Junior targeting lithium production of between 10,000 to 15,000 tpa

Q&A with Rodinia Lithium (V.RM) President & CEO William Randall

In the June 1st letter, the company discussed the Preliminary Economic Assessment ("PEA") and stated that the PEA was initiated for Diablillos on April 4, 2011, and goes on to say “We are in the process of entering into various engagement letters with the appropriate consulting groups involved in this process.” The two months between April 4th and June 1st appear to be a sufficient amount of time to hire consultants to conduct the PEA. Why has there been such a long delay in hiring a contractor?

Rodinia Lithium (TSX: V.RM, Stock Forum) has all the necessary contracts in place to complete the PEA. Further, work is well underway with these consulting groups towards the completion of the PEA. Information on the results of the PEA and certain steps within the PEA process will be disclosed once such information is available. At that time we will also disclose, where appropriate, which consulting groups have been involved in completing the work. We are confident that we have hired the best the industry has to offer and the quality of the work will become evident as we develop the Salar de Diablillos.

In the June 1st letter, the company states: “To date we have spent one-on-one time with over eight analysts; five analysts have spent time visiting our project sites and another three are in the process of scheduling visits.” How long ago did the company initiate contact with the eight analysts? When did the five analysts visit the Diablillos project site? Do you anticipate more analysts, which have visited Diablillos, to initiate coverage of the company? If so, when do you think this might happen?

Rodinia is continuously looking to engage additional analysts to increase our coverage. Initial site visits occurred during the first half of 2010, starting with Jon Hykawy of Byron Securities. Jon initiated coverage shortly thereafter and the team at Byron has been very supportive ever since. Thereafter, a team at Genuity Capital Markets initiated coverage. Unfortunately for the company, Genuity was acquired by Canaccord Financial and both the analyst team at Genuity and the team we were engaging at Canaccord moved on to new firms and new roles where lithium coverage was no longer part of their mandate. On a positive note, however, the company was pleased to learn that David Talbot at Dundee Securities initiated coverage on Rodinia on June 9, 2011. In addition to coverage initiated by Byron and Dundee, the company also has research coverage from UBIKA and from RB Milestone Group. We are working diligently to attract a broader research following and anticipate additional initiating reports within 2011. While the company is hopeful that such coverage will be initiated, it is important to note that investment banking research coverage is completely independent of Rodinia.

It is also worth noting, that as of the date of this Q&A, and using Bloomberg as the source for investment banking research coverage, the junior lithium comparator group of eight companies listed on slide 22 of our corporate presentation, has an average following of 2.37 analysts (range zero to four). With two currently publishing on Rodinia, and having lost a third to industry changes, management believes it has been successful in attracting the necessary coverage and will endeavour to attract a broader research following where applicable.

With a rough, projected production of 10,000 tonnes per year from Diablillos, how many customers in the lithium market are thought to be necessary for the company? Is Shanshan part of this projected market or is this organization solely working to develop the research and engineering for resource extraction from Salar deposits? Is an off-take agreement with Shanshan anticipated?

Our relationship with Shanshan remains strong and management expects this relationship to continue to evolve as we further develop the project. Shanshan is a significant end-user of lithium carbonate and not a mining company with research and engineering expertise.

Could the company provide an update regarding the progress of the Clayton Valley project? As this is now Q2 2011, are we to expect that these objectives are behind schedule, and if so, any reasons for the delay? Does the company project a new timeline for these events (i.e. permitting, drilling, Feasibility Study, pilot plant, financing, construction) be completed?

Clayton Valley is experiencing delays due to drill permitting issues. The company expects to resolve these issues shortly and complete additional drilling and the resource estimate by the end of this year. The delays experienced are unfortunate and we are doing everything in our power to commence drilling on the project again. Clayton Valley remains one of the company's key assets and management is working diligently to continue exploration and unlock its potential value for shareholders.

The company has indicated that it is currently well financed for the majority of the work planned for 2011. What type of financing is the company interested in pursuing towards the end of 2011? Is the company considering equity, debt or another partner? When does the company anticipate this financing?

