Shareholder Update - April 2020 | Cornish Lithium Ltd
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Shareholder Update – April 2020

Relevant legal information

This Shareholder Update (the “Material”) is for the sole purpose of updating Cornish Lithium Ltd’s (“Cornish Lithium” or the “Company”) current and existing shareholders on the Company’s current activities. Thus, this Material does not constitute an offer or recommendation to participate in any financing by the Company. This Material may not be used to comply with any legal or regulatory requirements applicable to you or resulting from the execution of any transaction directly or indirectly related to the content herein described. This Material was prepared by the Company’s management taking due care in its preparation.  However, neither the Company nor its directors have any responsibility regarding the accuracy and completeness of such information. Furthermore, this Material does not necessarily contain all of the information that may be required to evaluate all of the factors that would be relevant to a recipient considering entering into a financing of the Company. No party has made any independent verification as to the veracity and accuracy of any information contained in this Material.  By accepting this Material, you expressly declare that the Company and its directors are not responsible in whole or in part, expressly or impliedly, for any errors, omissions or sufficiency of information or other information sent or offered via written or oral forms, and nothing herein shall be considered as a representation or warranty, in the present or in the future of the Company. Furthermore, this Material is based upon information available as at the date of publication taking into account economic and other market conditions in the situation where they are and how these can be evaluated at the moment. The Company is not obliged to update or correct this Material. You also agree that you should not base your assessment in connection with the participation in any financing of the Company on the information described in this Material, but on your own analysis regarding all the information you need to make any decision regarding any potential financing considering the above. By accepting this Material you fully and irrevocably expressly waive any right, request or claim against the Company, its directors, employees and advisors. Although not obliged to update or correct this material, the Company reserves the right at its sole discretion to modify, amend and/or withdraw all or a portion of the information contained herein. This Material does not bind or create any obligation between you and the Company

The contents of the Material have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 (“FSMA”). Reliance on the Material for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested. Any person who is in any doubt about the subject matter to which this Material relates should consult a person duly authorised for the purposes of FSMA who specialises in the acquisition of shares and other securities. This Material does not constitute an offer to sell or solicitation of an offer to buy any shares, assets or businesses in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation in such jurisdiction.

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Shareholder Update – April 2020

Introduction

Cornish Lithium is using modern exploration methods to evaluate the potential for low-carbon extraction of lithium and other battery metals in Cornwall and to generate a domestic lithium supply for the UK economy. The Company has achieved a strong profile at the highest levels of the UK Government, given the potential to generate a new industry in Cornwall, one of the most economically challenged regions of Britain.

Following an extensive data gathering exercise, ongoing since early 2017, the Company recently completed two investigative drill programmes in different parts of Cornwall: 1) to evaluate the potential for lithium in “geothermal waters” and 2) to evaluate the potential for lithium in granite hardrock. While the results from these test programmes are currently being evaluated by our technical team initial results are considered encouraging and worthy of further work.

The Covid-19 pandemic has so far affected Cornish Lithium very little as all our staff were well prepared for working from home and thus the transition has been relatively seamless. Fortunately, we completed both of our drill programmes just before lockdown and thus can now focus on processing the data we acquired during these programmes. All staff have remote access to our new central computer which has made processing of data considerably faster. We have not furloughed any staff as our team are currently processing the results from our recent drilling programmes.

Cornish Lithium believes that the shallow (~1 Kilometre depth) geothermal waters which we have tested in our recent drill campaign are the upper parts of a regional geothermal system; the deeper part of which is being investigated for geothermal power production by the nearby United Downs Deep Geothermal Project (UDDGP). The Company hopes to augment the results from its own drilling programme with results from the adjacent deep geothermal project at United Downs as soon as restrictions caused by the Covid-19 pandemic ease and work at the site can recommence.

The UK Government is increasingly aware of the opportunity to create a domestic supply chain for lithium and other battery metals with specific mentions in recent public speeches from both the Prime Minister and from Nadhim Zahawi, Minister for Trade and Industry. The grant received for the ‘Li4UK’ project from the Government’s Faraday Battery Challenge Fund, in which Cornish Lithium is a participant alongside Wardell Armstrong and The Natural History Museum, also highlights the importance that the Government places on the opportunity for a domestic lithium supply.

Cornish Lithium has secured agreements with mineral owners covering a large area of Cornwall and has assembled a significant quantity of geological and historic data in the region. This information, and associated data processing techniques developed in-house, are considered a very valuable asset for the Company in the light of recent mineral discoveries in Cornwall. 

Lithium Market Overview

The lithium industry globally has recently been adversely affected by an increase in low quality supply which has resulted in prices falling from the highs of early 2018. Interestingly however, the price for high quality battery-grade production suitable for Western battery makers has remained more robust. Until the current Covid-19 crisis sales of electric vehicles continued to increase rapidly and resulted in demand for lithium continuing to rise. Widespread concern over emissions and global warming are expected to see this trend continue, and potentially to accelerate, once the Covid-19 pandemic eases.

UK Government Focus on Electric Vehicles and the Supply Chain

Following Brexit, the UK Government is focussed on becoming a world leader in battery technology and is trying to attract a Gigafactory and associated electric vehicle manufacturing to the country. Britain currently produces around 1.2 million vehicles and the automotive industry employs around 800,000 people. It is, therefore, vital that this industry is maintained and that the transition to electric vehicle manufacturing moves as quickly as possible.

