Clayton Valley lithium explorer Cypress Development achieved a key milestone last week by entering into an agreement with Dajin Resources which could allow Cypress to obtain water rights at Dajin’s Alkali Spring Valley Lithium Property only 12 kilometers away from Cypress’ Clayton Valley Lithium Project. Cypress CEO Dr. Bill Willoughby commented “We look forward to working with Dajin on the exploration of the Alkali Spring Valley Lithium Property, and we appreciate their work to date towards obtaining related water rights. We particularly welcome the prospect to explore synergies with our Clayton Valley Lithium Project, which is only 12 kilometers away.”
The key catalyst for Cypress over the next six months is the advanced metallurgical work that the company is currently working on. The goal of bench-scale met work over the next few months will be to confirm the US$4,000/tonne lithium-carbonate operating cost number that was used in the Cypress PEA with a higher degree of certainty. So far Cypress’ metallurgical work has generated recovery rates of 81.5% using an agitated leaching process that uses 125 kg of acid per tonne of clays.
The PFS metallurgy will concentrate on looking at the leaching characteristics of each individual geologic unit within the starter pit area and nailing those down. The chemistry is not in question, it is simply a question of the cost to get the lithium out of the clays. Cypress’ goal is to complete a preliminary feasibility study (PFS) by Q1 2019 which will go a long way towards confirming the economic viability of the Clayton Valley Lithium Project. A positive PFS will substantially de-risk the project and take it to the stage at which institutional investors might become comfortable making CYP shares a component of their portfolios.
This next step of advanced metallurgy work will cost roughly C$1 million which will not be a challenge for Cypress to raise. After investors “sold the news” following the release of Cypress’ positive PEA, CYP shares have declined to a level of important support/resistance near C$.25:
CYP.V (Daily – 2 Year)
At C$.25 per share Cypress has a modest C$15 million market cap. I believe that this correction has run its course and traders have likely more than ‘priced in’ the coming C$1 million financing. Once the size and terms of the financing are confirmed I can envision a scenario in which CYP shares experience a relief rally. After all, once Cypress has completed a positive PFS the company will be in the final stages of development before mine construction (permitting, feasibility). A sub-$20 million market cap for a company with a $1+ billion project NPV(8) in the final mine development stages would be absurd to say the least.
I’ll share “the most important graph in mining” simply as a reminder that Cypress is currently in the so called “orphan period”, but it is this stage of project development that offers some of the best investment opportunities:
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