The 3Q Project
The 3Q Project is located in the southern end of the “Lithium Triangle” in the Puna Plateau. The area is characterized by high altitude salt flats, many of which contain elevated lithium concentrations. The largest brine lithium mines and projects in the world are located in salars in the Lithium Triangle including Atacama Salar (SQM and Albermarle), Cauchari-Olaroz Salar (Orocobre and Lithium Americas Corp) and Hombre Muerto Salar (FMC and Galaxy).
LOCATION & INFRASTRUCTURE
The Project is located in the southwestern portion of the Catamarca Province of Argentina, the largest Lithium producer province of Argentina. The closest paved road to the Project is Ruta Nacional 60, which connects the capital city of Catamarca (San Fernando del Valle de Catamarca) to Copiapó and the seaport of Caldera, via Paso de San Francisco. The closest population centre to the Project is the town of Fiambalá, Argentina (population 5,000), located 100 km east of the Project
There are no aboriginal communities or inhabitants in the Project area, which is only 25 km from the border with Chile, and approximately 30kms from the Maricunga Salar. The Maricunga Salar is another high grade lithium brine project that is located over a highway 210 km away from the Chilean port of Caldera (Copiapo). That means that with minimal infrastructure 3Q would be the closest Argentinean project to a Chilean port. Other Lithium projects in the same Province Include FMC Fenix Lithium Mine and Galaxy Sal de Vida Project.
THE NORTHERN TARGET
The northern portion of the salar and brine reservoir complex now encompasses a high grade target that extends for approximately 20 km in length and 5 km in width along the 3Q brine reservoir and salar. Samples in the brine reservoir (28 in total) contained an average Lithium concentration of 895 mg/l and Potassium of 7,694 mg/L and samples in the salar (32 in total) contained an average Lithium concentration of 784 mg/l and Potassium of 6,796 mg/L (lithium concentrations in both zones range between 400 to 4,000 mg/L and Potassium concentrations between 5,100 to 18,000 mg/L). Preliminary brine sampling results indicate these values are comparable and in most cases higher than current producing mines or projects in construction.
The preliminary brine sampling results also indicate that the northern target of the 3Q brine reservoir and salar contains remarkably low impurities, which when compared to lithium brine projects around the world they are considered to be one of the lowest known amount of combined impurities in the industry. The average Magnesium/Lithium ratio is between 1.58 Mg/Li in the brine reservoir to 1.87 Mg/Li in the salar and the average Sulphate/Lithium ratio is between 0.46 SO4/Li in the salar to 0.67 SO4/Li in the brine reservoir. Sulfate and Magnesium are critical impurities in Lithium brine projects because they could increase operational costs significantly and many projects become uneconomic at high impurity levels.
The northern target is surrounded by many geothermal springs. The Company has sampled approximately 12 of the geothermal springs, some of which have returned exceptionally high values of lithium (over 1000 mg/l Lithium). Further exploration work is required to understand the source of lithium (thermal springs typically contain less than 100 mg/L lithium, according to public data), the 3Q Project appears to be receiving a permanent input of metals from hot springs that are the largest input of water into the recharge system that is creating a very particular chemical footprint to the salar and creating exceptionally favourable conditions for lithium concentration in the natural lakes that are created.
Lithium Brine Process Studies
Neo Lithium has received positive results from the final engineering reports by Novigi Ltd. (Santiago, Chile) and Celimin (Center for Advanced Research on Lithium and Industrial Minerals of Antofagasta University), both reputable organizations at arm's length to the Company, on the process required to produce lithium from the 3Q Project's brine. A representative 0.5 tonne sample of the Northern Target was collected on January 2016 and sent for process studies.
The results of these studies show that Northern Target lithium brine can be concentrated by simple solar evaporation, with no costly additives required, to up to 2.6% lithium in approximately eight months. The results also show that with minimal cleaning using lime and sodium sulfate, the brine can be further concentrated up to 4.6% lithium. Further evaporation to approximately 7% lithium is feasible but further studies are on-going to define the evaporation time to achieve that concentration.
