Lithium Demand is Front and Center Once Again
LOS ANGELES, October 20, 2017 /PRNewswire/ —
As Ford signs a new deal for electric cars in China, demand for lithium is in the spotlight once again and these 4 Canadian companies are positioned to capitalize. Companies engaged in lithium exploration, production, and refining include Nemaska Lithium (TSX: NMX) (OTC: NMKEF), Lithium Americas Corp. (TSX: LAC) (OTC: LACDF), Critical Elements Corp. (OTC: CRECF) (TSX-V: CRE), and Far Resources Ltd. (CSE: FAT) (OTC: FRRSF).
Lithium has been aptly labeled the “new gasoline” by Goldman Sachs as demand for the metal continues to outpace supplies.
The expansion of the electric vehicle (EV) market is expected to be a key factor in the rising demand. Clearly Ford Motor’s new deal to produce electric vehicles in China adds another level to the already heavy demand being placed on the lithium industry.
That’s in addition to Tesla’s new Gigafactory in Nevada, which is expecting to produce enough lithium ion batteries to power 500,000 electric cars per year by 2020.
There are some promising lithium companies positioned to be suppliers of the world’s new energy source of choice.
Canada’s group of lithium focused mining companies promise to be some of the first suppliers to take up the slack.
One that’s moving full speed ahead is FAR Resources Ltd. (CSE: FAT.CN) (OTC: FRRSF), which has a solid legacy of production based on its “historical” resource of high quality lithium in the province of Manitoba.
Other Canadian mining firms are also working furiously to tap the reserves for valuable lithium. These include Nemaska Lithium Inc. (TSX: NMX.TO) (OTCQX: NMKEF), the Quebec-based company focused on its new Whabouchi lithium project and establishing refining operations, along with Lithium Americas Corp. (TSX: LAC.TO) (OTCQX: LACDF), that has large-scale lithium carbonate production with its partner and industry giant, Chile’s SQM, and Critical Elements Corp. (TSX.V: CRE.V) (OTCQX: CRECF), whose Rose project in Quebec offers a low-risk jurisdiction with expected production by 2021.
MORE, MORE, MORE
Demand for lithium, the silvery-white metal labelled “the new gasoline”, rose 26% in 2016 and is predicted to climb another 39% in 2018. By 2025, demand is projected to increase by 73% as electric vehicles become more accessible and an increasing number of countries, including massive new players like China, tighten restrictions on petroleum powered vehicles.
Last year, the top 13 battery makers boasted annual production capacity of 29 gigawatt-hours (GWh) of energy-storage products. By 2020, those same companies are expected to grow production capacity to 171 GWh. Tesla’s first $5 billion Gigafactory represents roughly 35 GWh.
Macquarie estimates global demand is currently about 184,500 tons, and it’s slated to rise to more than 260,000 tons in 2020. But, it could end up being much greater based on the additional new demands.
Rising demand and prices for the top two lithium products — lithium carbonate and lithium hydroxide — have driven revenue, income, and shares higher for both the world’s top lithium producers, and higher share prices for smaller companies entering the space in order to increase supplies of lithium from existing reserves or new discoveries.
QUALITY OVER QUANTITY
There are two types of lithium processing: through hard rock ore, which is mined like other metals in Australia and Canada, or through a salt water brine, most prevalent in South America’s “lithium triangle” of Bolivia–Chile–Argentina.
That area holds an estimated 70 per cent of known reserves of lithium.
Hard rock ore, produces higher purity lithium and holds greater potential to be directly processed into lithium hydroxide, the type required for batteries.
Currently, lithium must be processed from lithium carbonate, which is used for medical and industrial applications that comprise the bulk of the demand for lithium.
Far Resources is one of the Canadian companies fully invested in creating new hard rock (high purity) lithium resources.
FAR RESOURCES‘ LEGACY
In the pure lithium category, Far Resources Ltd. ranks high.
Far Resources a junior mining company that has secured a potential major lithium resource. The company’s Zoro Lithium property near Snow Lake, Manitoba covers a significant lithium pegmatite occurrence that contains a historic “reserve” based on 1956 drilling of 1.8 million tonnes grading 1.4% Li2O to a depth of 1000 feet.
