NetworkNewsWire
Editorial Coverage: Driven by an unprecedented ramp-up of the
electric vehicle industry in China, fears of a lithium shortage
nearly tripled the metal’s price over the last couple years.
Although in a temporary lull, demand and price pressures are
expected to consolidate then accelerate at breakneck speed as
several nations advance similar plans to increase EV use.
Insatiable demand and inadequate market supply have intensified the
global quest to bring new lithium sources to market and have
created a seldom-seen opportunity. Lithium-related stocks and ETFs
have proved to be the best way to play the electric future powered
by lithium-ion batteries. With wholly owned prime properties and a
plethora of potential lithium assets, prospective junior miner
Lithium Chile (TSX.V: LITH) (OTC: LTMCF) (LTMCF
Profile) may possibly have the
largest upside of any lithium miner this year. Other companies
investing in the full lithium cycle, from raw resource to battery
production, include the Global X Lithium & Battery Tech
ETF (ARCA: LIT), while producers such as FMC
Corporation (NYSE: FMC), Orocobre Ltd. (TSX: ORL) and
Lithium Americas Corp. (NYSE: LAC) are expanding
production.
Salt on the Salad
Lithium is, as Tesla co-founder Elon Musk called it, “the salt
on the salad” — an interesting analogy since the bulk of the
world’s lithium comes from salt brines. More importantly, Tesla and
every other company dependent on lithium need to be certain there’s
a steady supply. Even if the market triples, there are still about
185 years’ worth of lithium reserves, according to Deutsche Bank
estimates. Unmined lithium is so abundant that the next dozen years
of production will drain less than 1 percent of global reserves.
Lithium is plentiful but critical and in critically short supply.
By 2030, lithium miners will have to supply enough lithium to feed
the equivalent of 35 battery plants the size of the Tesla
Gigafactory in Nevada. Like the salt on a salad, the cost of
lithium is negligible — absolutely nothing compared to the current
price of an electric vehicle — but it is critical for the
future.
Fueling the Future
Located in the heart of South America’s “lithium triangle,”
Lithium
Chile (TSX.V: LITH) (OTC: LTMCF) is about to unearth
what may be a mother lode of the scarce metal. Quietly and
strategically, Lithium Chile has managed to amass over 152,900
hectares (590 square miles) across 15 properties in the middle of
the world’s foremost lithium reserves. Lithium Chile’s holdings
represent the largest wholly owned lithium land package of any
private operating company in all of Chile.
About half the world’s lithium reserves are in Chile,
predominantly in the arid Atacama Plateau. Lithium Chile’s assets
include 66 square kilometers directly on the Salar de Atacama,
Chile’s largest mineral salt flat and home to about 30 percent of
the world’s lithium production. The Salar de Atacama offers
multiple competitive advantages in lithium production including
good infrastructure, high concentrations of salar brines, low
processing costs, superior evaporation rates and favorable
year-round weather.
Results of field tests announced in April (http://nnw.fm/N9SHl) identified multiple high-priority
target areas at both Lithium Chile’s Salar De Atacama and Salar
Ollague properties. Large, multiple lithium brine targets of 20 to
25 square kilometers were discovered at both properties. The
Atacama property contains near-surface lithium brine values up to
1330 mg/L of lithium and the Ollague Property contains near-surface
Li brine values up to 1140 mg/L of lithium. By comparison, typical
lithium concentration needed for production in the United States is
between 190 to 200 milligrams of lithium per liter.
Lithium Chile plans to commence drilling post-haste. Lithium
Chile’s President and CEO Steve Cochrane stated, “We are delighted
with the discovery of such impressive drill target areas at Atacama
and Ollague. The results also follow the recent discovery of a
60km2 target area at another of our top Chilean projects – Helados.
. . . We have an aggressive multi-project drill program planned for
this year, which includes all three of these exciting projects and
we look forward to sharing drill results as they come through.”