The results of the studies show that recovery of the ponds should be approximately 25 tonnes of lithium carbonate per hectare of pond constructed, comparable to other projects in the region. The results of the studies also demonstrate that the brine could produce potash as a by-product during the evaporation process although volumes and quality will require further studies.
With these results in hand the Company has already designed a pilot pond series that will be constructed on site covering an area of approximately 1 ha to test these study results at the project. Construction is expected to start in the next 30 days.
Final geophysical survey from Conhidro SRL on the 3Q Project were received in early December. Vertical Electrical Sounding (VES) was completed in thirty-five stations covering the entire 3Q Project and the alluvial cones surrounding the 3Q lithium brine northern reservoir. This geophysical technique attempts to detect the presence of brine at depth, which is highly conductive.
Results suggest that the brine bearing layers under the northern reservoir extend down over 100 metres and also extend horizontally under the surrounding alluvial cones for approximately 2 km to the east and 1 km to the west (to the end of the survey lines). In other words, the results suggest a doubling in the surface footprint of the northern reservoir down to a depth of approximately 100 metres.
The initial geophysical survey results were reported by the Company on November 28, 2016. The results of the full survey suggest that the saturated and semi-saturated layers extend the northern target for approximately another 6 km to the south. In addition, these results suggest that the brine saturated layers go down to approximate 100 metres from the surface and the semi-saturated layers go down in certain areas as deep as approximately 300 metres (to the end of the resolution of the geophysical survey).
In summary, these results suggest the northern target’s footprint (including the northern reservoir and northern salar) has increased from our original 14 km by 3 km to approximately 20 km by 5 km and extends down to approximately 100 metres under the northern reservoir and as deep as 300 metres under some sectors of the 3Q salar.
MAIDEN RESOURCE CALCULATION
Neo Lithium announced a maiden resource estimate for the 3Q Project on May 23, 2017. An independent measured, indicated and inferred resource estimate has been completed under the supervision of Canadian-based Groundwater Insight, Inc., which will be included in a technical report to be released within 45 days in accordance with the requirements of National Instrument 43-101 ("NI 43-101").
The resource estimate was conducted along the entire salar and brine lakes of the 3Q Project covering an area of 8,183 ha covering the Northern Target, as defined in the Company's current technical report entitled "Technical Report on the Tres Quebradas Lithium Project, Catamarca Province, Argentina", dated June 6, 2016 (the "2016 3Q Report"), and the Southern Target, described in Neo Lithium's press release dated February 28, 2017 and March 20, 2017
3Q Project Lithium and Potassium Resource Statement at 520 mg/L Lithium Cut-off
The low magnesium and sulfate content of the resource are consistent with prior samplings and drilling results and could make the brine very favourable for potential future processing. The table below summarizes the main impurities ratios for magnesium and sulfate.
3Q Project Impurity Ratios at 520 mg/L Lithium Cut-off
All the resource included in the 520 mg/L cut-off is in the area known as the Northern Target, which was originally identified by surface sampling that extends over the northern half of the salar (see the 2016 3Q Report). In the context of a sensitivity analysis, which does not constitute a mineral resource estimate, a lower cut-off of 400 mg/L would increase the Measured and Indicated resource to 1,224,305 tonnes of lithium carbonate with an average grade of 567 mg/L Lithium and the Inferred resource increases to 2,237,803 tonnes of lithium carbonate with an average grade of 567 mg/L Lithium. The Magnesium/Lithium ratio increases to 3.41 for Measured and Indicated resource and is also 3.41 for Inferred resources. The Sulfate/Lithium ratio is 0.64 for Measured and Indicated resource and 0.63 for Inferred resources.
Resource Estimation Methodology
The resource estimate was prepared in accordance with best practice estimation methods specific to brine resources, including a reliance on drilling and sampling methods that yield depth-specific chemistry and drainable porosity measurements of the brine host rock.
The resource calculation is based on 10 diamond drill holes (total of 1,960 metres) and 13 rotary wells (total of 1,177 metres) on 11 platforms. The diamond drill holes had core recovered in HQ triple tube. Of the 10 holes used for the resource analysis, only three reached the basement; all others were terminated after reaching target depth or due to drill limitations. The total thickness of the basin, and the total thickness of saturated sediments, is unknown for most of the basin.
