The push for a green economy has created an explosion in demand for lithium, which in turn has fueled a boom in exploration for the rare metal. One of the highest-grade projects to be discovered in recent years is Frontier Lithium’s Pak Project.
Introduction
Frontier Lithium’s 27 121-hectare Pak Lithium Project is located 175 km north of Red Lake, Ontario. The area is remote and can only be accessed by winter roads and by air, although the Watanynikaneyap powerline, which is expected to complete construction in 2024, will pass by the western margin of the property.
The Pak Project covers a ~60 km long trend of spodumene-bearing pegmatites which the company has dubbed ‘Electric Avenue’. The project has total reserves of 22 Mt at 1.55% Li2O, which are spread across two main deposits: Pak and Spark. A pre-feasibility study encompassing both deposits was completed in 2023. Mining plans call for production from two open pits, with Pak producing 210 kt/year of technical-grade spodumene concentrate, and Spark producing 830 kt/year of chemical-concentrate. Mine life is estimated at 24 years.
The Pak Project currently lacks any sort of infrastructure, everything except the high voltage powerline will have to be built from scratch. Total capital expenditure is estimated at 1.15 billion USD. The after-tax IRR is 24.1%, with a payback period of 4.9 years and NPV of 1.74 billion USD.
Electric Avenue
The Pak Deposit was discovered in the late 1990’s and was first drilled by Frontier in 2013. Pak’s probable reserves stand at 4.0 Mt at 1.79% Li2O with a cutoff grade of 0.65% Li2O; measured and indicated resources are 6.7 Mt at 2.02% Li2O, with inferred resources of 2.7 Mt at 2.29% Li2O. Pak is a rare deposit; not only is it high grade, but it’s also very pure, with an Fe2O3 content below 0.1%. Such low levels of iron make Pak’s spodumene suitable for technical/ceramic applications which most deposits can’t supply. Pak is the largest known technical grade spodumene deposit in North America. Pak remains open down plunge.
The Spark Deposit, located only 2.3 km northwest of Pak, was not discovered until 2018. Spark is much larger, but somewhat lower grade than Pak, with probable reserves of 18.0 MT at 1.50% Li2O with a 0.65% Li2O cut-off grade. Indicated resources stand at 18.8 Mt at 1.52% Li2O, with inferred resources of 29.7 Mt at 1.34% Li2O. The lithium produced from Spark is less pure, chemical grade material. Spark remains open along strike to the west and at depth.
In addition to Pak and Spark, Frontier also owns two more pegmatites which don’t yet have resource estimates: Bolt and Pennock. Bolt is located along the same trend as Pak and Spark, forming intermittent outcrops between these deposits. Bolt was discovered in 2020 and first drilled in 2023. Pennock also occurs along the same trend as the other three pegmatites but is a full 22 km northwest of Spark. The main Pennock pegmatite dyke extends over 1.5 km, and has so far received very little work, with 16m of surface channel samples averaging 1.96% Li2O. Pennock has not been drilled.
Geology
Mineralization in the project area consists of spodumene-bearing pegmatites, which are intruded into metasedimentary, metavolcanic, and granitic rocks. The property is situated along the boundary of the Berens River and Sachigo Subprovinces of the Archean Superior Province. Pak Project pegmatites are sub-vertical in orientation and aligned with the regional foliation of the host rocks.
Pegmatites in the area are classic Lithium-Cesium-Tantalum (LCT) type pegmatites. LCT pegmatites are formed from the last dregs of a larger body of molten granitic rock. As these granitic magmas cool elements such as lithium, which do not form solid minerals easily, become concentrated in the remaining liquid rock. These last vestiges of liquid tend to migrate away from the parental granite, often following major structures such as boundaries between geologic provinces, before eventually cooling into fields of small pods of pegmatite enriched in rare elements.
Many rare minerals occur in pegmatites, but lithium is found mainly in the minerals petalite, spodumene, and lepidolite. In the Pak Project area lithium originally formed petalite, but this mineral broke down into intergrown spodumene and quartz, a mixture often termed SQUI, as the pegmatite slowly cooled. Small amounts of lepidolite are also present. Gangue (non-economic) minerals are mainly K-feldspar, albite, muscovite, quartz, tourmaline, and apatite.
While LCT pegmatites can be mineralized with other rare metals such as cesium and tantalum, grades of these elements in the Pak Project pegmatites are relatively low, and they don’t contribute substantially to the economics of the project.
The Long Road
From a geological perspective, Frontier has an excellent resource. Pak and Spark together comprise a high-grade, moderately high tonnage resource. The technical-grade purity of the Pak Deposit will allow its’ concentrate to command a premium price.
The recent discovery of the Spark and Bolt pegmatites speaks to the potential of more deposits remaining to be found, especially considering the size of Frontier’s property and that much of it remains largely unexplored. The Pennock and Bolt pegmatites both await resource estimates. It seems likely that Frontier’s resources will increase, perhaps substantially so, as exploration continues.
Frontier’s biggest barrier to entering production is access. Ice roads only allow trucks to reach the site from January through April, and that’s in a good year. Unusually warm winters, such as the one central Canada is currently experiencing, can shorten the ice road season significantly. While winter roads may be sufficient for initial construction, opening the mine will require construction of an all-weather road, which would need to be funded by the provincial government.
Building this road will not be easy. Discussions around building a road to the remote Ring of Fire area have dragged on for years with little sign of reaching a conclusion. Even if governments and local indigenous communities prove to be supportive of a road, building such a long road through the rugged country of northwestern Ontario will require very significant investments of time and money.
Further complicating these challenging logistics is the need to maintain two separate processing steams: one for Pak’s technical grade spodumene concentrate, and one for Spark’s chemical grade concentrate. This will necessitate the construction and maintenance of extra infrastructure, and combined with the remote location, explains the projects’ large CapEx.
The lithium industry as a whole is also facing headwinds, as lithium prices have seen steep declines in the past year, falling more than 40% from their peak in 2022. The drop has been attributed to significant increases in lithium supply coupled with weaker than expected demand due to a sluggish Chinese economy and disappointing North American electric vehicle sales.
It remains to be seen if this a short term blip or the beginning of a long term trend. Most projections still anticipate a significant shortfall in lithium supply over the next few years, although prices are not expected to return to previous highs before 2025.
Investor Takeaways
Frontier Lithium has a large land package in northwestern Ontario which contains two high grade lithium deposits, Pak and Spark. Two additional lithium-bearing pegmatites, Pennock and Bolt, don’t yet have resource estimates, and there is a strong possibility of additional resources being discovered. The project’s main obstacle to entering production is the need for construction of a lengthy all-weather road as well as high initial CapEx.
List of Companies Mentioned:
Frontier Lithium: https://www.frontierlithium.com/ (website)
