Car Makers Lining up for Lithium
USA Group News Commentary
31 Oct, 2017, 13:00 GMT
LOS ANGELES, October 31, 2017 /PRNewswire/ --
If you had any doubt about Electric Vehicles (EVs) and their role in our future, news from GM should seal the deal. The giant automaker has just announced that it is working toward an all-electric, zero-emissions future.
This news just places further demand on the future needs for the material that fuels the new power cells for these vehicles, Lithium.
Lithium mining and production companies are seeing huge gains as the forecast demand reaches a fever pitch. These include Orocobre Ltd. (OTC: OROCF) (TSX: ORL), FMC Corporation (NYSE: FMC), Galaxy Resources (OTC: GALXF) and NRG Metals Inc. (TSX-V: NGZ) (OTC: NRGMF).
Goldman Sachs has gone as far as to label Lithium the "new gasoline" for its necessity in producing the new EV products, including those built by GM.
EVs depend on lithium-ion batteries for their efficient storage and effective operation. For this reason, increased demand for lithium has producers concerned about having enough of the metal to answer the rapidly growing demand.
However, many lithium companies are stepping up and planning to develop more lithium or tap new supplies in known regions.
A few of these are emerging companies looking to use the current positive market momentum to advance their positions.
A likely lithium developer in this category is NRG Metals Inc. (TSX-V: NGZ.V) (OTCQB: NRGMF), who have a potentially huge lithium brine project in South America. The company is ideally positioned and looking to mine in the very productive "lithium triangle".
Share prices of current lithium companies have been rising as the demand pours in. Leaders in the space include FMC (NYSE: FMC) the diversified chemical company that rallied 87% in 2017 based largely on its lithium unit, Australia's Orocobre Ltd. (OTC: OROCF) (TSX: ORL) who just announced its maiden year profits, as well as Galaxy Resources (OTC: GALXF), also an Australian mining concern that has continued its incredible run and rose over 5% to hit a multi-year high in October.
LITHIUM IS THE FUTURE FUEL, PERIOD
GM's mandate is really just the sign that EVs are the future and that Lithium will be the feedstock needed to power the revolution.
GM says it will begin with two new, fully electric models next year and then then at least 18 more by 2023.
That product roster puts the GM in line with a large crowd of automakers who have endorsed the age of electricity. In recent months, Volvo, Aston Martin, and Jaguar Land Rover have announced their EV initiatives. All of these are promising to move away from gasoline- and diesel-powered vehicles.
China has even gone so far as to mandate that it will move toward a zero petroleum-powered vehicle level, but with no date attached for enforcement.
All this points to new estimates for just how much lithium will be needed.
Consultants Roskill have estimated 785,000 tonnes of lithium carbonate equivalent a year will be needed by 2025, amounting to a 26,000-tonne shortfall from anticipated supply, compared to 217,000 tonnes of demand versus 227,000 tonnes of supply this year.
However, those numbers are ratcheting up as each new automaker and power application manufacturer chimes in with their new plans.
It looks like lithium producers will have their hands full just trying to answer the increase in demand. Several are already increasing their production and refining capabilities, but that's not going to cut it if demand reaches the projected levels. We will need new lithium resources.
NEWS SOURCES WILL COME ONLINE
Analysts are telling us that one new lithium mine will need to come on line each year through 2025 in order to meet the rapidly growing demand for lithium. That would answer existing demand. But in order to avert a shortfall, there's going to have to be more exploration and development.
Two-thirds of proven reserves of lithium are concentrated in a small, high-elevation area of South America known widely as the Lithium Triangle for its position at the intersection of Argentina, Bolivia, and Chile.
In fact, only four companies account for about 86% of all global lithium production. And within that group, over 70% of lithium production based is South America around the Lithium Triangle.
This is the likely area to seek near-term lithium production.
Emerging miner NRG Metals is putting its lithium strategy in play the Puna Region in Argentina. It's considered one of the most productive regions in that country, which produces about 50% of the world's lithium.
NRG METALS NEAR TERM OPPORTUNITY
NRG Metals hails from Canada, but its' lithium interests are located in Argentina. Canadian miners like the lithium space and have fared well.
NRG Metals has managed to put itself at the heart of the lithium trend. It has two projects; the Salar Escondido lithium project, a well-developed project heading into drilling, and the Hombre Muerto North lithium project in the province of Salta, now under exploration.
The region is also host to the Hombre Muerto Salar. That's where major lithium producer FMC is generating about 20,000 tonnes of lithium carbonate equivalent per year. It's also the location for Galaxy Resources' large development stage Sal de Vida project.
Using Vertical Electrical Sounding (VES) geophysical survey NRG Metals has identified what it calls "a highly conductive horizon that is interpreted to represent a brine target with potential to host lithium"
In other words, they have found what it is like a salt lake, about 4 kilometers by 6 kilometers in size located at depths from 70 to 300 meters below the surface.
NRG Metals has been approved and plans to drill to define the actual lithium resources available. This could be the next major lithium resource in the area.
It appears clear from announcements by automakers like GM that the demand for lithium is continuing to escalate. The opportunity to respond to the demand is still wide open.
As these initiatives to increase the EV market emerge, new producers and near term producers of lithium could use the window to move to production. Smaller players like NRG Metals, and the leaders like FMC are both in a position to capitalize on the lithium trend.
POTENTIAL COMPARABLES
Orocobre Ltd. (OTC: OROCF) (TSX: ORL.TO)
Orocobre Limited operates primarily in Argentina in the mining industry. The Company engages in the production ramp up of its Olaroz Lithium Facility and the operation of Borax Argentina S.A. (Borax Argentina). Its segments include Corporate, the Olaroz project, South American Salars and Borax Argentina. Its primary focus is on exploration for and development of lithium, potash and salar mineral deposits. The Company's assets also include boron mines and processing facilities of Borax Argentina and a portfolio of brine exploration projects. Its Olaroz Lithium Facility is located in the Puna region of Jujuy Province in northern Argentina, over 230 kilometers northwest of the capital city of Jujuy.
FMC (NYSE: FMC)
FMC Corp. is a Philadelphia-based chemical company which is swiftly ramping up its lithium production. Last year, FMC said it was planning to triple lithium hydroxide production capacity by 2019. The first phase of the plan has already started. FMC management also said that it was not ruling out the possibility to spin-off FMC's lithium segment as a separate publicly owned company. BofAMerrill Lynch recently upgraded FMC stock to "Buy" from "Underperform," increasing the price target to $103.00 from $66.
Galaxy Resources (OTC: GALXF)
Galaxy Resources Limited is a lithium-focused resources company, with assets spanning Australia, Canada and Argentina. Galaxy is currently advancing plans to develop the Sal de Vida Lithium and Potash Brine Project ("Sal de Vida") in Argentina, which is situated in the Lithium Triangle, a region where Chile, Argentina and Bolivia meet. Sal de Vida is a proven high quality resource has excellent promise as a future low cost production facility. Galaxy also owns the Mt Cattlin Spodumene Mine near Ravensthorpe in Western Australia and the James Bay Lithium Pegmatite Project in Quebec, Canada.
For a more in-depth look into NGZ you can view the in-depth report at American News Group: http://usanewsgroup.com/2017/10/29/how-south-americas-lithium-triangle-is-gearing-up-to-feed-our-battery-addiction-3-2-2/
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USA News Group
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