m
Millennial Lithium Corp [TSXV:ML] (OTCQB:MLNLF)	CAD 276m
Argosy Minerals [ASX:AGY][GR:AM1]	CAD 263m

Note: LSC Lithium Corporation (51%) has partnered with Dajin resources (49%). LSC Lithium has agreed to spend $2,000,000 to earn a 51% interest in Dajin S.A.’s land holdings. These mineral concessions exceed 93,000 hectares (230,000 acres) and are primarily located in the Salinas Grandes/Guayatayoc salt lakes basins (salar), Argentina.

Below is a company prepared market cap comparison – as of November 2017 – Source
My very preliminary model (not to be relied on yet) values AIS Resources with a price target of CAD 2.07 (1.6 x higher) if they can successfully make it to become an 8,000 tpa LCE producer (current company guidance) by end 2020. More than likely they will expand to say 16,000 tpa LCE. If they reach this level by say end 2021 my preliminary price target moves to CAD 4.89 (3.8 x higher).

AIS Resources Peer Company Market Caps

Catalysts

• 2018 – Geophysical and drill results, followed by a NI43-101 Inferred and possibly Indicated mineral resource statement.
• 2018 – BFS, followed by project fund raising, off-take partners.
• 2019/2020 – Commence lithium production.

Guayatayoc Project Timeline – Source

Competitors
The current lithium producers SQM (SQM), Albemarle (ALB), FMC Corp. (NYSE:FMC)), Orocobre [ASX:ORE] (OTCPK:OROCF), Tianqi Lithium (SHE:002466), Jiangxi Ganfeng Lithium (SHE:002460), Galaxy Resources [ASX:GXY] (OTCPK:GALXF), Mineral Resources [ASX:MIN], and Neometals [ASX:NMT] (OTC:RRSSF). The near-term producers include Altura Mining [ASX:AJM] (OTCPK:ALTAF), Pilbara Minerals [ASX:PLS] (OTC:PILBF), Tawana Resources [ASX:TAW], AMG Advanced Metallurgical Group NV [NA:AMG][GR:ADG](OTCPK:AMVMF), Kidman Resources [ASX:KDR], Critical Elements [TSXV:CRE] (OTCQX:CRECF), Nemaska Lithium (OTCQX:NMKEF) [TSX:NMX], Lithium Americas [TSX:LAC] (OTCQX:LACDF), Lithium X [TSXV:LIX] (OTC:ROCEF), European Metals [ASX:EMH] (OTCPK:MNTCF), Neo Lithium Corp [TSX:NLC] (OTC:NTTHF), Bacanora Minerals [TSXV:BCN] (OTC:BCRMF), Lithium Power International [ASX:LPI] (OTC:LTHHF), Advantage Lithium [TSXV:AAL] (OTCQB:AVLIF), Millennial Lithium Corp [TSXV:ML] (OTCQB:MLNLF), AVZ Minerals [ASX:AVZ] (OTC:AZZVF), International Lithium Corp [TSXV:ILC] (OTCPK:ILHMF), Sayona Mining [ASX:SYA] (OTC:DMNXF), Pure Energy Minerals [TSXV:PE] (OTCQB:PEMIF), Wealth Minerals [TSXV:WML] [GR:EJZN] (OTCQB:WMLLF), Birimian Ltd [ASX:BGS] (OTC:EEYMF), LSC Lithium [TSXV:LSC] (OTC:LSSCF)/Dajin Resources [TSXV:DJI] (OTCPK:DJIFF) and Piedmont Lithium [ASX:PLL] (OTC:PLLLY).

Risks

• The usual mining risks – Funding, permitting, off-take, production issues etc.
• Stock dilution, liquidity risk (best to buy on local exchanges).
• Sovereign and political risks.

Investors can view the November 2017 company presentation here. Also I would highly recommend watching the following AIS interview video here.

Conclusion
AIS Resources were previously not easily investable trading under the TSX-H ticker, and have only recently become more accessible to investors; hence the stock price has risen recently.

AIS Resources strength lies in their very experienced management especially Phillip Thomas, who has explored all 52 of Argentina’s salars, and worked previously to develop the Rincon salar, the Pozuelos salar, Hombre Muerto salar, and the Pocitos, Salinas Grandes and Guayatayoc salars. Experience does not come any better than that, especially in the lithium sector.

Valuation is still very attractive due to the early stage, with a current market cap of a mere CAD 62 million, around 4x cheaper than comparable peers at a similar stage.

AIS Resources already has some excellent results from their flagship Guayatayoc salar, plus has exposure to three different salars (Guayatayoc, Vilama, Quinos Salar), and is fast tracking progress towards production. Given the above facts and the very low market cap AIS Resources appear to be an excellent speculative lithium buy right now. My only thought to understand why they are still so cheaply valued is that the stock was held back previously due to not being listed properly on the TSXV and US OTC, and perhaps has not received the same promotion.

A 2018 resource announcement followed by a BFS, then progress towards funding, off-takes and production, should all serve as catalysts to drive the stock price much higher towards my preliminary price targets.

I would be a buyer now, and would look to accumulate as they progress to de-risk the project. As usual all comments are welcome.

Disclosure: I am/we are long NYSE:ALB, NYSE:SQM, ASX:ORE, ASX:GXY, ASX:PLS, TSX:LAC, ASX:AJM, ASX:EMH, TSXV:ILC, ASX:AVZ, ASX:LPI, ASX:PLL, ASX:SYA., TSXV:AIS, TSXV:WML. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.

Canadian junior lithium explorer and developer optioned to buy into several promising lithium salars in Argentina.