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Encouraging results at Liberty Lithium

QX Resources Limited (ASX:QXR) Managing Director Steve Promnitz discusses movements in the lithium price and recent drill results.

Paul Sanger: We’re talking today with QX Resources (ASX:QXR), and QXR has a market cap of around $29m. QX Resources is focused on exploration and development of battery minerals with hard rock lithium assets in a prime location of WA, a lithium brine project in the USA, California, and copper, moly and gold assets in Queensland, and a strategic investment in nickel sulphides in Sweden.

We’re talking today with their CEO, Steve Promnitz. Steve, welcome back to the network.

Steve Promnitz: Thank you very much.

Paul Sanger: Now, Steve, when I last spoke to you at the end of last year, you were excited that you are finally ready to embark on a two-hole diamond drill program at the Liberty Lithium Brine Project in California. Earlier today, you announced to the market that numerous brine aquifers were intersected between 90m and 250m depths at your second drill hole. Tell us what exactly does this mean. And also, at this stage, do you know if the brines are lithium-bearing or is it too early to tell?

Steve Promnitz: Well, first of all, thank you very much for the opportunity. In lithium brine exploration, we are in a new field. We’ve tied up the entire basin with leases. We did that last year. As you said, we’ve just finished the second hole. And what’s been encouraging in the second hole is when you find a whole series of brine-bearing aquifers in sediments which look almost cookie-cut repeat of the lithium producer across the Nevada border, which is Albemarle’s long-producing Silver Peak, then you’re quite encouraged.

Now, the problem is we don’t have the results yet for the first hole, and we’re only undergoing the sampling now, very detailed sampling using packer for the second hole. So, we’re going to get that in the coming weeks and for the second hole, probably late March. But, all things being equal, if you’re out there looking for a virgin lithium brine play, this has got all the hallmarks of that. So, that’s basically what today’s announcements mean. We can’t really say much more because at the end of the day the results drive these outcomes, but it looks pretty encouraging.

Paul Sanger: That’s great to hear. And just on the same topic, I’d love to get your views here. It’s been a pretty tough start for lithium companies this year. Lithium price is under enormous pressure. Brokers downgrading aggressively. Love to get your thoughts and views and what you are seeing from your end.

Steve Promnitz: Look, I’m only one fish in this pond. But from my own interactions, both with people in the supply chain and in the market generally, yes, we have seen prices come off, certainly spodumene prices in particular. And so that’s had a depressive effect on market caps. But then we’ve seen the traditional supply side response. It doesn’t matter if it’s copper, or iron ore, or whatever, you start to see projects being mothballed. You see development projects being slowed down. And that’s always a sign that things are starting to turn around.

And then secondly, specifically with QXR, I think there’s going to be more of a focus on operating costs. We haven’t really bothered because prices has been up here, operating costs down there. I think we’re going to see more of a focus on operating costs. And brines historically have always been right down the bottom of the cost curve.

And then, last of all, we’re in the USA, and almost regardless of what happens in the market, the US really does want domestic production. If they can get that, put in the supply chain from a geopolitical risk reduction perspective, they’re quite keen.

So, look, I am not certain when we’ll see things turn around. It’s always a little bit silly to try and pick the bottom, because you only ever see that in the rearview mirror. But I think it’s a great time for anybody who’s got a portfolio to start looking around for value opportunities, because as things turn around, that’s when you create value.

Paul Sanger: And earlier this week, I think Wednesday, globally it started in Asia. Lithium stocks had decent rebounds. The same in the US. And it obviously followed into Australia. So there are early signs that people may be feeling the same, that things are a little bit overdone at these levels.

Steve Promnitz: And I suspect once we come out the other side of Chinese Lunar New Year, which kicks off this weekend, we’re also going to see a response as the machines turn back on in the Middle Kingdom.

Paul Sanger: Steve Promnitz, always great to have you on, and we’ll love to have you back on soon.

Steve Promnitz: Cheers for that.

Ends