OpenRadar: Charger (ASX:CHR) powered by Rio Tinto at Lake Johnston

OpenRadar: Charger (ASX:CHR) powered by Rio Tinto at Lake Johnston

November 28, 2023 Off By Amanda Ellis

Major miner Rio Tinto’s exploration division has recently entered into a farm-in agreement with Charger Metals for the junior’s Lake Johnston lithium project in Western Australia.

How have Charger and Lake Johnston blipped the radar?  

Charger is one of several mineral explorers in the Lake Johnston lithium province, about 450 kilometres east of Perth.  

In October, the junior company attracted interest when neighbouring TG Metals (ASX:TG6) discovered Burmeister, a high-grade lithium soil anomaly at its Lake Johnston lithium project with grades of up to 2.28% Li2O lying close to Charger’s territory. 

Interest in Charger intensified when it identified several new lithium exploration targets on its wholly owned Mt Gordon tenement. Several areas contain lithium in soils over 46 parts per million Li (greater than 100 ppm Li2O), including a 3-kilometre-plus anomaly along the tenement’s western boundary adjacent to Burmeister.  

The buzz culminated in a major validation from Australia’s biggest lithium company on its exploration subsidiary’s decision to sign on the dotted line for a Lake Johnston farm-in. The 118-year-old British-Australian miner’s Rio Tinto Exploration (ASX:RTX) arm will tip in $1.2 million before the partners start and $3 million in the first 12 months to boost exploration. 

Charger Managing Director Aidan Platel says the Rio exploration deal reaffirmed the prospectivity of its Lake Johnston lithium project and its potential to host a large-scale lithium deposit.  

By spending an extra $7 million on exploration and putting another $1.5 million in Charger’s pockets, the Rio exploration business can earn a 51% majority stake in the project. By serving up another $30 million for exploration or producing a definitive feasibility study, Rio can then take its stake to a significant 75%.  

“The planned significant investment by RTX will allow thorough systematic exploration over all of the project tenure, with initial exploration focused on fast-tracking the Medcalf Spodumene prospect as well as progressing the Mt Day and Mt Gordon lithium prospects,” Platel says.  

To make the deal possible, Charger will snap up its partner Lithium Australia’s (ASX:LIT) minority interest in their Lake Johnston project for $2 million – if shareholders and third parties agree – leaving Charger the project’s full owner – for now at least. 

A $2.7 million capital raising unveiled this week will help support efforts. 

What do Charger and TG do?  

Charger Metals is a Western Australian battery metals explorer with ground in WA and the Northern Territory. The Subiaco-based company was listed on the ASX 2.5 years ago, in July 2023.  In addition to its Lake Johnston project on the Lake Johnston greenstone belt of the Goldfields-Esperance region, Charger is exploring the Bynoe lithium project in the Territory. Core Lithium’s (ASX: CXO) Finniss lithium project surrounds Bynoe. Charger is also advancing the Coates nickel-copper-platinum-group-elements project in WA.  

TG Metals is pursuing nickel, lithium and gold exploration and development opportunities in WA, with its key project being its Lake Johnston lithium project, now known for its Burmeister lithium discovery.  

The two companies also have Bryah Resources (ASX:BYH) as a neighbour, holding its lithium horizon near Burmeister and experience a share price gains alongside them. Bryah’s project is called the Lake Johnston lithium-nickel project.  

Lake Johnston is also home to nickel mines and deposits. 

What are the advantages of Charger’s Lake Johnston project?  

Lake Johnston is strategically located within the wider Yilgarn lithium province, an established hub of lithium production activity. It is close to existing infrastructure and expertise, boding well for any potential development from the lake area.  

Charger’s drillable targets could potentially host significant lithium deposits in a market looking to support critical minerals and battery metal products. Rio’s decision to back Charger is a sign of confidence, validating its project’s potential and offering the promise of a well-funded avenue towards production if a DFS supports a lucrative decision to mine.  

Demand for lithium drives exploration activity in Lake Johnston, the Yilgarn and across the globe as nations move towards full uptake of vehicles and utilise renewable energy storage systems.  

What are Lake Johnston’s complications?  

While Lake Johnston certainly has promise, its challenges could affect its success like any resources project. Among these complications is the complexity of the geology in Lake Johnston, where various rock types and structures could hamper exploration resource definition work.  

Exploration is generally risky, and there is no guarantee that a significant resource will be discovered or that explorers won’t encounter obstacles. The environment is sensitive and must be handled by permitting conditions and best practices, like any area.  

With so many players in Lake Johnston, Charger must stand out from the crowd to attract funding and continued partnership support to turn its efforts into shareholder returns. Lithium mines are capital intensive, so investors must take a pragmatic approach, acknowledging that their stakes may be diluted over time with the various financing, partnering and joint venture activities needed to get a project over the line and into production.  

Final thoughts on Lake Johnston  

Despite facing the typical challenges of an exploration junior, Charger has shown its commitment to systematic exploration and has been rewarded with the backing of a major industry player. The company’s ability to navigate its complications and embrace its advantages will help determine whether it achieves long-term success at Lake Johnston alongside other explorers. Suppose Charger can leverage its strategic location and meet its exploration potential with results. In that case, it can potentially make significant gains as it positions to meet the growing demand for lithium and put shareholder returns in investors’ pockets.  

What is lithium?  

Lithium is a soft, silvery-white alkali metal that scientist Johan August Arfwedson discovered. It reacts to water and is a chemical element known as Li with the atomic element 3. While lithium has traditionally been used in antipsychotic medication, it’s also used to produce value-add products such as lithium concentrates, lithium hydroxides and lithium phosphates. Lithium products and graphite are used as inputs to the lithium-ion batteries that power electric vehicles and are particularly useful to resource investors and developers.  

Lithium is considered a critical mineral by crucial countries and jurisdictions keen to see deposits identified, developed and mined in Western nations and welcoming jurisdictions with free-trade agreements in place with nations such as the US.  

According to the Market Index, the three biggest lithium companies on the ASX are Rio Tinto, Chris Ellison’s Mineral Resources (ASX:MIN) and Pilbara Minerals (ASX:PIL). More than 60 other lithium companies are listed on the exchange. 

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