Early yesterday morning Rodinia Lithium (RM-TSX-V $0.55) issued a press release titled “Rodinia Lithium Inc. Defines 4,959,000 Tonne Lithium Carbonate Equivalent Resource at Salar de Diablillos.” I believe this is the corporate milestone that management and investors have been waiting for.

From the Press Release

• Diablillos inferred mineral resource: 4,959,000 tonnes of lithium carbonate equivalent and 19,837,000 tonnes of potassium chloride equivalent
• 4,959,000 tonnes lithium carbonate equivalent is believed to be the second largest lithium brine resource to date prepared under NI 43-101 standards
• Project maintains its favourable geochemistry with low magnesium and sulphate levels
• Deposit remains open at depth with considerable potential for increased resource grade and size with further drilling

William Randall, President and CEO of RM commented “this resource estimate positions Diablillos amongst the premier lithium and potash bearing salars in the world. This represents one of the largest estimated brine resources in the world. In addition to its size, the brine geochemistry is favourable with low magnesium-to-lithium and sulfate-to-lithium ratios. Based on the above, the Company believes the project has the potential to become a producer of lithium, potassium and boron products in the near future.”

I figured it was time to schedule an update call. As I began to chat with Will Randall, President and CEO, and Aaron Wolfe, VP Corporate Development, it became clear to me that much of our discussion would be of particular interest to readers ( I left out the part about the Toronto Maple Leafs making the playoffs).

Q: Gentlemen, you have a press release out announcing an initial resource at Diablillos, what can you tell me about it?

A: Peter, we are very excited to report an initial resource estimate at Diablillos. Today’s announcement is a culmination of a lot of long hours and hard work by the entire Rodinia team and by AMEC, the independent consulting group that undertook the resource estimation work.

The results are fantastic!

We have defined a 4.95 million tonne lithium carbonate equivalent resource, which to our knowledge makes it the second largest NI 43-101 lithium resource in the world, including both hard rock and brine assets. At the same time, we’ve been able to define a 19.8 million tonne potassium chloride equivalent resource. Almost 20 million tonnes KCl, is like having a potash mine of approximately 100 million tonnes at 20-25% KCl! We are very pleased with these results.

The project maintains its favorable geochemistry with low magnesium and sulphate levels. And just as important, the property remains open at depth with considerable potential for increased resource grade and size. Today’s resource estimate is based on the top 140-150 meters. We know based on our work to date that the mineralized zone extends well below 200 meters and even to the 300 meter depth in certain areas.

Q: So you’re saying that you have the 2nd largest resource, and have the potential to expand it significantly. How big could this resource be?

A: Let’s firstly clarify that we’re talking about the 2nd largest lithium carbonate equivalent resource under the NI 43-101 or JORC measurement standards. It is possible that there are larger resources out there, but when you look at the junior lithium market, we would be the second largest at this point.

We do not want to complicate or confuse matters when we talk about the total potential of the resource. So rather than comment on the potential size or grades, let’s just re-emphasize the importance of what we already know: approximately 5 million tonnes at relatively shallow depths. With an initial plan to produce 10,000 tonnes per year, we’ve already got an approximately 500 year mine life potential, without additional resource expansion.

What we’re really focused on with the ongoing exploration work is understanding the grades of the brine materials at deeper depths.

Q: 500 years mine life? I won’t live long enough to see if you’re right-lol. Seriously, that does sound like a substantial resource. Talk to me briefly about the resource and whether there should be any concerns around it in light of the press release earlier this week from Canada Lithium with respect to their lithium resource.

A: It is an unfortunate situation for any company or group to go through a review of their resource work. And, because we are not involved and don’t have all the information around the situation, we cannot comment any more on it.

That said, we are receiving a number of calls and inquiries as a result of this incident so it is a real concern for us. We can’t help but think that the point would be mute if we were both say gold or nickel companies. At the end of the day, we are confident in the group we contracted to do the work, in the process they used to complete the work, and in the internal review procedures that the group completes before turning the results over to us. We have no concerns or reason to believe that a similar issue could affect us.

We chose to work with AMEC. AMEC is one of the world’s leading engineering, project management and consultancy companies. They are very large by size, experience and reputation. These guys are great at what they do, and working with them is like working with the largest of banks or insurance companies. They are not going to put their name to something that hasn’t been completed in proper order and reviewed numerous times. They have a valuable reputation and brand to protect. Again, we don’t know the entire situation with Canada Lithium but we are very confident in what we’re reporting today.

