Shareholder Letter – July 11, 2011
Dear SHAREHOLDERS,
In response to
Rodinia Lithium Inc.'s (“Rodinia” or the “Company”) letter to shareholders dated June 1, 2011, set out below, the Company received a written response from a shareholder containing various questions raised from the corporate update provided by the Company. As such correspondence refer to comments raised in an on-line discussion board with a number of other current investors in Rodinia and given that the questions are shared by more than a few investors, management of the Company would like to take this opportunity to address such questions and comments and provide a response to all of its shareholders. Accordingly, we have set out a Q&A style update we hope will serve to universally respond to the issues raised.
Please note such questions are based on comments and questions received from shareholder correspondence, however, for the purpose of this update have been reworded slightly where applicable to fit the context of this update.
Q: In the June 1st letter, the Company discussed the Preliminary Economic Assessment ("PEA") and stated that the PEA was initiated for Diablillos on April 4, 2011 and goes on to say “
We are in the process of entering into various engagement letters with the appropriate consulting groups involved in this process.” The two months between April 4th and June 1st appear to be a sufficient amount of time to hire consultants to conduct the PEA.
Why has there been such a long delay in hiring a contractor?
RM: Rodinia has all the necessary contracts in place to complete the PEA. Further, work is well underway with these consulting groups towards the completion of the PEA. Information on the results of the PEA and certain steps within the PEA process will be disclosed once such information is available. At that time we will also disclose, where appropriate, which consulting groups have been involved in completing the work. We are confident that we have hired the best the industry has to offer and the quality of the work will become evident as we develop the Salar de Diablillos.
Q: In the June 1st letter, the Company states: “
To date we have spent one-on-one time with over eight analysts; five analysts have spent time visiting our project sites and another three are in the process of scheduling visits.”
How long ago did the Company initiate contact with the eight analysts? When did the five analysts visit the Diablillos project site? Do you anticipate more analysts, which have visited Diablillos, to initiate coverage of the Company? If so, when do you think this might happen?
RM: Rodinia is continuously looking to engage additional analysts to increase our coverage. Initial site visits occurred during the first half of 2010, starting with Jon Hykawy of Byron Securities. Jon initiated coverage shortly thereafter and the team at Byron has been very supportive ever since. Thereafter, a team at Genuity Capital Markets initiated coverage. Unfortunately for the Company, Genuity was acquired by Canaccord Financial and both the analyst team at Genuity and the team we were engaging at Canaccord moved on to new firms and new roles where lithium coverage was no longer part of their mandate. On a positive note, however, the Company was pleased to learn that David Talbot at Dundee Securities initiated coverage on Rodinia on June 9, 2011. In addition to coverage initiated by Byron and Dundee, the Company also has research coverage from UBIKA and from RB Milestone Group. We are working diligently to attract a broader research following and anticipate additional initiating reports within 2011. While the Company is hopeful that such coverage will be initiated, it is important to note that investment banking research coverage is completely independent of Rodinia.
It is also worth noting, that as of the date of this Q&A, and using Bloomberg as the source for investment banking research coverage, the junior lithium comparator group of eight companies listed on slide 22 of our corporate presentation, has an average following of 2.37 analysts (range zero to four). With two currently publishing on Rodinia, and having lost a third to industry changes, management believes it has been successful in attracting the necessary coverage and will endeavour to attract a broader research following where applicable.
Q: With a rough, projected production of 10,000 tonnes per year from Diablillos, how many customers in the Lithium market are thought to be necessary for the Company? Is Shanshan part of this projected market or is this organization solely working to develop the research and engineering for resource extraction from Salar deposits? Is an off-take agreement with Shanshan anticipated?
RM: Our relationship with Shanshan remains strong and management expects this relationship to continue to evolve as we further develop the project. Shanshan is a significant end-user of lithium carbonate and not a mining company with research and engineering expertise.
Q: Could the Company provide an update regarding the progress of the Clayton Valley project? As this is now Q2 2011, are we to expect that these objectives are behind schedule, and if so, any reasons for the delay? Does the Company project a new timeline for these events (i.e. permitting, drilling, Feasibility Study, pilot plant, financing, construction) be completed?
