Forrestania Resources: how to survive and succeed in a new era of mining

This article is a sponsored feature from Mining.com.au partner Forrestania Resources Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.

It is a phenomenon of life that things tend to happen slowly, then very suddenly indeed. Welcome to the Age of Decarbonisation. 

The pursuit of a greener way of living is no new endeavour, but it’s one that has only gained serious traction over the last few years. And though we’ve all felt its effects to some degree, it’s the mining sector that appears to have been shaken up the most.

A recent report by professional services firm PwC said the era of critical minerals represents “the most momentous change the industry has seen in decades” and warned that miners and explorers could no longer depend on the portfolios and strategies that had brought success in the past.

“As demand for critical minerals grows, miners will face continued pressure to establish competitive positions with respect to geographic footprint and asset balance,” read the report, titled ‘Mine 2023: The era of reinvention’.

“Finding the right value-chain partners will be important, whether through partnerships, acquisitions or consolidation.”

Indeed, there is safety — even prosperity — in collaboration. Particularly when it comes to junior miners and explorers, which can often find themselves spread too thin to do their portfolios real justice.

With that in mind, Perth-based Forrestania Resources (ASX:FRS) has wasted no time in recognising and adjusting to what is a rapidly evolving game. As Managing Director and Chief Executive Michael Anderson told Mining.com.au, the company’s strategy to “explore, collaborate and acquire” has already opened a number of potentially lucrative doors.

If you can’t beat them…

When Forrestania listed at the end of September 2021, it did so with a dominant focus on its lithium and gold-focused Forrestania project, located 80km east of Hyden in southwest Western Australia. It also had a number of other projects in the state, including the Southern Cross and Leonora gold projects, but by the time Anderson took the helm in March 2023, the board was already contemplating a major move.

“When I joined, I was aware the company was also considering entering the Canadian space through the James Bay region, where a number of our peers have entered into option agreements,” Anderson said. “So I took on that initiative and, of course, landed the joint venture with ALX.”

Signed in May 2023, the strategic joint venture agreement with Vancouver-based ALX Resources (TSXV:AL) gives Forrestania the opportunity to acquire a 50% stake in the Hydra lithium project in northern Quebec.

“Through this partnership with ALX on the Hydra lithium project in James Bay, we are positioning ourselves to capitalise on the enormous exploration potential of this highly prospective region,” Anderson said at the time. “This is a major milestone for our company and a testament to our commitment to explore, collaborate and acquire.”

Covering a total of 293km-square, Hydra consists of 8 sub-projects that overlie highly prospective greenstone belts, where several major discoveries — including Allkem’s (ASX:AKE) resource of 40.33 million tonnes grading 1.4% lithium oxide at its James Bay project — have instilled a strong sense of regional confidence.

But collaborative arrangements mean little unless they’re executed properly. What’s pivotal about the agreement with ALX is that it’s with a partner, rather than with a vendor, which will remain the operator of the project.

“To acquire the 50%, we have to pay them a consideration of combined cash and shares, which we’ll do in the next couple of weeks. And at that point we are then immediately 50-50. So, probably a buy-in more than an earn-in,” Anderson said. 

“The consideration is CAD$350,000 in cash, CAD$600,000 in shares. At the point that we provide those to ALX, we are 50-50 partners. Then, going forward, our job is to match their expenditure. But that was, I think, quite a sensible, pragmatic way for us to enter into that space with a respected team — people who have staked the ground themselves and who want to work the ground, but to share the risk.”

Anderson also noted that having this sort of non-operational interest is “a big plus for us”. Unlike Forrestania, some Australian explorers to have recently entered Canadian jurisdictions do not have the necessary expertise in place, relying instead on the efforts of consultancies, which is, of course, another expense.

“That’s the way things seem to work in Canada. You need geologists that are registered in the province you’re working in. It’s not easy to just build a team from a standing start. So we’re quite relaxed with the relationship and the arrangement that we’ve got,” Anderson added.

It’s not easy to just build a team from a standing start”

“We know ALX is an established, trusted explorer in the Canadian space and we’re confident that the people they’ll have doing this work will be credible and experienced. We’ll have our ability to input on the programs. It’ll be a JV committee with the opportunity to help define and design programs. But at this early stage, it’s pretty straightforward.”

And with ALX handling exploration work at Hydra, Forrestania is free to focus on its own portfolio of assets in Western Australia.

Expand your horizons

Back home in Western Australia, Forrestania has been continuing its acquisitive streak.

Just over a week after the deal with ALX was signed, the company signed another with privately-held Outback Minerals. Under the agreement, Forrestania has the option to purchase a package of 4 tenements, 2 of which are contiguous with its existing Eastern Goldfields project north of Kalgoorlie.

“It’s a similar deal in that it’s expanding our horizons, but it’s structured very differently,” Anderson said. “It’s a two-year option and it’s, to be honest, relatively affordable.”

Forrestania will pay an initial option fee of $50,000, followed by another payment of $50,000 on the first anniversary of the agreement. To exercise the option, the company will need to fork out a further $150,000 in cash and issue a package of shares to Outback worth $950,000.

“We were somewhat fortunate that the counterparty, Outback Minerals, wasn’t proactively exploring and were happy to, if you like, hand the baton to us,” Anderson added.

