Riversgold Limited (ASX: RGL) - Exploring for Lithium.
Coffee with Samso Episode 172 is with Julian Ford, CEO of Riversgold Limited (ASX: RGL). Riversgold is blessed with good fortune, finding a Lithium deposit in an old fashioned way of mineral exploration.
Riversgold has been pursuing their Tambourah Lithium project earnestly. Investors need to understand why there is a need to pay attention to this minnow in an exciting sector of the EV market. What may differentiate Riversgold from their peers is kind of complex.
The Riversgold Story
Why do I like the Riversgold story? It is one of the few exploration companies that are actually doing some real exploration. When you look at the companies that are out there exploring for lithium, you will be very surprised to find one that is actually exploring.
What I mean is that the majority, if not all, of the stories out there are ones where they have found a pegmatite on the surface and then drilled with discovery almost handed to them. These are the benefits of having low hanging fruits. I am not saying that this is a liability. What I am implying is that not everyone is blessed with such good fortunes.
Figure 1: Riversgold Bengal Prospect within the Tambourah Project in the Pilbara Region of Western Australia.
Riversgold seems to have gone that extra step to explore for the economic grades of spodumene. During the interview, Julian talks about how they are realising that they may be too close to the granite source. The mineralisation may be more fruitful further. The drilling intercept from TMBRC003 (listed below) is what lays hidden below the surface.
TMBRC003 (See Figure 1) intersected:
- 14m @ 0.50% Li2O from 15m to 29m downhole including 1m @ 1% Li2O from 18m down hole
- Applying a 0.5% Li2O assay threshold cut-off within the 14m downhole intersection, two smaller intersections of 4m @ 0.9% Li2O from 17m to 21m and 3m @ 0.6% Li2O from 25m to 28m downhole were identified reflecting zonation of Li2O grade within the pegmatite unit.
When you watch today's Coffee with Samso, you will hear Julian Ford talking about a systematic process in trying to find an economic deposit. Readers must remember that the easy pegmatites have now all been discovered. What lies underneath in the depths of these projects will be the next prize. The lithium industry in Australia, the real spodumene discovery is still young.
The Riversgold's story is one that has developed from concept to what is now creating some credibility. This is the virtue of mineral exploration. The more you drill, the more confident you become in creating a dream into reality. I think Riversgold has come a long way since our first Coffee with Samso in October 2022.
Chapters:
00:00 Start
00:20 Introduction
01:05 What is Riversgold about?
02:59 Updates on Riversgold projects: Mt Holland.
04:27 Mt Weld.
06:45 Tambourah Lithium Project.
11:09 Hypothesis for finding lithium.
14:06 What should investors look out for as a parameter for grade and size?
15:16 Thoughts on the current lithium market.
18:50 How should investors look at Riversgold?
22:25 How is Riversgold spending resources on their projects?
25:22 Comments on doubts about the demand of lithium.
27:21 News flow.
28:26 Why RGL?
31:16 Conclusion
While companies are drilling for minerals, investors can drill for information. Keep reading and build your knowledge for your DYOR.
The Equity Market and why companies like Riversgold should be on your trading screen.
Investors in the Australian Stock Exchange (ASX) are spoilt with companies that are promising the lithium prize. In the last two years, lithium stories dominated and commanded a lot of attention. The rush meant that investors were washed with stories and that made it hard to differentiate good from bad. To add salt to the wound, it also meant that investors could not tell what is a realistic potential and what is a pipe dream.
Figure 2: Riversgold share price chart. (Source: Commsec)
Let's get some context to the current market condition before we get into the Riversgold story. Historically, the small-cap market has been notorious for promising more than delivering and the last two years (since COVID) have been exemplary. If I am not mistaken, over AUD $1 billion has been raised in the small-cap commodity space (Figure 3).
As I write today, investors have suddenly been thinking that this was normal and the bull run would last a long time. They are fundamentally not incorrect. The market may be slow and not responding, but the commodity pricing is still strong. The fundamentals are still solid. This move toward Clean Energy is not reversible.
Figure 3: Top of the IPO market was in 2021. 2022 followed but it was greatly reduced as compared to 2021.
What is bad is in 2015. If anyone remembers, 2015 was when every commodity was heading south. Even oil and gas was heading south. There was no equity appetite and there was no sight of when the commodity pricing would recover. What was worse was what was going to create the demand - the surge in demand that will spur a commodity bull run.
Come back to 2023 and I believe that the main factor restricting funding is the rising interest rate. One can debate when the rates will pause and fall. What is sure is that there is nothing wrong with the commodity market. So the bearish tone in the market is most likely going to be temporary.
The Lithium Price Journey - The economic viability of a lithium project is more important now.
So the next part of this conversation is all about the Lithium pricing. As I mentioned, two years ago, Lithium was a word that could do no wrong. Companies that stumbled onto some "lithium pegmatites" or some pegmatites were able to raise money immediately.
For me, there was always the need to discover an economic deposit. As an investor, I need to know if there is some resemblance of a chance to make that discovery. The market and the eagerness of investors is to ignore this and just go with the flow.
My conservative thinking comes from the fact that I remember that it was not so long ago that the great Pilbara Minerals Limited (ASX: PLS) was almost broke. The lithium market had come to a point where Pilbara Minerals was the last man standing in Australia (See Figure 4). Altura Mining Limited which had a project adjacent to Pilbara Minerals and was the second in line for lithium glory was in administration and now has been consumed by Pilbara Minerals.
(Source: https://seekingalpha.com/)
As you can see in the chart below (Figure 4), it points to the steep rise in price and today, we are looking at almost a greater than 50% retracement. What is not obvious with the steep drop is that there is still no sight of a replacement for lithium in batteries where density of charge is concerned. If this is to be the case, then the price drop may be temporary and at worst rest a new path which at the current price, is still significantly higher than its low in 2021.
What this means is that the future for lithium is still bright but you better make sure your deposit is good. I think that the future lithium project has to be back to basics, meaning it needs to have the same economic parameters like every other project.
Samso's Conclusion
The Lithium sector is one of the most intriguing stories to comment. The demand for lithium cannot be dismissed and taken for granted. There is no shortage of narratives that tell investors that there is an endless demand for the metal. There are a lot of potential alternatives to lithium batteries but they are too slow and they cannot compete in the density of charge factor.
So there seems to be a clear pathway for lithium to dominate proceedings in the future. Hence, companies are all pushing the lithium song. However, when you look at what kind of projects are being marketed, investors should start asking pertinent questions on the viability and the reality of extracting the metal economically.
Lithium is not an anomaly. It has its place like every other commodity that has ever been mined or sucked out of the reservoirs. We have moved from horse carriages to hydrocarbon infused vehicles and are now moving into electrical automobiles. These paraphilias are all not immune to the simple demand and supply requirements. Price actions determine all matters that affect the viability of the project.
Hence, for me, if one is investing for a market volatility (always short term) then please forgive my thoughts. For those that are looking at long term actions, then the reality of finding an economic viability is important.
In my opinion, what I am seeing and hearing from Riversgold seems to be in step with building the long term story. It is easy to look at management and say that just because they failed before, they will fail again. But ask any well aged investor and they will tell you the old story of Great Fortunes falling to Great Failure and Great Failures turning to Great Fortunes.
Hence, in the case of Riversgold, they have said and done the things when we first met them in October 2022. So there is no reason to doubt their next move.
Management looks good and the old team of David Lenigas and Ed Mead has returned. Some have made money from this team and some have lost. So time will tell.