RM: Clayton Valley is experiencing delays due to drill permitting issues. The Company expects to resolve these issues shortly and complete additional drilling and the resource estimate by the end of this year. The delays experienced are unfortunate and we are doing everything in our power to commence drilling on the project again. Clayton Valley remains one of the Company's key assets and management is working diligently to continue exploration and unlock its potential value for shareholders.
Q: The Company has indicated that it is currently well financed for the majority of the work planned for 2011.
What type of financing is the Company interested in pursuing towards the end of 2011? Is the Company considering equity, debt or another partner? When does the Company anticipate this financing?
RM: Rodinia monitors its capital needs very closely and assess financing opportunities as they are needed or presented to the Company. At this point, the Company does not anticipate requiring additional financing in the near term. When required, Rodinia will attempt to secure the necessary financing to develop the projects with a view to minimizing the dilutive impact to current shareholders. It is our aim to reach production in as short a time period as possible without overly diluting the Company. We believe we will demonstrate this strategy as we continue to develop.
Q: Does the Company envision taking its properties to production or does it hope for the properties to be bought out pending successful results of respective Bankable Feasibility Studies?
RM: Rodinia does not speculate on market activity, nor does the Company chase projects that we don’t believe have the potential to become important lithium producers. We intend to develop these assets with the clear mandate of putting them into production. We have compiled a team of the industry’s top experts to ensure timelines are met and the most efficient and profitable production facilities are built and operated.
Q: Does the Company have an opinion as to why current SP has declined so dramatically since the last refinancing and why the current SP languishes in an apparently moribund state? While global economic uncertainty has been factors in investment, it does not explain much of the current SP value relative to other Lithium Juniors.
RM: We are wholeheartedly disappointed with the share price performance thus far in 2011. We believe we are working very hard and most importantly achieving the right results with the project, however, these efforts are not reflected in the share price. We believe that much of the downward pressure on the stock has come as a result of global economic uncertainty and the flight of investment capital away from junior names in lesser known commodities like lithium to liquid gold names or into cash. In addition, the Company believes that it may have suffered from an increasingly cautious junior lithium market which management believes may have resulted from the material restatement of one of our competitor's initial resource estimate. While the Company cannot foresee complications our competitors may have, management remains optimistic that it is developing its properties with view to unlock the potential value for its shareholders.
Our goal is to be a leader in the junior lithium market and we will continue to strive to achieve this. Since our last financing, we see as ourselves as middle-of-the-pack performers. This is not where we want to be and we hope to demonstrate, in the near future, multiple reasons why we should be a leader.
Q: What is the type and amount of proposed production of lithium and potash targeted at this stage by the Company?
RM: Initial production estimates are between 10,000 to 15,000 tpa LCE. The facilities will be scaled upwards as warranted and as applicable.
Q: When will RM have a good idea about the economics (e.g. costs per tonne and revenues per tonne) of the proposed production levels?
RM: These items will be addressed initially in the upcoming PEA scheduled for the second half of this year. These parameters will be further refined during the subsequent Feasibility Study.
With respect to revenues per tonne, we draw your attention to a press release issued by FMC Lithium on June 23, 2011 announcing a 20% price increase for lithium carbonate effect July 1, 2011.
http://www.prnewswire.com/news-releases/fmc-lithium-announces-global-price-increases-124446383.html
Q: Could the Company elaborate on some of the ideas around the level of production and time? I understand that, at a production level of 10,000 to 15,000 tonnes per year of lithium carbonate, there could be as much as 400 years of resource extraction given current indications of resource. This timeline does not appear to be beneficial from a Net Present Value perspective to shareholders.
RM: 15,000 tpa represents over 10% market share at this time. While forecasts show demand increasing over the next ten years, it is Rodinia’s policy to begin with a reasonable level of market participation. The Company anticipates it will be able to increase production as demand increases. Management believes that a more conservative approach to its production level targets will assist in reducing higher capital expenditures associated with much larger production, which the Company hopes will ultimately benefit shareholders in the long term.
