Frontier Lithium (TSXV: FL; US-OTC: LITOF) is raising $20 million with which to continue exploration of the PAK lithium project in northwestern Ontario — one of the largest and highest grade spodumene resources in North America.
The PAK deposit is located 175 km north of Red Lake, Ont. Frontier produced a preliminary economic assessment in 2021 and is working toward a prefeasibility study by the end of this year. The deposit has a strike length of 500 metres and a depth of 300 metres with a true width varying between 10 metres and 125 metres.
Frontier foresees a 26-year project capable of producing 23,174 tonnes of lithium hydrate annually and generating US$8.52 billion over its lifetime. The project has a post-tax net present value of US $974.5 million and a post-tax internal rate of return of 21%. Preproduction capital costs will be US$878.8 million, followed by sustaining costs of $151.1 million.
The bought deal, announced on Oct. 19, will be underwritten by a syndicate led by RBC Capital Markets and Goldman Sachs.
The underwriters have agreed to purchase 9.1 million units of Frontier at a price of $2.20 per unit. Each unit consists of one common share and one-half of one purchase warrant. Each full warrant will entitle the holder to purchase a common share at a price of $2.75 within a period of 36 months following the closure of the bought deal. Closing is expected on Nov. 8.
Frontier has also granted the underwriters an over-allotment option for a period of up to 30 days after closing. If all available units are taken up, the total of the fund received could be slightly over $23 million.
The total resource (measured, indicated, and inferred) of the PAK deposit is 9.3 million tonnes grading 2.06% lithium oxide (Li2O). The deposit remains open at depth and along strike. The inferred resource is 2.8 million tonnes at 2.22% Li2O.
In addition to the PAK deposit, the PAK project hosts the Spark deposit, estimated to contain 14.4 million indicated tonnes at 1.4% Li2O and 18.1 million inferred tonnes at 1.37% Li2O. Two other pegmatite occurrences — Bold and Pennock — have been located in the area. Channel sampling returned grades of 1.51% and 1.96% lithium oxide, respectively.
Frontier Lithium shares traded this morning at $2.03 in a 52-week range of 92¢ and $3.89. The company has a market capitalization of $475 million.