Pan Asia Metals with a Lithium Story that Makes Total Economic Sense
In May 2021, I had a Coffee With Samso with Paul Lock, the Managing Director of Pan Asia Metals Limited (ASX: PAM), entitled - Pan Asia Metals Limited (ASX: PAM) banks on a Lithium Project with a Low Cost Structure Strategy. This was one of the few occasions when I was surprised by something I heard during a Coffee with Samso. I learnt that Lepidolite actually has a place to play in the Lithium space.
The thing is, I have always thought that Lepidolite, as a mica lithium mineral, was inferior and has difficulties in the production of lithium. During my conversation with Paul, I started to realise that things may have changed over the years and if this were true, then the whole Pan Asia Metals strategy would make total sense.
This new understanding made me think about how the combination of Lithium and Tungsten could make the perfect storm.
So What is Lepidolite?
Lepidolite is a lilac-grey or rose-coloured member of the mica group of minerals with chemical formula K(Li,Al)3(Al,Si,Rb)4O10(F,OH)2. Mica is a flaky mineral and is extremely soft.
Figure 1: Lepidolite in its natural form. Source: (Geology.com)
What lepidolite has is that it is the most abundant lithium-bearing mineral and is commonly associated with rubidium and cesium as by-products. Whether this is a good thing or not, I will have to wait for them to tell me :-).
The Tungsten Factor
Tungsten or Wolfram is a chemical element with the symbol W and atomic number 74. According to Wikipedia, Tungsten is a rare metal found naturally on Earth almost exclusively as compounds with other elements. It was identified as a new element in 1781 and first isolated as a metal in 1783. Its important ores include tungsten, scheelite, and wolframite, the last lending the element its alternate name.
Over the years, Tungsten has been one of the commodities that I have an understanding about the rise and fall of its market. A summary outlook to 2030 by Roskill has painted a moderate to low key projection for the pricing of Tungsten.
According to the report, the price of tungsten is deeply affected by the transition to electric vehicles and the US/China trade disputes. The good news is that the Chinese and Russian mines are reaching their mine life which will take some of the supply out.
The Pan Asia Metals Limited Story
Pan Asia has Lithium and Tungsten projects in southern Thailand. The project lies within the Southeast Asian Tin Belt (SEATB) that stretches from Myanmar towards the Indonesian island of Belitung. The island of Belitung is the birth of the Billiton in BHP Billiton. Billiton’s roots trace back to 1851 and to a tin mine on the Indonesian island of Billiton (Belitung).
Figure 2: Pan Asia Metals Limited projects in southern Thailand. (Source: Pan Asia Metals Limited)
It is reported that over 50% of the world's tin production is derived from the SEATB region. This region is basically a large granitoid and those that have biotite are where the action starts. The significance of granitoids is that they are synonymous with pegmatites. Pegmatites are where you find the minerals that host incompatible elements that are of interest, such as Lithium, tungsten and tin.
The Case for a Lithium Story
In April 2021, it was reported that a 8GWh lithium battery plant will be built with a joint venture agreement between zero emission vehicle pioneer Evlomo Incorporated and Rojana Industrial Park Public Co., Limited. (Source: Green Car Progress)
Bestmag.co.uk says companies will invest up to $1.06 billion through a new joint venture company with Rojana — a joint venture between Japan’s Nippon Steel and Sumikin Bussan Corporation, and Thailand’s Vinichbutr’s Group — owning 55% shares with the remaining owned by Evlomo.
A 1GWH plant at a cost of USD$143 million is expected to start in 2021.
An investment of this scale is just the beginning of things to come. Readers should remember that Thailand is a car manufacturer. In my opinion, this is just the start of things to come. The density of Asian countries will mean that the adoption of EVs will be at a faster rate than Europe.
I am sure that with these kinds of development, the projects being talked about by Pan Asia will be greatly welcomed. Which country would not want to be able to source their own lithium? It is a no brainer. You can argue if they will be able to mine economically what is in the ground, but you cannot argue the business case.