Q: In light of the announcement made by the governor of Jujuy Province in March 2011, has the Company approached the authorities in Salta Province to seek assurances that they are not planning a similar move in declaring lithium a strategic material and if so what was their response?
RM: While management has had private conversations with Salta’s mining authorities, Salta has publically expressed their position in regards to this issue stating on several occasions that they
do not plan to follow Jujuy’s footsteps. In fact, Salta has publically frowned upon its neighbouring Province's policies calling them “unsound”.
We said it last month but feel it just important to reiterate now – as a team,
our top priority is the successful development of our lithium projects. An extension of this priority is making sure that our efforts are accurately reflected in our share price. While we are disappointed with recent trading, we maintain our positive attitude and are working hard to develop the company and to unlock value for shareholders. With the work we continue to complete, the news flow that will follow our recent initiatives (drill results, processing work, etc.), and support from new and existing shareholders such as the individual who took the time to compile the list of questions set out above, we remain highly motivated to continue to grow the Company and execute our strategic plan.
Thanks again for your continued support.
Sincerely,
RODINIA LITHIUM INC.
Farhad Abasov – Executive Chairman
Aaron Wolfe – VP, Corporate Development
William Randall – President & CEO
Jennifer Wagner – Corporate Secretary
Ryan Ptolemy – Chief Financial Officer
Investor Cubed Inc. – Investor Relations
June 1, 2011
Dear SHAREHOLDERS,
On behalf of
Rodinia Lithium Inc. (“Rodinia” or the “Company”), we would like to express our appreciation of your ongoing support as a shareholder, and share with you our excitement and vision for the Company as we continue to develop the Salar de Diablillos Project (“Diablillos”).
Despite challenging times in the global capital markets, we were able to close an $11.5 million bought deal equity financing on February 8, 2011. Since that time, we have been extremely busy. We have taken numerous steps towards the development of the Diablillos project in Salta Province, Argentina. In doing so, we have been actively deploying the funds raised to further the project in hopes of generating returns for shareholders. Notably:
- Defined an In-Situ Inferred Brine Resource. On March 2, 2011, we completed our initial inferred brine resource estimate under the guidelines of National Instrument (“NI”) 43-101. This initial inferred brine resource estimate was independently completed by the internationally recognized, professional engineering and consulting firm AMEC Internacional Ingenieria y Construccion Limitada (“AMEC”). At that time, we proudly press released 4.9 million tonnes of lithium carbonate equivalent inferred resource and 19.8 million tonnes of potassium chloride equivalent inferred resource. This resource estimate positions Diablillos amongst the premier lithium and potash bearing salars in the world.
- Defined a Recoverable Inferred Brine Resource. On April 1, 2011, one month after releasing an in-situ inferred brine resource at Diablillos, we completed additional work and analysis to define a recoverable inferred brine resource estimate. This work was again completed independently by AMEC. The recoverable inferred brine resource was 2.8 million tonnes of lithium carbonate equivalent and 11.2 million tonnes of potash. As a team we were very excited by this development, a recoverable resource provides additional confidence for a significant portion of the in-situ resource, and with additional work and economic data, could represent an expectation for an eventual brine reserve level.
- Initiated a Preliminary Economic Assessment (“PEA”). Following from the positive information learned with the recoverable inferred brine resource, we initiated a PEA for Diablillos on April 4, 2011. The PEA will review the economic parameters for the development of a 10,000 to 15,000 tonne per annum lithium carbonate operation and management expects the PEA to be completed before calendar year end. We are in the process of entering into various engagement letters with the appropriate consulting groups involved in this process and wish to express to shareholders that we will only be working with the industry’s top tier consultants to ensure the integrity of the work.
