By Steven Ralston, CFA
READ THE FULL WML.V RESEARCH REPORT
Wealth Minerals (WML.V) (WMLLF) is a junior mineral exploration company that is well-positioned to benefit from its portfolio of prospective lithium projects in the Lithium Triangle. The company holds control over portions of several lithium salar projects in northern Chile (Atacama, Trinity and others). Management intends to advance its concessions through exploration programs and opportunistically acquire additional ones. An Agreement with ENAMI creates a path for the development of Wealth’s Atacama Project. The Lithium Triangle appears to be the global sweet spot for low-cost incremental supply of lithium.
As prospective lithium properties are being investigated, management is exposed to the deal flow of a variety of mineral properties in Chile. Two properties copper properties (the Escalones and Cristal Copper Projects) appear especially promising. Opportunistically, management set out to acquire these prospective projects through a newly created entity, Wealth Copper. However, rather than dilute the company’s focus on lithium, management decided to transfer the potential of these properties directly to the shareholders of Wealth Minerals.
After initially attempting to spin-off Wealth Copper to shareholders, Wealth Minerals is now pursuing a path by which Wealth Minerals’ ownership in Wealth Copper will be transferred to the shareholders of Wealth Minerals through a business transaction with Allante Resources, a Capital Pool Company. The process is similar to business combination with a SPAC (Special Purpose Acquisition Company) in the United States by which a private company (in this case Wealth Copper) becomes a publicly-traded company while at the same time receives an influx of capital.
According to a letter of intent dated March 15, 2019, Wealth Minerals and TriMetals Mining will each own 50% of all of the issued and outstanding Wealth Copper shares immediately prior to the closing of the business transaction with Allante Resources. It is expected that after the closing Wealth Minerals and TriMetals Mining will each own 46.3% of Wealth Copper (with Allante Resources owning 7.4%). After the proposed private placement of Allante Resources, it is anticipated that Wealth Minerals will own between 30% and 35% of Wealth Copper, which the Board/management plans on distributing to the shareholders of Wealth Minerals, possibly in the form of a stock dividend.
On June 7, 2019, Wealth Copper Ltd. (a private company and wholly-owned subsidiary of Wealth Minerals Ltd.) and Allante Resources Ltd. entered into a binding letter agreement to combine their respective businesses. Trading was halted on ALL.H and will remain so until the transaction is completed.
Allante Resources is a Capital Pool Company whose principal business is the identification, evaluation and acquisition of a business in a Qualifying Transaction. Capital Pool Companies provide an alternative method for private companies to raise capital and go public in Canada.
View Exhibit I
Allante Resources is required to raise at least $2,000,000 through a private placement, which will be loaned to Wealth Copper at a 4% annual interest rate. Allante is also required to complete another private placement such that the combined gross proceeds of both financings will total at least $5,000,000. The net proceeds are expected to fund the exploration and development of the Cristal and Escalones Projects as well as to be used for general working capital.
There are several conditions on the completion of the transaction with Allante Resources Ltd:
• the transactions for the Cristal and Escalones Projects close
• the completion of Allante’s first private placement with gross proceeds of at least $2.0 million
• the approval of the TSX-V that the acquisition meets the requirements of a Qualifying Transaction
• the TSX-V initial listing requirements are met for a Tier 2 mining issuer, including the preparation of a 43-101-compliant Technical Report that contains a recommended work program of at least $200,000
Management became aware of these copper opportunities through its constant exposure to deal flow in Chile. Rather than dilute the company’s focus on lithium projects, it was decided to take advantage of these copper prospects and transfer them out to the shareholders of Wealth Minerals in some fashion.
ESCALONES COPPER-GOLD PORPHYRY PROPERTY
Before or on June 3, 2019, Wealth Copper Ltd., a wholly-owned subsidiary of Wealth Minerals, entered into a definitive agreement to a acquire 100% interest in the Escalones Copper Porphyry Project from TriMetals Mining Inc. in consideration of the delivery of 25,000,000 common shares in Wealth Copper and $1,000,000 in cash payments by Wealth Copper. In addition, TriMetals Mining will be granted a 2% net smelter royalty. The closing of the Escalones transaction is imminent.
The Escalones Project encompasses 59 exploitation concessions covering 16,100 hectares, some of which host porphyry and skarn copper-gold mineralization. The project is located 35 kilometers east of CODELCO’s well-known El Teniente underground copper mine.