Thailand and Indonesia aim to be regional EV (electric vehicle) production hubs as well as build manufacturing facilities for EV batteries. The Thai government has set a target for electrified vehicles to reach 30% of total domestic vehicle production by 2030 as part of its 3030 EV Production Policy. - Marklines.com
Thailand is not a minnow when it comes to car manufacturing in both combustion (Figure 3) and future EVs (Figure 5). I have read that even the Chinese car manufacturer, Great Wall is manufacturing in Thailand. The strength of the car manufacturing industry is made more apparent with a very mature car part producing industry (Figure 4).
Figure 3: Passenger car production volume APAC 2020, by country. (Source: Statista)
In 1963, the Thai government imposed "local content requirement" (LCR) that sets a minimum number of parts to be included in vehicles in Thailand. LCR is still 60-80% of Thai made parts. LCR can reach 90% for eco-cars and pickups, and is close to 100% for motorcycles (Krungsri.com).
Figure 4: The Thailand car manufacturing sector is doing very well. (Source: Asean Briefing)
As China becomes more expensive to work in, the influx of companies setting up operations in South East Asia is evidence of the migration of value creation. The established nature of the manufacturing industry in the Indo-China region serves to show that a developed source of lithium would be strongly encouraged by government and capital markets.
Figure 4: Number of publicly accessible electric vehicle chargers in Asia Pacific in 2020, by country. (Source: Statista)
Corporate (Pan Asia Metals Limited)
Current market Capitalisation: 20.8M @ AUD$ 0.155c/share (19th August 2021)
Shares on Issue : 126,010,288 (7th July 2021)
Key Shareholders: Paul Lock 33.4% | Thai Goldfields NL 16.1 % | Board & Management (55.6%)
Figure 5: The share price chart for Pan Asia Metals Limited (PAM), (Source: Commsec)
There are four main projects in the portfolio:
The Reung Kiet Lithium Project – SEASnW Belt , Southern Thailand – 100% held;
The Khao Soon Tungsten Project – SEASnW Belt , Southern Thailand – 100% held;
Bang Now Lithium Project – SEASnW Belt , Southern Thailand – 100% held; and
Minter Tungsten Project – Lachlan Fold Belt, NSW, Australia – 100% held.
These projects are selected based on the following parameters listed below:
At or near surface mineralisation, with depth potential;
Extensive mineralised strikes;
Industry leading grades;
Proximity to required infrastructure;
Well educated workforce; and
Potential for downstream value adding
There is a good amount of information on the Pan Asia Metals website. Click Here.
Over the last couple of months, the world of lithium has taken a leaf out of the crypto trading phrase of " Gone to the Moon" as they would say...
Currently, I will admit that I do not understand the underlying demand for lithium. What I do know is that we are in a world of electrification and the rise of the Electric Vehicle and the use of Renewable Energy is just gaining pace. What I don't understand is the apparent depletion of supply. Surely, the ginormous resources of Brine Lithium is more than sufficient for any surge in lithium demand?
As the market is making my thoughts amateurish everyday, I now look at projects such as this one with Pan Asia Metals with a different set of glasses. In my conversation with Paul Lock, it appears that the extraction of lithium from lepidolite may have improved.
There may be arguments about the validity of the last sentence but what we all have to agree is that a potential of a lithium resources in Thailand's backyard is a big deal. The exit strategy is guaranteed for Pan Asia.
From an investment perspective, a company with a market capitalisation of AUD20M with a potential lithium resource has got be of good value. The market for lithium is super hot at the moment and if the current market narrative is correct, this will get larger.
Technically, the projects appear to be workable. A series of pegmatites which are bringing in Li at the low 1% grades is perfect. What the company needs is to drill extensively and get a resource out soon to give the market some assurance. Once this has been established, the company will present itself differently.
Looking at the maps produced in the presentations and the websites, the geology looks good. The projection of the prospective resource is not overly marketed and I think being in this Tin Belt is very important. The belt runs for a long way and the presence of large granitoids indicate to me that mineralisation is abundant and consistent.
No story has a clear run to the finish but I like those that have good entry and exit strategies clearly mapped out.
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