Grid Metals and the Future of Mining Production Agreements
Grid may not have set out to be different, but through smart businesses decision making and pragmatic growth they may now be writing the template for how commodity explorers make money.
In the mining space, building a production and processing facility always follows exploration and with actual sales to the market the final step to revenue.
However, in Grid’s case they found themselves in a unique situation where the only active lithium spodumene producer in Canada just happens to be their next door neighbor.
And this neighbor, who we will call the Tanco Mine Group, is on the lookout for more lithium to keep its production facilities humming.
Sensing an opportunity, Grid Metals begans discussions with Tanco and in October 2022 the two companies announces a memorandum of understanding (MOU).
This MOU does two things for Grid
- They now have a potential sales partner for raw lithium, helping to avoid processing it themselves.
- They can generate cashflow sooner and can potentially fund construction of their own production facilities out of internally generated cashflow when the time is right.
Being able to move from exploration, directly to sales is largely unheard of in the mining world and can only happen when the stars align like they have for Grid Metals.
Tanco Pre-Production Agreement Details
Source: Grid Metals
The Timeline to first Sales with Tanco
Grid Metals has been proactive in moving their unique tolling MOU along and even before they had the deal signed with Tanco they had already been moving through the government application process in anticipation of the Tanco deal.
They now are working through an advanced exploration permit which takes around 12 months. With this permit, Grid can begin bulk sampling of their resource and building critical infrastructure.
Grid’s goal is to be producing from the Donner Lake project within two to two and a half years.
With the near term sales potential from the Tanco agreement, Grid can get away with drilling only the top part of their resource instead of waiting to prove there is far more lithium deeper underground.
Source: Grid Metals
The Rationale for the Bannockburn Asset Sale
Grid Metals recently sold their Bannockburn nickel asset to Canada nickel.
When asked why, Dave Peck, VP of exploration responded that it simply came down to monetizing an asset they did not have experience with and currently had no plans to explore further.
They were happy to receive shares of Canada Nickel (Ticker: CNC.V) in the deal and believe Canada Nickel has a bright future and the shares are worth holding onto.
Grid’s Unique Knowledge of the Fox River Belt
Dave Peck, VP of exploration commented that the geology of the northern Fox River belt is a dead look-alike for the Raglan Belt in Northern Quebec which has been a prolific nickel sulfide resource for global miner Glencore.
He thinks Fox River will end up being a world class Nickel resource, just like Raglan in a few years.
Mr. Peck has already made discoveries personally for Anglo American when he worked in the Raglan Belt in a previous position and he believes with persistance and some capital, Fox River will pay off.
To learn more about Grid Metals visit their website HERE
Source: Grid Metals
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