Lithium Gets Power Boost From China
USA News Group News Commentary
10 Oct, 2017, 14:00 BST
LOS ANGELES, October 10, 2017 /PRNewswire/ --
An announcement by China's Xin Guobin, the country's industry and information technology vice minister stating that China plans to ban new vehicles powered by gasoline and diesel has given lithium a real boost.
Companies in the lithium mining and production space already feeling the wave of enthusiasm include Orocobre Ltd. (TSX: ORL) (OTC: OROCF), FMC (NYSE: FMC), Galaxy Resources (OTC: GALXF) and NRG Metals Inc. (TSX-V: NGZ) (OTC: NRGMF).
Lithium, the white powdery metal that has been dubbed the "new gasoline" by Goldman Sachs, is in major demand and expected to rise even more as initiatives like China's take hold.
China is the world's fastest-growing market for alternatively fueled vehicles, and it is predicted that demand in the country will hit 6 million units a year by 2025.
Electric Vehicles (EVs) depend on lithium-ion batteries for efficient storage and operation, and increased demand is creating what is already looking like a significant shortfall for the foreseeable futures.
On the plus side, there are some very promising lithium companies who are ready to step in and create more lithium and new or previously untapped supplies.
And while the big producers have the upper hand now, some smaller companies are using the current positive market momentum to move fast and capture the prize.
One early entrant that has gone to the most likely source for lithium is NRG Metals Inc. (TSX-V: NGZ.V) (OTCQB: NRGMF), who have positioned themselves with a potentially huge lithium brine project in South America's productive "lithium triangle".
Existing producers already seeing their share prices rewarded for upping their stake in the lithium game include Australia's Orocobre Ltd. (TSX: ORL.TO) (OTC: OROCF) who just rallied 14% after announcing maiden year profits, FMC (NYSE: FMC) the diversified chemical company that rallied 87% in 2017 based largely on its lithium unit, as well as Galaxy Resources (OTC: GALXF), also an Australian mining concern that just rose 7% on revenues of $14.1 million for the half-year ending June 2017.
LITHIUM DEMAND SOARS
China's new mandate, coupled with existing plans by Tesla, BMW, Volvo and now Volkswagen have sent the expected demand for lithium soaring.
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.
Others expect an even larger deficit.
There are several major producers of lithium who are increasing their production and refining capabilities, but even they will not be able to fulfill the massive appetite for lithium needed to power these new markets.
GETTING FROM HERE TO THERE
To meet the rapidly growing demand, analysts say that one new lithium mine will need to come on line each year through 2025. That's just to answer existing demand.
About two-thirds of proven reserves of lithium are concentrated in a small, high-elevation area of South America called the "Lithium Triangle", located at the intersection of Argentina, Bolivia, Chile.
That's the area where NRG Metals has begun rolling out its lithium strategy in the Puna Region, considered one of the most productive in a country that produces about 50% of the world's lithium.
Most lithium appears as tiny particles suspended in briny solutions that have to be pumped to the surface, and extracting lithium through evaporation, which can take months.
In reality, just four companies account for 86% of global lithium production with over 70% of lithium production based South America, mostly in or around the Lithium Triangle.
NRG METALS' PERFECT POSITION
NRG is a Canadian based mining company, but its lithium interests are located in Argentina. It makes good sense based on Canada's strong track record for global mining.
This small, but well-run company has put itself right at the heart of the lithium trend. Its two primary projects are 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, where FMC is producing approximately 20,000 tonnes of lithium carbonate equivalent per year, as well as Galaxy Resources' large development stage Sal de Vida project.
NRG Metals recently released news of its "Vertical Electrical Sounding (VES) geophysical survey that has identified a highly conductive horizon that is interpreted to represent a brine target with potential to host lithium."
Basically, the sophisticated technology has outlined 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.
At this stage of the game the field is still wide open. As initiatives to increase the EV market emerge, new producers and near term producers of lithium will surely benefit from the surge.
While it is one of the relatively new entries to South American lithium development, NRG Metals has rapidly advanced two significant projects. Focusing on its promising salars in the lithium rich region, NRG Metals appears in step with the serious lithium companies and looking to immediately join their ranks.
POTENTIAL COMPARABLES
Orocobre Ltd. (TSX: ORL.TO0 (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 (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 NRG Metals Inc. you can view the in-depth report at USA News Group: http://usanewsgroup.com/2017/10/09/how-south-americas-lithium-triangle-is-gearing-up-to-feed-our-battery-addiction-1-2/
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