For a Song
Amazingly, Lithium Chile acquired its large property reserves
for a song. Land prices in lithium-rich Chile are currently pegged
at $1,500 per hectare, but over the last three years Lithium Chile
accumulated large tracts of prime lithium-bearing properties for
only $3 dollars per hectare. Terry Walker, vice president of
exploration and the chief geologist, spearheaded the company’s
procurement of these properties. Using a 1970s French technical
report overlaid on a national database of water well hydrology and
water chemistry, he meticulously matched their information with an
extensive lands claim database. With full financial backing and
support from the company, Terry identified and Lithium Chile
acquired the best salars in proximity to the highest lithium
concentrations and closest to needed infrastructure such as roads
and power. The result may be the most promising lithium-rich land
package in Chile.
Quick math shows that Lithium Chile paid less than a half
million dollars for its entire 152,900 hectares encompassing 14
salars and one laguna, and the company currently trades at a market
valuation of just over $70 million. If Lithium Chile were able to
sell all its properties today at the current ask price of $1,500
per hectare, the imputed value would be over $222 million.
Obviously, that’s not about to happen, but it does give cause to
consider what the company may be worth if the promising field tests
turn into positive drilling results. Proved lithium reserve parcels
sell for north of $10,000 per hectare.
Demand Drivers
Commonly recognized as power sources for portable electronics,
rechargeable lithium-ion batteries are lighter and smaller than
lead acid batteries, have a high tolerance for movement and
temperature changes, recharge much faster and, importantly,
maintain their power delivery during use. These attributes are what
make Li-ion batteries essential to electric vehicles (EVs). Driving
demand much faster that anyone foresaw, the global transition to
electric vehicles has created a serious squeeze on lithium. Miners
can’t deliver it fast enough to satisfy the tsunami of EVs about to
hit the road. The world's fleet of electric vehicles grew 54
percent year over year to about 3.1 million in 2017. By 2030, the
International Energy Agency forecasts (http://nnw.fm/Ju510) that a minimum of 125 million and
as high as 220 million electric vehicles will be on the road around
the world.
Ubiquitous EVs are no pipe dream. Bloomberg New Energy Finance
forecasts electric car production will increase more than
thirtyfold by 2030, and China is leading the way. China wants a
sevenfold increase in electric vehicle sales by 2025 and is
plotting a course for phasing out fossil-fuel vehicles
altogether.
Tripling its demand forecast for lithium, Roskill, a respected
leader in international metals and minerals research, raised its
projection of lithium carbonate equivalent (http://nnw.fm/P6y7p) to more than 1 million tons in
the next eight years. With electric vehicles suddenly competing
against laptops and smartphones for lithium-ion batteries, the
demand for lithium isn’t expected to slacken anytime soon. The
planet has plenty of lithium reserves, but battery makers need
massive new lithium sources to support production, and they need it
much more quickly than anyone thought.
Where Will the Lithium Come From?
With the world racing to an electric future, there’s no doubt
that more lithium must be produced. Established producers such as
FMC Corp. (NYSE: FMC) have announced plans to
aggressively expand production, but it won’t be nearly enough to
meet demand. Estimated to be the fourth- or fifth-largest lithium
producer in the world, FMC Corporation primarily serves the
agricultural industry, providing solutions to enhance crop yield
and quality. FMC is planning to sell off around 15 percent of its
lithium business in an IPO late this year, giving the business a
market value of more than $3 billion.
Listed on the Australia and Toronto Stock Exchanges,
Orocobre Ltd. (ASX: ORE; TSX: ORL) is a global
lithium carbonate supplier and an established producer of boron.
Orocobre has announced expanded production at its Olaroz Lithium
Facility in northern Argentina. The company also owns Borax
Argentina, an established Argentine boron minerals and refined
chemicals producer, and a 29 percent interest in Advantage Lithium.
Lithium Americas Corp. (LAC) is also advancing
several lithium projects. In a joint venture with Sociedad
Quimica y Minera de Chile (NYSE: SQM), it is advancing its
Cauchari-Olaroz project with target production of 50,000 tpa of LCE
expected to come on line in 2020.
If there is any doubt at all about the lithium shortage, look at
any lithium mining company — every single one is working to rapidly
expand production. The shortage won’t end any time soon, and
increased production isn’t likely to keep pace with the burgeoning
demand. It appears that a company with vast promising resources in
the heart of the lithium triangle may be in for a promising upside
ride.
For more information about Lithium Chile, visit Lithium
Chile (TSX.V: LITH) (OTC: LTMCF).
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