Escalones hosts a four km2 area of hydrothermal alteration with geophysical anomalies consistent with copper, gold and silver hosted in porphyry-related mineralization. The resource deposit is open laterally and down dip, with an untested 10-kilometer northern extension to the north.
View Exhibit II
A NI 43-101-compliant mineral resource estimate on the Escalones Porphyry Copper Project was completed in July 2014.
View Exhibit III
CRISTAL COPPER PORPHYRY PROPERTY
In March 2019, Wealth Copper entered into an assumption agreement with New Energy Metals Corp by which up to a 100% interest in the Cristal Copper Project can be earned through assuming the obligation of making the remaining cash payments on the original option agreement dated August 4, 2017. The schedule of payments is listed in the table below. In consideration for the assumption agreement, Wealth Copper will deliver 50,000 common shares of Wealth Copper to New Energy Metals Corp. If Wealth Copper successfully exercises the option, Wealth Copper will grant a 30% participating interest in the Cristal Project grant to New Energy Metals with the remaining 70% interest being retained by Wealth Copper.
View Exhibit IV
View Exhibit V
Located in northern Chile about 10 kilometers from the border with Peru, the Cristal Property encompasses approximately 900 hectares in three exploitation concessions. A NI 43-101-compliant Technical Report on the Cristal Copper Property was completed in March 2018. It is believed that the property hosts a porphyry copper mineralization deposit at depth as supported by a fault zone and airborne geophysical data surveys (magnetics, gravity, and electromagnetic) conducted by BHP Billiton between 2012 and 2014. A circular doughnut-shaped anomaly (approximately 3 kilometers in diameter) was defined by the reduced-to-pole magnetic data while the electromagnetic data suggests a northwest-trending topographic ridge underlies the volcanic cover-rocks at a depth of at least 600 meters. Wealth Minerals signed a letter of intent (LOI) on August 30, 2018 with New Energy Metals Corp. (ENRG.V) to acquire the Cristal Property.
Lithium Pricing Update
Since early 2018, spot pricing has been under considerable pressure, beginning after a contract was announced between SQM (Sociedad Quimica y Minera) and CORFO (Corporación de Fomento de la Producción - Chile’s governmental agency for the promotion of production) in mid-January, which allows SQM (SQM) to produce up to 216,000 tonnes of lithium carbonate annually through 2025, which raised concerns about a potential oversupply situation. Subsequently, a Morgan Stanley report forecasted that an oversupply of lithium would occur starting in 2019. In the second quarter, LCE prices began to decline sharply, pressuring all lithium stocks, including producers and juniors. Since October 2018, the price of lithium carbonate appears to be stabilizing around the $12,000 per tonne level.
View Exhibit VI
On May 31, 2019, Wealth Minerals announced the arrangement of a private placement of up to 1,084,918 Units at $0.40 per Unit. Gross proceeds of up to $431,567 are expected. Each Unit consists of one common share and a 2-year, half-share warrant exercisable at $0.75 per share. Hendrik van Alphen, CEO, is participating in the private placement. Net proceeds are expected to be used primarily for the exploration and development of the Atacama Project and for working capital purposes.
On April 11, 2019, the initial tranche of the private placement announced on March 22nd was closed. A total of 3,960,911 Units were issued at $0.40 per Unit. Gross proceeds were $1,584,364.40. Each Unit consists of one common share and a 2-year, half-share warrant exercisable at $0.75 per share. Net proceeds are intended to fund mineral property option payments, costs for assessments of potential lithium mineral property acquisitions, exploration work and for working capital purposes, including for general and administrative expenses.
View Exhibit VII
Headquartered in Vancouver, British Columbia, Wealth Minerals Ltd is a junior exploration company that is building a portfolio of highly prospective lithium-brine mineral concessions located within the Lithium Triangle, currently targeting properties within salars situated in Chile. However, management’s scope for potential lithium-in-water and brine candidates extends beyond the region in the search for prospective mineral properties. Management has positioned the company to benefit from the upcoming expected growth of demand in the lithium space. Also, management continues to seek the acquisition of additional interests in prospective concessions. The company continues to constantly review and evaluate a number of properties in the region and then aggressively pursues to control the attractive ones.
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By Steven Ralston, CFA