We are also working on a number of initiatives that we believe will help generate interest in the Rodinia story and that will ideally have a direct and positive impact on our share price. Specifically:
- Continue to Attract Top-Quality Professionals. Over the past month, we have retained the services of Bob Cinq-Mars to advise on processing methodologies. This was yet another significant addition for the Rodinia team as Bob comes with an extensive lithium and lithium processing background, but more importantly with direct experience with salars in Argentina having spent 20 years with FMC Lithium Division (“FMC”). Our team already includes key professionals that helped successfully define and build lithium operations for FMC and for the Argentine government. We believe this addition will solidify our processing capabilities, but more importantly highlights that top-quality industry professionals view Rodinia as having significant potential.
In addition to adding Bob, we are in active discussions with a few other industry professionals that also boast impressive lithium resumes, and with a number of successful and well connected lithium-focused, end-market professionals that we hope to include as part of a Business Advisory Board for the Company or as additions to our Board of Directors. In this last light, we recently added Xizhong Shi to our Board. Mr. Shi is the CEO of Hong Kong Shanshan Resources Co. Ltd., a strategic investor in Rodinia and one of the world’s largest producers of materials used for the manufacturing of lithium ion batteries. Mr. Shi is a graduate of Beijing University, the most prestigious post secondary institute in China, and has a track record of success that has made him a known and highly regarded figure in China. Mr. Shi provides valuable insight into the end-market for lithium carbonate and is able to open doors for Rodinia to meet many other key industry players.
- Working to Initiate Equity Research Coverage. A key part of getting the Rodinia story out to the market and to attracting new investors is coverage from third party equity research analysts. We have been fortunate over the past 16 months to have developed a following and support from Byron Capital Markets, however we believe that more research coverage is vital to getting our story out, and we are working diligently to try and attract the attention of these analysts. We believe in the coming weeks or months we will see the results of these efforts through various initiation reports. To date we have spent one-on-one time with over eight analysts; five analysts have spent time visiting our project sites and another three are in the process of scheduling visits.
- Continuing our Broad Marketing Initiatives. Throughout the past two years we met with a number of institutional investors across the Americas, Europe and Asia. We have continued to meet with new institutional accounts and with a number of retail groups, but understand that we have really only begun to scratch the surface of potential investors and supporters. Over the summer months, we plan to be very active marketing Rodinia to new potential investors and to those who saw us before our recent Diablillos advancement efforts. We have a compelling story to tell and the more we tell it, the more support we will see in the market.
- Advancing Relationship with Shanshan and Other Strategic Investors. During 2010, Rodinia was successful in establishing a relationship and exploration funding from Shanshan Enterprise, based in Ningbo, China. As previously mentioned, Shanshan is China’s largest lithium battery materials provider and one of the largest end users of lithium products in the country. Over the past few months, and in the weeks to come, Rodinia’s senior management team will be travelling to China in order to meet with Shanshan to further our strategic releationship. It is our expectation that both Rodinia and Shanshan can mutually benefit from a closer working relationship consisting of broader cooperation developing the Diablillos deposit into an operating mine.
We also continue to receive inbound calls from other strategic end-users of lithium carbonate. These inquiries range from well-known international businesses, to smaller cutting-edge technology companies. We actively engage with all interested groups and are hopeful that in the near-to-mid-term we can broaden our off-take horizons while securing additional development capital.
As a team, our top priority is the successful development of our lithium projects. An extension of this priority is making sure that our efforts are accurately reflected in our share price. While we are disappointed with recent trading we maintain our positive attitude and are working hard to develop the company and to unlock value for shareholders. With the work we have completed since the last financing, the news flow that will follow our recent initiatives (drill results, processing work, etc.), and support from new and existing shareholders, we remain highly motivated to continue to grow the Company and execute our strategic plan. As we progress, we will continue to update you through our website and press releases.
Thanks again for your continued support.
Sincerely,
RODINIA LITHIUM INC.
Farhad Abasov – Executive Chairman
Aaron Wolfe – VP, Corporate Development
William Randall – President & CEO
Jennifer Wagner – Corporate Secretary
Ryan Ptolemy – Chief Financial Officer
Investor Cubed Inc. – Investor Relations
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