In simple terms, that figure represents a lot of very high grade lithium potential.
By the industry regulations, Far Resources cannot treat the historical estimate as current mineral resources or mineral reserves as defined by national mining regulations. But that limitation may be replaced by new data from samples and drilling meant to validate the existing information.
Far Resources has begun a full exploration program with sophisticated mining technology on their Snow Lake property yielding results that look very promising.
Success in that low-risk and very productive mining region could quickly put Far Resources right on track with leading lithium producers, and add tremendously to the company’s value.
A NEW FRONTIER
The ramp-up of lithium-ion battery manufacturing facilities in the next several years will need to be matched by an equal ramp-up of lithium supply from a range of producers – both in the brine and hard rock space.
Just how much lithium will actually be required remains unknown.
Macquarie estimates global demand is currently about 184,500 tons, and it’s slated to rise to more than 260,000 tons in 2020.
Metals and minerals consultancy Roskill Information Services provides a similar estimate, with its base scenario for lithium consumption at 290,000 tons in 2020. However, that figure rises to a sizeably larger 420,000 tons in what it calls its “optimistic” scenario.
And things are continuing to look very optimistic in this space, especially when major automakers like Ford, BMW and Volvo kick in with major demands from new markets including China.
There is little doubt that there will be a significant shortfall, based on current reserves and slated new production.
This is where the existing lithium producers, and newcomers alike have the opportunity to capture a windfall.
Most of these companies are investing major capital and enormous resources in the rush to answer the demands. At the same time, exploration and development companies like Far Resources are opening the potential for whole new opportunities that were previously left dormant.
A most likely place to look for the emerging lithium appears to be opportunities is in low-risk mining jurisdictions like Canada, with experienced miners tapping historically productive lithium zones.
Nemaska Lithium Inc. (TSX: NMX.TO) (OTCQX: NMKEF)
Nemaska Lithium intends to become a lithium hydroxide supplier and lithium carbonate supplier to the emerging lithium battery market that is largely driven by electric vehicles, cell phones, tablets and other consumer products. The Corporation is developing in Quebec one of the most important spodumene lithium hard rock deposit in the world, both in volume and grade. The spodumene concentrate produced at Nemaska Lithium’s Whabouchi mine will be shipped to the Corporation’s lithium compounds processing plant to be built in Shawinigan, Quebec. This plant will transform spodumene concentrate into high purity lithium hydroxide and carbonate using the proprietary methods developed by the Corporation, and for which patent applications have been filed.
Lithium Americas (TSX: LAC.TO) (OTCQX: LACDF)
Lithium Americas, through a Joint Venture with Sociedad Química y Minera de Chile (SQM), is developing the Cauchari-Olaroz brine deposit in Jujuy, Argentina. Through its wholly-owned subsidiary, Lithium Nevada Corp., the company is developing one of North Americas’ largest lithium deposits in northern Nevada*. The company intends to become a major supplier of lithium products to the energy storage and electrified vehicle markets. In addition, through its wholly-owned subsidiary RheoMinerals Inc., Lithium Americas is a supplier of specialty drilling additives and other organoclay products for the oil and gas, agricultural, and other industries.
Critical Elements Corp. (TSX-V: CRE.V) (OTCQX: CRECF)
Critical Elements Corporation is a mining exploration company owning several mining properties in Quebec. The Company is focused on the rare earths, particularly lithium. It has achieved its objective with the Rose lithium-tantalum project, which is currently at the advanced exploration stage. Based on the work programs developed and positive results, Critical Elements Corporation is aiming to put the Rose lithium-tantalum project into production rapidly. The Company flagship project is well located in Quebec with on-site access to infrastructures like: powerline, road, airport, railway access and camp. The project hosts a current Indicated resource of 26.5 million tonnes of 1.30% Li2O Eq. or 0.98% Li2O and 163 ppm Ta2O5 and an Inferred resource of 10.7 million tonnes of 1.14% Li2O Eq. or 0.86% Li2O and 145 ppm Ta2O5.