Led by initiatives set in place through Executive Order 13817 in December, the U.S. is on a mission to reduce its dependency on imports of metals deemed critical to national and economic security. The Executive Order signed by President Donald Trump was followed by a draft list from the Department of Interior specifying 35 minerals, including lithium and barite, minerals that the country consumes more of than it produces.
Owing to the electric vehicle revolution, demand for lithium, a critical metal in rechargeable lithium-ion batteries used in EVs, is expected to surge in the coming years, yet the U.S. has only one producing mine today, the Silver Peak operations in Nevada of Albemarle (NYSE:ALB). To that point, companies of all sizes are working vigilantly to develop lithium properties to capture future market share.
Barite has a different importance in energy, in that it is integral to oil and gas drilling. While it has other uses, including the paint and coatings industry, the drilling mud segment accounted for about two-thirds of the total market. Its barite’s high specific gravity that makes it an effective weighting agent in drilling fluids, facilitating the removal of debris while cooling bits during drilling.
The U.S. is the largest consumer of barite, accounting for about 2.6 million tonnes of the 8.4 million tonnes used globally in 2017. With production around half a million tonnes last year, the U.S. relies heavily on imports from China, the world’s biggest producer, generating about 3.6 million tonnes of the 8.7 million produced worldwide in 2017.
Due largely to increased energy consumption, Global Market Insights forecasts the barite market will grow from over $1 billion in 2016 to more than $4.1 billion in 2024, suggesting there is room for smaller producers to carve out share in what is a highly fragmented market.
One of those players looking for its fair share is Voyageur Minerals Ltd. (TSX-Venture:VM), a Calgary-based actively developing a barite project in British Columbia, Canada called Frances Creek, while simultaneously exploring and developing lithium brine projects in Utah, USA.
Voyageur is employing a business model where it is aiming to create cash flow in the near term from Frances Creek to fund exploration and development at its other properties. The other projects in the portfolio include the Roberts’ Rupture asset in the lithium-rich Paradox Basin and the Large Lithium King property. These projects are not only indicated to include lithium, but high levels of magnesium, a bonus of sorts that VM management believes delivers a robust economic profile for the properties.
Frances Creek is unique in that barite grades have been shown as high as 99.5% BaSO4 (barium sulfate), a grade that qualifies the project as the only high-grade industrial deposit in Canada. High-grade barite, which is used for different applications outside drilling (namely analytical grade, pharmaceutical grade and high-end paint power coat grade) commands a premium price not only because of quality, but because the U.S. currently imports all of this type of barite to the tune of about 400,000 tonnes annually.
In order to serve this market segment, Voyageur has partnered with Innovation Metals Corp., a pact that gives Voyageur access to IMC’s proprietary processing technology to produce high-grade barite. The two companies are working through a memorandum of understanding to form a joint venture to construct a demo plant initially capable of producing 2,000 tonnes annually of high-purity barite. In the future, Voyageur says that it will be able to leverage its Frances Creek and nearby Pedley Mountain project to ramp production to 20,000 tonnes per annum.
Voyageur estimates production costs in its latest corporate presentation at only $600 per tonne, which should equate to high margins based upon sales prices that currently range from $2,800 - $7,500 per tonne (FOB China).
With these fundamentals in tow, investors will be watching closely for the next stages of development from Voyageur as it aims to quietly become a viable player in the barite, and subsequently lithium, markets.
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