A total of 152 brine samples and 23 QA/QC samples were collected in drill holes. Brine samples were collected in diamond drill holes using standard packer technique (both single and double packer) to obtain samples from discrete levels of the formation. Fluorescein dye was used to ensure that the samples were representative of the collection interval. Intervals range from 2 to 50 metres, depending on the hole.
A simplified geology model was assembled from surface mapping and diamond drilling core. The deepest hole goes down 330 metres and does not intercept the basement. Six main geological units were identified:
· 3Q Project lake (standing body of surface brine at the north end of the salar);
· High Porosity Halite (extends from surface of the salar, down to 30 to 50 metres in depth);
· Upper Sediments (present under the High Porosity Halite, mostly in the boundary areas of the salar, down to 75 metres in depth);
· Porous Halite (present below the Upper Sediments or High Porosity Halite),
· Massive Halite (under the Porous Halite);
· Lower Sediments (present under the Massive Halite, although not all the drill holes extended to this unit).
Core samples were shipped to Daniel B. Stephens & Associates Inc. ("DBS"), Inc. laboratory in the U.S., to measure relative brine release capacity ("RBRC"). This method of porosity determination is designed to estimate Specific Yield, which is the portion of the total porosity that can reasonably be expected to drain through pumping. General porosity trends were consistent with geology, with considerable variability also noted within geological units.
RBRC was measured in 58 core samples, to estimate the Specific Yield of each geological unit. Pumps test were also completed in the high porosity halite and the upper sediments.
RBRC Results and the Distribution of the Resource Between the Primary Geological Units
The High Porosity Halite hosts 16.25% of the resource. Pump tests were completed in this unit using fluorescein dye, which enable estimation of Effective Porosity, a parameter that is closely related to Specific Yield. These tests provided Effective Porosity values above 30%, indicating the average RBRC value used for this unit (18.16%, in the table above) tends to be conservative. More pump tests will be carried out in this unit in the next season to confirm porosity characteristics.
The deeper sediments host only 2.32% of the total resource. However, few boreholes penetrated this unit, indicating potential to host more resources. Further exploration is required at depth along the entire salar to identify the full extent of this aquifer, and to evaluate for the presence of lithium brine.
Measured, Indicated and Inferred resources classified by lithology are listed in Table 3. The Measured resources correspond to the 3Q Project lake, where detailed bathymetry, sampling, and relatively homogeneous composition allowed for a high degree of confidence in the estimation. The Indicated resources correspond to the upper units (High Porosity Halite and Upper Sediments) where all holes intercepted the units and there are pump tests that show that the units produce brine in short and long term tests. The combined thickness of these units ranges from a few meters to approximately 70 metres. The Inferred resource corresponds to lower units, which were intercepted by fewer holes and where no pump tests have been completed.
Resources were estimated using a block model and ordinary kriging technique with 180x180x10 metre (x,y,z) blocks.
Maps, sections, and additional information about this resource estimate will be available on the Company's website in the following days.
Neo Lithium requested Groundwater Insight, Inc. based in Nova Scotia, Canada to prepare an independent lithium brine resource estimate for the Company's 3Q Project brine deposit in Argentina and to compile a Technical Report (including a resource estimate), in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects - and consistent with the standards and guidelines set out by the Canadian Institute of Mining, Metallurgy and Petroleum.
In preparing the Report, Groundwater Insight, Inc. took into account and applied processes which Groundwater Insight, Inc. determined to be appropriate for brine style deposits. The NI 43-101 Technical Report will be available on SEDAR within 45 days of the news release dated May 23, 2017.
The mineral resource estimation was prepared by Geo. Marisa Franciosi using Geosoft Target 9.1 for Arc GIS under the supervision of Dr. Mark King, Ph.D, P.Geo. of Groundwater Insight. Inc, a Qualified Person as defined in NI 43-101. Dr. King has read and approved the contents of this release. Waldo Perez, Ph.D., P.Geo, is the internal Qualified Person for the 3Q Project and has also read and approved the contents of this release.