Rodinia monitors its capital needs very closely and assess financing opportunities as they are needed or presented to the company. At this point, the company does not anticipate requiring additional financing in the near term. When required, Rodinia will attempt to secure the necessary financing to develop the projects with a view to minimizing the dilutive impact to current shareholders. It is our aim to reach production in as short a time period as possible without overly diluting the company. We believe we will demonstrate this strategy as we continue to develop.

Does the company envision taking its properties to production or does it hope for the properties to be bought out pending successful results of respective Bankable Feasibility Studies?

Rodinia does not speculate on market activity, nor does the company chase projects that we don’t believe have the potential to become important lithium producers. We intend to develop these assets with the clear mandate of putting them into production. We have compiled a team of the industry’s top experts to ensure timelines are met and the most efficient and profitable production facilities are built and operated.

Does the company have an opinion as to why current SP has declined so dramatically since the last refinancing and why the current SP languishes in an apparently moribund state? While global economic uncertainty has been factors in investment, it does not explain much of the current SP value relative to other lithium juniors.

We are wholeheartedly disappointed with the share price performance thus far in 2011. We believe we are working very hard and most importantly achieving the right results with the project, however, these efforts are not reflected in the share price. We believe that much of the downward pressure on the stock has come as a result of global economic uncertainty and the flight of investment capital away from junior names in lesser known commodities like lithium to liquid gold names or into cash. In addition, the company believes that it may have suffered from an increasingly cautious junior lithium market, which management believes may have resulted from the material restatement of one of our competitor's initial resource estimate. While the company cannot foresee complications our competitors may have, management remains optimistic that it is developing its properties with view to unlock the potential value for its shareholders.

Our goal is to be a leader in the junior lithium market and we will continue to strive to achieve this. Since our last financing, we see as ourselves as middle-of-the-pack performers. This is not where we want to be and we hope to demonstrate, in the near future, multiple reasons why we should be a leader.

What is the type and amount of proposed production of lithium and potash targeted at this stage by the company?

Initial production estimates are between 10,000 to 15,000 tpa LCE. The facilities will be scaled upwards as warranted and as applicable.

When will RM have a good idea about the economics (e.g. costs per tonne and revenues per tonne) of the proposed production levels?

These items will be addressed initially in the upcoming PEA scheduled for the second half of this year. These parameters will be further refined during the subsequent Feasibility Study.

With respect to revenues per tonne, we draw your attention to a press release issued by FMC Lithium on June 23, 2011, announcing a 20% price increase for lithium carbonate effect July 1, 2011. http://www.prnewswire.com/news-releases/fmc-lithium-announces-global-price-increases-124446383.html

Could the company elaborate on some of the ideas around the level of production and time? I understand that, at a production level of 10,000 to 15,000 tonnes per year of lithium carbonate, there could be as much as 400 years of resource extraction given current indications of resource. This timeline does not appear to be beneficial from a Net Present Value perspective to shareholders.

15,000 tpa represents over 10% market share at this time. While forecasts show demand increasing over the next 10 years, it is Rodinia’s policy to begin with a reasonable level of market participation. The company anticipates it will be able to increase production as demand increases. Management believes that a more conservative approach to its production level targets will assist in reducing higher capital expenditures associated with much larger production, which the company hopes will ultimately benefit shareholders in the long term.

In light of the announcement made by the governor of Jujuy Province in March 2011, has the company approached the authorities in Salta Province to seek assurances that they are not planning a similar move in declaring lithium a strategic material and if so what was their response?

While management has had private conversations with Salta’s mining authorities, Salta has publically expressed their position in regards to this issue stating on several occasions that they do not plan to follow Jujuy’s footsteps. In fact, Salta has publically frowned upon its neighbouring Province's policies calling them “unsound.”

We said it last month but feel it just important to reiterate now – as a team, our top priority is the successful development of our lithium projects. An extension of this priority is making sure that our efforts are accurately reflected in our share price. While we are disappointed with recent trading, we maintain our positive attitude and are working hard to develop the company and to unlock value for shareholders. With the work we continue to complete, the news flow that will follow our recent initiatives (drill results, processing work, etc.), and support from new and existing shareholders such as the individual who took the time to compile the list of questions set out above, we remain highly motivated to continue to grow the company and execute our strategic plan.

Disclosure: Rodinia Lithium is a Stockhouse client