Finding the Winners in Lithium's Rise to Glory
USA News Group News Commentary
16 Oct, 2017, 13:45 BST
LOS ANGELES, October 16, 2017 /PRNewswire/ --
USA News Group- Lithium is in the spotlight again as the Electric Vehicle (EV) market seems to be producing near unstoppable demand for the white metal to power its future.
Companies in the lithium mining and production sector are likely to be some of the biggest winners in the space including Orocobre Ltd. (OTC: OROCF), FMC Corporation (NYSE: FMC), Lithium X Energy Corp. (TSX-V: LIX) (OTC: LIXXF) and NRG Metals Inc. (TSX-V: NGZ) (OTC: NRGMF).
The recent rise in demand was first triggered by Tesla and now by virtually every major auto manufacturer and power storage company - even the likes of Dyson have thrown their hats in the ring.
Investors keen on profiting from this massive push that appears to be creating a shortfall in lithium supplies are scanning the up and coming lithium companies looking for solid growth capacity and near-term production.
Obviously the big producers have the upper hand now, but smaller companies are using the market momentum to rapidly get into the space.
A participant that is earning praise for its position in a likely source for lithium is NRG Metals Inc. (TSX-V: NGZ.V) (OTCQB: NRGMF), with its potentially huge lithium brine project in South America's well known "lithium triangle".
Lithium miners already seeing the share strength and solid future lithium value include Australia's Orocobre Ltd. (OTC: OROCF), which just rallied after announcing its maiden year profits, FMC (NYSE: FMC), the large and the diversified chemical company that continues to win praise for its lithium interests in South America, and Lithium X Energy Corp. (TSX-V: LIX.V) (OTCQX: LIXXF), which is also an emerging company that has significant lithium interests in both Argentina and Nevada, USA.
Time Tells
Lithium's climbing price and the immense demand have been forming up for the last two years. Only now, they are coming to a focal point as the industry sets mandates and some nations, especially China's new mandate, have sent the expected demand for lithium soaring.
China states flat out that it will end the use of petroleum engines altogether. Of course there is no deadline attached, but based on the location of major EV auto factories there and the EV production levels forecast, China will be a force to be reckoned with in lithium demand.
The estimates can hardly keep pace with the shift in demand for lithium and markets are reeling as they try to figure just how much lithium is going to be needed over the next decade.
Leading consultants Roskill estimate 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.
The pundits say that's really conservative and that we are going to need a lot more.
The major producers of lithium are lapping this up and increasing their production and refining capabilities, but even all of those efforts are just not going to be enough to fulfill the massive global requirements for the lithium needed to power new and emerging markets.
Room for Near-term Producers
Besides gearing up the large producers, analysts say that one new lithium mine will need to come on-line every single year through 2025 to meet the rapidly increase in demand.
Again those estimates may fall short as new applications and new manufacturers pile on.
About two-thirds of proven reserves of lithium are concentrated in a small area of South America known as the "Lithium Triangle". This highly productive area is located at the intersection of Argentina, Bolivia, and Chile.
Statistically speaking there are just four companies that account for roughly 86% of global lithium production, with over 70% of lithium production based in South America, mostly in or around the Lithium Triangle.
This has created a significant opportunity for smaller producers to concentrate on the region.
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.
NRG Metals Solid Position
NRG is a Canadian based mining company that has really become a stand out among the near term lithium mining companies. What makes them so attractive is their property and their management.
This small, but well-run company has put itself right at the heart of the lithium trend.
They have great property in the Argentina lithium triangle. These 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).
Basically, the company has used sophisticated technology to outline 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 to drill and define the actual lithium resources on their property.
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.
Reviewers of the company made particular note of the impressive management onboard early.
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 come from Lithium Americas and Galaxy Resources.
With management of this caliber involved, the goal of becoming a lithium producer appears very attainable in the near term. They clearly have the experience to move a project from exploration stage to production.
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.
As lithium turns into the new oil, there are opportunities to retire early of this situation given the appetite for reasonable risk, and getting in early enough. By compasrison, companies like NRG Metals are still at that relatively early stage.
POTENTIAL COMPARABLES
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.
FMC Corporation (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) (OTCQX: 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.
For a more in-depth look into NRG Metals you can view the in-depth report at USA News Group: http://usanewsgroup.com/2017/10/10/how-south-americas-lithium-triangle-is-gearing-up-to-feed-our-battery-addiction-1-3/
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