Investors with exposure to lithium are expected to reap some nice returns in the near-term, says Gwen Preston, founder of Vancouver-based Resource Maven. “Some have done very well in 2016 and share prices will move again as lithium demand and price increases continue to draw attention,” she says.
What’s the driver?
In recent years, the lithium-ion battery has changed the demand profile for the resource. Personal electronics are growing at a rate faster than population growth, which is driving the need for small batteries. Then there are the battery needs of hybrid and electric vehicles.
“Even if you take cars out of the picture, the growing demand for lithium from industrial applications and personal devices will increase by 40 per cent in the next half decade — that’s an impressive growth profile,” says Preston. “But electric vehicle demand is really the fuel on the lithium demand fire, and it’s changing the industry. When you add cars back in, using only conservative estimates for adoption, the demand for lithium will triple in the next decade.”
Many like to focus on Tesla and their Nevada Gigafactory, and of course that matters, she adds, but China is far more important in orders of magnitude because of environmental issues that include smog.
“If you want to buy a regular car in Beijing, you have to enter a lottery to get a licence plate. If you win, you can only drive on certain days of the week. However, if you want an electric car, you can get a licence plate right away and drive any day of the week,” explains Preston. “The environment is playing a huge role in why lithium demand is growing so much, and this is the kind of incentive that will encourage electric vehicle adoption.”
The surge in demand, and the inability of existing players to meet that demand, has brought opportunities for new players to enter the lithium marketplace.
Lithium production has remained an oligarchy over the years, with four major players controlling more than 80 per cent of supply, says Preston. “Those players can increase production but not enough to meet expectations. This boosted prices at the end of last year and changed the economics of new projects dramatically.”
There are two kinds of lithium deposits that require different extraction methods: brine and hard rock. Hard rock (spodumene) deposits are found in a number of areas in the world and predominantly in Australia. The heart of brine is Argentina and Chile, where most production comes from. Nevada’s Clayton Valley is also getting noticed.
While hard rock is getting attention, much of the emphasis for new companies is on brine, likely because it is faster to put into production, Preston says.
“New technology is also emerging to make brine processing more efficient and to reduce the land area used for evaporation ponds, although details are not yet forthcoming.”
With prices up dramatically, companies are picking up prospects near areas that are already producing. Among them there are some real contenders, says Preston.
“The supply gap is very real. The way to create real value is to actually do something that impacts the supply-demand gap. Investors should be looking for projects advanced enough that timelines to production can be counted in years on one hand. Or, where the asset is attractive enough from a jurisdiction or economic perspective that it will be taken out by a lithium major so they can put it into production. There are not many companies in that position.”
One important factor when looking at where to invest is people, states Preston.
“With four dominant players for decades, there are not many people who know how to successfully explore or build a functional lithium production facility. A good team is hard to come by.”
It’s also about legitimacy, she adds. “Is there a resource there? Is it big enough? Is it in a jurisdiction where the company is allowed to develop? Do the economics of the resource make sense, especially if it is in a remote location?” she says. “It comes down to the typical questions put forward for any mining project, but in this case those questions have to be answered by a team that knows what lithium is and how to develop it.”
Five lithium companies to watch in 2017
Company: American Lithium Corp.
Stock Ticker: TSX.V: LI
Market Cap: 18,727,000
Share Price: $0.43
Property Location: Nevada
CEO: Karl Kottmeier
American Lithium Corp holds a dominant land position in the Fish Lake Valley in Nevada. The property runs parallel to the Clayton Valley and is less than 40 kilometres from Albermarle’s Silver Peak, the largest lithium mine in the United States. The company also has a 70 per cent option in the 623-hectare (1,540 acre) Clayton Valley-1 property. The American Lithium administrative team is experienced in raising capital and stewarding public entities, having piloted a major oil sands company from inception to a $2 billion commercial operation. Its technical team takes a practical and pragmatic approach to exploration.
Company: International Lithium Corp.
Stock Ticker: TSX.V: ILC
Market Cap: 15,341,000
Share Price: $0.18
Property Location: Argentina, Canada, Ireland
CEO: Gary Schellenberg
International Lithium Corp has a balanced global portfolio of lithium brine and spodumene pegmatite projects that span Argentina, Ireland and Canada. The company’s operational model is to manage multiple high-quality exploration targets through joint-venture partnerships that share associated costs and risk. The company has secured an experienced strategic partner in Ganfeng Lithium — one of the largest lithium manufacturers in the world and supplier to Panasonic and Tesla. The Mariana lithium brine project in Salta, Argentina is on an accelerated development timeline, advancing with strategic partner Ganfeng Lithium.
Company: Neo Lithium Corp.
Stock Ticker: TSX.V: NLC
Market Cap: 93,701,000
Share Price: $1.44
Property Location: Argentina
CEO: Dr. Waldo Perez
Neo Lithium is becoming the most prominent new name in lithium brine exploration via its quality team and project. Already well-capitalized, Neo Lithium is rapidly advancing its newly discovered 100 per cent-owned 3Q Project, a unique high-grade lithium brine reservoir and salar complex in the Lithium Triangle. The 3Q Project is in the province of Catamarca, the largest lithium producer in Argentina. The project covers about 35,000 hectares; recent exploration indicates a highgrade lithium target (895 mg/L) in the northern part of the salar complex with the combined lowest magnesium/lithium (1.58x) and sulphate/lithium (0.67x) impurities in the industry
Company: Nevada Sunrise Gold Corp.
Stock Ticker: TSX.V: NEV
Market Cap: 14,581,000
Share Price: $0.385
Property Location: Nevada
CEO: Warren Stanyer
Nevada Sunrise Gold Corp has 100 per cent interests in the Neptune, Clayton NE and Aquarius lithium brine exploration projects, as well as 100 per cent interests in the Jackson Wash and Gemini projects in the Lida Valley. In March 2016, Nevada Sunrise obtained a water right in the Clayton Valley, a requisite for future development of lithium brine deposits there. A recent option earn-in deal with Advantage Lithium Corp (ALC) is expected to reduce further dilution of NEV’s share capital as ALC will fund exploration and make vendor payments for five lithium projects in the area, and American Lithium Corp has optioned a sixth project, Atlantis.
Company: NRG Metals Inc.
Stock Ticker: TSX.V: NGZ
Market Cap: 4,525,000
Share Price: $0.11
Property Location: Argentina
CEO: Adrian Hobkirk
NRG Metals claims the most experienced management team in Argentina with the recent additions of chemical engineer José Gustavo de Castro, explorer José Louis Martín, and geologist James K. Duff. They have a combined 80 years of mining experience. In September 2016, NRG signed a Letter of Intent to acquire 100 per cent of the La Borita property, subject to a 90-day due diligence period. La Borita comprises 3,000 hectares (7,400 acres) located within the Lithium Triangle in the province of Catamarca. Other acquisition opportunities are currently under negotiation in miner-friendly jurisdictions in the region.
Source: http://www.bnn.ca/finding-value-in-the-booming-lithium-sector-1.574113
