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Essential Metals Limited (ASX: ESS)

Essential Metals (“Essential” or “the Company”) is in an ideal position to hitch a ride on the expected re-rating of lithium over coming years. With their Dome North Lithium Project (11.2 Mt @ 1.21% Li2O and 40 ppm Ta2O5) located near Norseman, between the mining centre of Kalgoorlie and the Port of Esperance, the Company has an asset with a reasonable chance to grow into a potentially commercially viable project. This is one of few such lithium assets available in a junior resources company, and in our view has a good chance to drive significant value.
Our view also is that ~15 - 20 Mt of resources will be the scale required to justify progressing to detailed development studies, and with mineralisation at the current deposits open, and several other targets in the Pioneer Dome project, we would expect Essential to have a good chance of reaching this figure. Also, preliminary metallurgical testwork has been very positive.
Other companies with comparable resources include Core Lithium (ASX: CXO, “Core”), which has a market capitalisation of ~A$290 million. Core’s Finnis project, close to Darwin, however is well advanced, with permitting and offtake in place and currently advancing additional offtake and Project Financing. This demonstrates the potential value to shareholders of such a project.
In addition to the lithium, Essential has two prospective gold projects (Juglah Dome and Golden Ridge) within the highly productive Kalgoorlie-Kurnalpi Rift - both are within 70 km of Kalgoorlie. Previous exploration has highlighted the prospectivity, with the Company having recently completed drilling at various prospects with encouraging results, although it is still early stage work for Essential.
Golden Ridge is located within the Boorara Shear Zone (“BSZ”), which trends SSE from Menzies to Golden Ridge, and which is the main control on a number of gold deposits and operations, including Paddington/Broad Arrow, and Horizon Minerals’ (ASX: HRZ, “Horizon”) Boorara operations, immediately to the north of the Golden Ridge tenements.
Previous work at Golden Ridge concentrated on nickel, with the historically operated Blair Nickel Mine being located within the tenements. The nickel rights have recently been farmed out, with Crest Investment Group (“Crest”) having to spend A$4 million over four years to earn 75%.
This brings us to another part of the Company’s strategy - farming out projects where it is considered that this will provide better potential returns to shareholders, by being exposed to the upside through the use of the balance sheet of other parties. To date the Company has farmed out several gold and nickel projects, holding free carried interests (“FCI”).
As such we see the potential for good returns to shareholders with exploration success.