China Taking the Lead in the Lithium War
FN Media Group Presents USA News Group News Commentary
LOS ANGELES, December 14, 2017 /PRNewswire/ --
In the current clamor for climate-friendly consumption, few things are hotter than the electric car.
American manufacturer Tesla undoubtedly is the most visible brand in this particular effort to save the planet. However, as the US policy under the current administration steps away from climate change as a priority, China is monopolizing the torch as leaders in electric car manufacture and sales.
Companies in the lithium mining and production space are already benefiting from the effects of global competition including NRG Metals Inc. (TSX: NGZ) (OTC: NRGMF), FMC (NYSE: FMC), Lithium X Energy Corp. (TSX-V: LIX) (OTC: LIXXF) and Orocobre Ltd. (OTC: OROCF).
China's new efforts to take an early lead are fueling up the lithium space and sending lithium miners looking to expand in order to answer the vast need.
And while the big producers have the upper hand now, smaller companies are using the momentum to rapidly enter the lucrative lithium market.
An early participant is a likely source for lithium - NRG Metals Inc. (TSX: NGZ) (OTCMKTS: NRGMF), with its potentially huge lithium brine project in South America's well known "lithium triangle".
Other major lithium miners closely following China's advances include Australia's Orocobre Ltd. (OTC: OROCF), with big rallies in its stock this year, FMC (NYSE: FMC), the large and the diversified chemical company with major lithium interests in South America, and Lithium X Energy Corp. (LIX.V) (OTC: LIXXF), an emerging company that has significant lithium interests in Argentina and Nevada, USA.
China's Drive to EVs
Today, China accounts for half of all electric car sales in the world. Chinese owned and foreign electric car manufacturers have set up shop in China at breakneck speed, with more of them including Tesla, looking to set up factories in China.
At the center of the electric car revolution is a crucial element, lithium.
The variety of batteries used in electric cars are highly reliant on lithium-ion technology, which is also critical for mobile phones and handheld devices. Lithium has various qualities that make it suitable for use in rechargeable electronics and vehicles. It is the lightest of all metals, helping to keep lithium-based batteries lightweight. Lithium also has the greatest electrochemical potential among metals. These two qualities give it a high energy density.
Since the discovery of lithium battery technology in 1912, it has come a long way - especially in recent years, facilitated by innovations that overcame heat-related deterioration and incidents.
Essentially, lithium is to future motoring what oil is to the combustion engine motor.
The price of this precious element reflects this reality with the price rising more than 40% in 2017 alone, to about $14,000 per ton. Much of this demand is driven by China's emergence as a major player in the battery manufacturing industry.
Currently, China produces nearly two-thirds of the world's electric vehicle batteries, and more than 10 battery mega-factories are in the offing.
Competing markets particularly Europe are realizing that they have to play the catchup game. With the realization of this fact, China is leading an aggressive campaign to control reserves of the relatively rare mineral across the world.
Plenty of Room for Miners
This unique climate has created a significant opportunity for smaller producers to concentrate on the boom in lithium. Case in point: NRG Metals operating in Argentina.
NRG Metals has begun putting its lithium strategy to work in the Puna Region of Argentina, considered one of the most productive of all regions in a country that produces about 50% of the world's lithium.
The company that has become a stand out among the near term lithium mining companies. It is especially attractive based on its early lead in property and attracting top management.
The COO of NRG, Jose Gustavo de Castro, was country manager for Orocobre in Argentina until 2015. He helped to grow the operation of that company from 10 employees to 800 in construction and about 200 people in operations. He is also credited with the exploration and development of the Orocobre Oraloz lithium project into commercial production.
Others on the management team hail from Lithium Americas and Galaxy Resources.
The company's properties include options in Salar Escondido, which is massive at 29,180 hectares (112 square miles) and Hombre Muerto, which consists of 3287 hectares (12.7 square miles).
The Hombre Muerto property alone is a good reason to consider this company, because it shares the same salar as a lithium carbonate production facility owned by FMC. However, Salar Escondido is what could propel this company to "great heights". NRG's management team has high expectations for the salar, and drilling is in progress now to prove its value.
While it is one of the relatively new entries to South American lithium development, NRG Metals has rapidly advanced two significant projects, making it one of the best bets in the region.
Winning the Lithium Battle
China's approach is a very similar strategy to what western powers such as the United States, Britain and France used to control a significant share of the world's global oil reserves. By pushing their private oil companies such as BP, Shell and ExxonMobil to acquire reserves in oil producing countries, oil wealth has flowed to these countries and it has been a major weapon in global power plays.
Similarly, a government-sanctioned push by the Chinese government has seen Chinese companies such as Great Wall Motor and Ganfeng Lithium acquire stakes in lithium mines and companies in Australia and South America. Only, lithium is hundreds if not thousands of times scarcer than oil and hence immensely more sensitive for the future.
The resource war is not restricted to lithium alone, as China has moved to control crucial cobalt reserves, another critical component of batteries, most notably by purchasing a cobalt mine in Congo for over $2.5 billion in 2016. With China constricting supply to competing markets, the price of cobalt has more than doubled since the deal.
What lies ahead for lithium in 2018 is certain to play out on in the next interesting chapter in this ongoing battle.
Potential Comparables
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.
Lithium X Energy Corp. (TSX-V: LIX.V) (OTC: LIXXF)
Lithium X Energy Corp. is a lithium exploration and development company with a goal of becoming a low-cost supplier for the burgeoning lithium battery industry. On July 11th, the company announced that further to its news release of June 29th, 2017, the Company has closed the definitive agreement with Aberdeen International Inc. for the purchase of Aberdeen's remaining 50% interest in Potasio y Litio de Argentina S.A., which controls 100% of the Sal de los Angeles Project. The project consists of 8,154 hectares covering 95% of Salar de Diablillos, and has an NI 43-101 mineral resource estimate of 1.037 million tonnes of lithium carbonate equivalent in the indicated category and 1.007 million tonnes of lithium carbonate equivalent in the inferred category.
Orocobre Ltd. (OTC: OROCF)
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.
For a more in-depth look into NGZ you can view the in-depth report at American News Group: http://usanewsgroup.com/2017/06/08/lithium-stocks-on-the-rise/
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