Production Drilling

A total of five production wells were tested. Four of the wells were used to evaluate the yield potential of the brine aquifer, and one was used to evaluate the yield of the freshwater aquifer. 

These results are an important step in moving the project towards commercial production as they indicate that brine can be extracted from the salt lake at significant rates without affecting the chemistry (or quality) of the brine.  The pump test results will also enable the Company to upgrade its NI 43-101 measured and indicated resource into a proven and probable extractable reserve.

Brine Aquifer Wells

The four production wells used to evaluate the yield of the brine aquifer yielded the following results:

The flow rates identified in three of the four wells are more than double the estimates used in the Preliminary Economic Assessment (PEA), independently produced by ARA Worley Parsons and filed on May 4^th, 2011.  According to the PEA, a total brine production rate of approximately 400 litres per second is required to produce 20,000 tonnes per year of lithium carbonate.  The PEA assumed that 40 production wells were required to achieve this production.  The pump test results indicate that the actual number of required production wells could be approximately half of the original estimate, thereby decreasing both the capital cost and operating cost requirements.  The pump test results will be used to calibrate a numerical groundwater model (in progress) that will support the definitive estimate before the end of the year.

Chemical sampling of the brine was conducted daily for the duration of the pump tests and results are also provided in the table above.

The average lithium grade of the measured resource, as previously reported in the PEA, is 656 milligrams per litre. Chemical sampling results confirm that after extracting significant amounts of brine, the composition remains stable and is comparable to the resource average. This result indicates continuity of grade across the extensive hydraulic capture zones of the pumping wells, and provides a high degree of confidence in the resource estimate.

Freshwater Aquifer Well

The test well used to evaluate the freshwater aquifer was drilled to a depth of 51 metres.  Preliminary pumping results are as follows:

                        *Test Still in Progress

According to the PEA, the lithium carbonate processing plant needs approximately 60 to 80 litres per second of freshwater.  The PEA estimated that 6 wells would be required to satisfy this amount of freshwater.  The updated pump test results from the freshwater well suggest that adequate supply may be obtained from fewer than 6 wells, to supply all the freshwater required to operate the on-site lithium carbonate processing plant.

This freshwater, while not of potable quality, is suitable for the industrial water requirements of the lithium refining process.  This access to freshwater represents a significant cost advantage for the project as it confirms that the lithium processing plant can be built on-site.   Lack of local freshwater is a common problem for some current lithium carbonate producers.  Consequently, there is often a need to transport concentrated brine to an off-site facility in order to complete final processing of the lithium carbonate, adding significantly to the overall operating costs.

The pumping tests described herein provide key technical support for a numerical brine model, currently in development.  In turn, the model will support the conceptual design of a production well field, and a final reserve estimate.