We should also note that AMEC has done previous lithium brine related work in Chile on Atacama, which is the largest producing lithium brine operation in the world. These guys know their stuff and know brine resources. This is not new territory for them by any means.

Q: What other questions have you been clarifying for investors?

A: It’s still early, but there 3 core areas for us to clarify with certain investors outside of technical questions on the brine etc. These would be, and in no particular order: 1) do we have any strategic partners? 2) what province is your asset in and are there any challenges there? 3) what is the relationship between lithium carbonate equivalent and potassium chloride equivalent.

1) Do we have a strategic partner? The answer is both no and yes all at once. We do not have a defined strategic development agreement with any group. So from that perspective the answer is no. But, we do have a strategic equity investment from Shanshan and we are working closely with Shanshan and the Qinghai Institute of Salt Lakes. Shanshan is a world leading company in new energy materials and is an international first-class supplier of lithium-ion battery composite materials. They are China’s largest supplier of lithium-ion battery materials and the 3rd largest globally. Shanshan doesn’t actually produce batteries at this point but they supply the anode, cathode and electrolyte materials to battery assemblers throughout China, other parts of Asia and globally. They invested in Rodinia because they like our potential and because they see challenges in sourcing the lithium carbonate they will need to meet their growth initiatives. We do not have a strategic partnership with them at this stage, but it is a real possibility for the future.

Along with Shanshan came an introduction to the Qinghai Institute of Salt Lakes, which is a part of the Chinese Academy of Sciences. ISL is the only institution specializing in fundamental, applied fundamental and high-tech research in geosciences, chemistry and chemical engineering of salt lakes and related fields. They are currently doing a significant amount of research and testing on our brines from Diablillos and are responsible for recommending that Shanshan make the investment in Rodinia. Again, we don’t have a strategic partnership framework in place as yet, but we are working with some significant groups that have real experience and access to significant financial means.

We are not married to these Chinese groups, although they have demonstrated many reasons why a formal relationship may exist in the future. If it doesn’t, we have received unsolicited interest from a handful of other groups that could prove to be compelling partners as well.

2) Diablillos is located in Salta, Argentina. Salta is a very mining friendly province and has an established mining industry that dates back more than 100 years. Rio Tinto Minerals is currently operating there and has been for many decades. We have seen no reason to be concerned about mining in Salta or our potential to put this asset into production in this province. There is a group completing a feasibility study on a silver-gold deposit a few kilometers south of us in Salta and all indications from them is that there have been no issues.

Salta is not like other provinces in Argentina where mining is closely monitored by the government and where there may be a potential for problems. We are very happy with our location and with the prospects of moving our asset from the exploration stages into production.

3) What is the relationship between lithium carbonate equivalent and potassium chloride equivalent? The easy answer here is to explain a difference in language interpretation. When we say approximately 5 million tonnes LCE or approximately 20 million tonnes KCl equivalent, we’re not talking like a copper equivalent resource that might include gold credits. These two numbers are completely independent. We’re talking about 5 million tonnes LCE and 20 million tonnes KCl eq. This is a reporting requirement because as the asset sits we don’t exactly have 5 million tonnes of lithium carbonate or 20 million tonnes of potash. Through the extraction and harvesting we do. We look at this as a potential lithium producer that has a potash producer bolted onto it.

Q: It wouldn’t be a complete catch up if I didn’t ask you your thoughts and impressions of the market reaction to your press release.

A: Peter, so far it has been a little disappointing to be honest with you, but at the end of the day we are positive in the work we have completed to date, we are thrilled with the initial resource estimate, and we are confident that as the dust settles with respect to Canada Lithium, and as we are able to talk to more investors about our results we can see a significant move in the share price. I would suggest to you and your readers is to take a look at slide 24 in our new corporate presentation posted on our website (www.rodinialithium.com). On that slide you’ll see two comparable valuation tables that suggest that we are grossly undervalued. We see an easy argument why today’s news should position us a $100+ million company without question, and significantly higher as we continue towards production. But let’s focus on explaining today’s news first.

PG’s Last Word

This new management team at RM has worked very hard and accomplished a great deal on a small budget. They set challenging but fair timelines and continue to deliver when they say they will. My initial take on the resource is estimate is very positive and I will certainly look at the valuation as they have suggested.

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