“There are not that many areas in Western Australia that aren’t in the hands of explorers who want to proactively do the work themselves. So, I guess it was somewhat opportunistic and entrepreneurial to find these sorts of opportunities to enhance and improve our ground position. I suppose it’s symptomatic of our desire to optimise our portfolio and to increase the probability of being successful.”

Exploration is a probability game

With the ALX and Outback agreements now in place, Forrestania owns or has exposure to 4 projects in 4 prolific mining regions: Forrestania towards the south-west corner of Western Australia, the Eastern Goldfields just north of Kalgoorlie, Southern Cross to the west of there, and the Hydra project in northern Quebec, Canada.

Asked if any additional acquisitions might be on the cards, Anderson was hesitant to rule anything out.

“I think you never stop looking and never say never, but we absolutely feel that we do have enough to be getting our teeth into right now across these fronts, and we’re confident that the work we’ll do will take us forward and hopefully bring some discovery potential into reality,” he said. “But exploration is a probability game. It’s all about maximising your opportunity.”

But exploration is a probability game. It’s all about maximising your opportunity”

In any case, the company is looking to recommence drilling at its Forrestania project, where a staged approach to testing priority targets will examine the Calypso, South Cap Iron East and Giant Pegmatite prospects.

At the Eastern Goldfields — where recent fieldwork identified multiple outcropping pegmatites up to 100m in strike length, thereby confirming Forrestania’s deal with Outback as a good one — there is more mapping and sampling to be done before drilling can get underway.

As for Canada, “it’s real greenfield stuff”. Although Anderson believes the discovery potential at Hydra is real, both Forrestania and ALX are very much at the beginning of what is likely to be an interesting journey.

“We know we’re in the right areas. We’re just along strike and across tenement boundaries from some of the bigger projects up there, including Patriot Battery Metals’ (ASX:PMT) Corvette project. And we’re south of the Radisson area in known greenstone belts that haven’t historically been mapped, but those are the settings that have hosted other recent discoveries.”

Lithium: the darling commodity

All this — from the acquisitions to the ongoing focus on exploration — is part of an underlying push by Forrestania to surf the rising tide that is the global lithium market.

“Both in Forrestania and with the move to Canada, I guess there’s no surprise that we’re on that bandwagon, if you like, of having a key focus on battery minerals and lithium in particular,” Anderson said.

“Western Australia and Quebec are two of the hottest areas for lithium exploration. With all the right ingredients of geology, known prospectivity, outcropping pegmatites, and historical and recent discoveries, we certainly think that demands our time and focus in the near-term. And we’ve got a lot of work to do before we’ll consider to have done it all justice.”

Though Australia is already the world’s largest producer of spodumene — the precursor material for lithium hydroxide and lithium carbonate — it and the rest of the world has a long way to go before supply meets current demand. And that demand is only expected to soar from here.

The most recent forecasts from Tesla suggest the electric vehicle maker will need approximately 1,000 kilotons — just over 907,184 tonnes — of lithium carbonate equivalent (LCE) per year by 2030. That figure, according to a report by McKinsey, is equal to roughly 16 times the amount Tesla needed in 2022, and 30% more than the world currently produces.

In the meantime, that supply-demand gap — along with surging investments in the sector — is doing good things for lithium prices.

After a steep five-month decline, lithium has for the last month or so been re-gaining some of the ground it lost. And while it’s certainly encouraging, Forrestania is making a conscious effort not to think too far ahead.

“To be honest, other than the effect that they have on sentiment, lithium prices will only be relevant to us when we’ve got our resources and we’re on our way to production,” Anderson said.

“We’re 5 to 7 years away from production. That’s the harsh reality of any explorer that has yet to achieve a critical mass of resource or reserve. You’ve then got to go through the study work, the permitting, the development, the construction, the commissioning, the ramp-up before those prices are ever really that relevant. So, who knows what it’s going to be in 5 to 7 years time. But all the projections are that demand currently sits well above projected supply. There is a need for a whole new wave of projects and we hope to be one of those.”

Safety in numbers

Clearly, there is one hell of an opportunity at play. But it is also a challenging one to manage. The rules of engagement have changed. Those companies that recognise this fact and act quickly will be the ones best placed to succeed.

As the PwC report said: “Critical minerals transactions dominated deal activity in 2022 as miners big and small raced to reposition themselves for the energy transition. Miners now face an intensely competitive environment for critical minerals assets. As opportunities dwindle, mining leaders must act with urgency to acquire the assets that will power their companies’ future growth.”

Indeed, Anderson and the rest of the Forrestania team appear fully in touch with this logic.

Every door is open, as it were, and we’ll keep a very open mind, doing the right things for the right reasons”

“None of the scenarios that could play out here are closed to us. Every door is open, as it were, and we’ll keep a very open mind, doing the right things for the right reasons,” Anderson said. 

“If it makes sense to partner up or to be in joint venture with the major players in this space… that’s clearly emerging as a preferred path for many, whether they’re partnering with downstream or whether they’re partnering with other major players. So, safety in numbers, in some respects, across an integrated industry.”

Write to Oliver Gray at Mining.com.au

Images: Forrestania Resource Ltd
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Written By Oliver Gray
Originally from Perth, Oliver has a keen interest long-form journalism. He has written for a number of publications and was most recently Contributing Editor of The Market Herald’s opinion section, Art of the Essay.