Brian Zinchuk is editor and owner of Pipeline Online
Living Skies Lithium’s Trent Jordens, left, and Ed Dancsok, are the company’s two principals. Photo by Brian Zinchuk
NOTE: This is a sidebar to Lithium in SK, Part 7: Dealing with an embarrassment of riches – sorting out the primacy of rights. which you probably want to read first.
Living Skies Lithium’s co-founder, technical and regulatory advisor Ed Dancsok brought another issue with regards to acquiring and maintaining mineral rights – they pay rent of $2 per hectare per year. So on 80,000 hectares, for example, they’re paying $160,000 a year, for rent, for eight years. And there’s work commitments.
“Do you not think that $160,000 a year can be put into the ground, to develop the resource?” Dancsok asked.
He noted that a Crown Petroleum and Natural Gas lease has a lower rent – just $1.42 per hectare, “on a product that can be extracted and sold, right now. We can’t do anything with lithium. We’re three years into this on a lot of our minerals.”
Dancsok provided some insight, noting, “The key is that the mineral disposition regulations were developed for potash. And potash companies can afford $2 a hectare, per year, for their permits. They can afford $5 per year on work commitments for five years. That’s $25 per hectare on work commitments. They can afford that. Lithium companies cannot. We’re still in exploration mode. The regulations need to be right-sized for lithium.”
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Living Skies president and CEO Trent Jordens said oil companies don’t want lithium companies interfering with their normal operations. Where there are interferences, oil companies don’t approve it.
Dancsok said, “We can’t bite the hand that might be a future partner with us in potentially developing our lithium resources.”
Jordens said the government attitude to all this that he’s detected so far is, “We are working on clearing up all the confusion and would like different resource companies working together as mush as possible given current policy”.
Dancsok said, “There’s a way to make this work,” regarding assuming liabilities for old, former oil wells. “You could give a deemed asset value to a lithium well, equivalent to abandonment reclamation value. So the liability equals the asset. Therefore your LLR is one … no deposit and we carry on our work.”
Asked what would happen if the lithium company went belly up, and there’s no deposit for the liability for cleanup, Jordens replied, “We’ve looked at two opportunities there, it returns back to the oil company that had it and still hold the Liability if that’s in our agreement with them. So that no matter what, the government isn’t left hanging with it.
“Or there’s the kind of post-mortem and in the contract with the government, we still have to abandon it.
“So what a lot of the companies are doing right now that are kind of screwing this up, because we had been working with the government trying to say, ‘Eliminate this rent, give us the LLR at zero, and we’re gonna get moving on this, right? Because it’s not fostering the economic development of an emerging resource play,” Jordens said.
“But now we’ve got other companies that have become public companies cruising through cash, but we are spending our own private money. You know, we’re still private. You have to spend the public money coming into this who can’t wait. The public investors want activity. ‘Let’s just go.’”
Dancsok noted that helium wells are not covered under LLR regulations in the same way oil wells are. “Why can’t lithium get the same treatment?” he asked.
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