Given this situation, it is now apparent that the creation of a battery and electric vehicle industry in the UK is more likely to happen if the nation has a domestic supply of lithium, especially if this lithium can be responsibly sourced with a low-carbon footprint. The opportunity to create such and industry is highlighted in recent research from the Faraday Institute which you can read here: Lithium, Cobalt and Nickel: The Gold Rush of the 21st Century. The potential new lithium industry in the UK has been officially mentioned by Boris Johnson during Prime Minister’s question time (See Hansard Link) and by Trade and Industry Minister Nadhim Zahawi at a recent event in Parliament (See media link).

It is apparent from work conducted by Cornish Lithium and other explorers in Cornwall, that the UK has the potential to become the “Battery Materials Hub” for Europe given the highly prospective geology of the county. The granite that underlies Cornwall has been recognised as the largest volume of lithium enriched granite in Europe1. Almost uniquely in Europe, Cornwall still has a strong mining culture given that the china clay industry still produces approximately 1 million tonnes of kaolin each year.

Through our involvement in the Faraday Battery Challenge funded ‘Li4UK’ project, our geologists are evaluating the potential for domestic production of lithium, following a successful UK-wide hard rock and water sampling programme. In addition, the consortium is working to produce a sample of battery quality lithium chemicals from domestically sourced material, which would be suitable for use by the UK battery industry.

  1. Gourcerol et Al. 2018. Assessment of Lithium Geological Potential in Europe

Recent Progress 

Following the successful completion of our crowdfund in August 2019, the Company has now completed its planned drilling programmes for lithium in geothermal waters and for lithium in granite hard-rock. The test holes for lithium in geothermal waters were deliberately drilled adjacent to the UDDGP as we had considerable historic geological data in the region and wanted to test the concept of a shallow brine operation coupled with potential extraction of brine from the UDDGP geothermal power system. We had hoped to obtain samples of water from much greater depths than our own drilling programme from the UDDGP, which is only 300 metres from our drilling operations, but this sampling programme has been delayed due to operational restrictions caused by the Covid-19 pandemic.

  1. Geothermal Waters Drilling Programme

The two holes drilled to evaluate lithium in geothermal waters were scientific holes drilled to establish various geological factors and operational procedures. Cornish Lithium has successfully completed both of these test holes at United Downs, the first of which was drilled to a depth of 1,100 metres and the second to a depth of 800 metres. Each hole intercepted a number of highly permeable geological structures, containing naturally circulating geothermal waters which we sampled and tested for their lithium content. The first hole was drilled to a greater depth than planned as the number of natural fluid bearing fractures was greater than initially expected. The presence of so many fluid bearing fractures is greatly encouraging for potential future production from this area especially as we were able to easily extract large volumes of fluid from such structures.

Picture: Drill rig at United Downs

During the past few months Cornish Lithium has been actively assessing various lithium extraction and processing options from possible technology partners worldwide. The Company intends to work collaboratively with providers of suitable extraction technologies to construct a pilot plant as soon as possible.

  1. Hard-Rock Lithium Project – Trelavour Downs

In addition to the Company’s work to evaluate the opportunity of extracting lithium from geothermal waters in Cornwall, Cornish Lithium has also been actively evaluating the potential to extract lithium from granite rock in certain areas. Following recognition that lithium appears to have been mined in Cornwall during the Second World War the Company discovered that the likely location of this historic mine was at Trelavour Downs near St Austell. After an initial sampling programme in the area Cornish Lithium recently completed 41 shallow drillholes on the project, with initial results being highly encouraging.

Picture: Drilling Programme at Trelavour Downs

Cornish Lithium is currently in discussions with companies which have developed low-carbon processing techniques to extract lithium from similar minerals to those found within the granite at Trelavour Downs and thus hopes to be able to fast-track investigations into suitable processing options.

Other Metals

During our drill programme for lithium enriched geothermal waters at United Downs we intersected a mineralised structure which proved to contain very high levels of copper and tin. The mineral rights to such metals in the United Downs area are held by Canadian listed company, Strongbow Exploration, which now plans to conduct further exploration in the region. This drilling success highlights the potential for tin and copper that remains in Cornwall and validates Cornish Lithium’s work on the potential that lies in areas where the Company has rights to explore for such metals. Cornish Lithium has compiled data on such areas and the Company now considers this to be a very promising adjunct to its overall business. The data assembled during this exercise is considered to be of great value to Cornish Lithium, given that a re-evaluation of regional potential has not been conducted using modern technologies for several decades.

Current Operational Plan

Having recently completed the two drilling programmes at United Downs and at Trelavour Downs, the Company is now entering a busy, but relatively low-cost, period which will entail sample processing, data assembly and interpretation, and project evaluation. Any further drilling plans are currently on hold due to uncertainty regarding the Covid-19 pandemic.

Summary

Cornish Lithium has achieved an enormous amount since the Company was founded in May 2016 and first funded in August 2017. Our drill programmes at United Downs and Trelavour Downs have demonstrated the potential to establish a lithium extraction industry in the UK. The Company is delighted to say that we recently made a successful claim for Research and Development tax relief and that this funding will make a substantial difference to the company’s ongoing activities in Cornwall. The Company has also recently obtained £430,000 in equity funding from certain of its existing shareholders and one new investor, which is considered sufficient to fund its 2020 activities at the current time. The Company is also currently assessing possible further sources of financing, including Government grants such as those recently announced by Chancellor of the Exchequer Rishi Sunak which appear to be targeted at innovative companies such as ourselves. We intend to update shareholders as and when such funding becomes available.

We would like to thank all our shareholders for their support in what is undoubtedly a very difficult time for the UK economy.

Yours sincerely,

Jeremy Wrathall

Founder & CEO – Cornish Lithium Ltd.