Lithium Shifts Into Overdrive
USA News Group News Commentary
17 Oct, 2017, 14:00 BST
LOS ANGELES, October 17, 2017 /PRNewswire/ --
USA News Group - Multiple announcements from major automakers and countries planning to increase their Electric Vehicle (EV) mandates have suddenly put the lithium market in high gear.
Companies in the lithium mining and production space feeling the impact of the massive demand include Sociedad Quimica y Minera de Chile (NYSE: SQM), FMC Corporation (NYSE: FMC), Orocobre Ltd. (OTC: OROCF), and QMC Quantum Minerals Corp. (TSX-V: QMC) (OTC: QMCQF).
Following China's announcement that it plans to ban traditional fuel cars, and mass investments announced by Ford, Volkswagen, Mercedes, BMW, and of course Tesla, the shift to electric vehicles is spurring a surge in demand for lithium batteries and the companies that supply the raw materials.
The increase is creating a projected shortfall that will begin as early as 2018 by some estimates.
Major producers who have been predicting the shift and increasing their stakes are rallying, alongside some smaller companies who have been working to bring on new lithium sources.
A promising entrant is QMC Quantum Minerals Corp. (TSX-V: QMC.V) (OTC: QMCQF), a smaller company positioning itself in Canada's hard-rock lithium sector. The company is tapping a known region with very favorable mining logistics in Manitoba.
Others who are leading the charge to deliver more lithium faster include Sociedad Quimica y Minera de Chile (NYSE: SQM), the largest producer of lithium, FMC (NYSE: FMC), the diversified chemical company that rallied 87% in 2017 mostly over lithium growth, and Australia's Orocobre Ltd. (OTC: OROCF), which rallied 14% after announcing maiden year profits.
SERIOUS NEED INDEED
There seems little question that there is going to be a massive demand placed on the world's lightest metal.
Automakers are unilaterally increasing their forecasts, with most looking to increase their EV fleets to about 20% by 2015. That's aside from China's mandate, which will effectively end petroleum and diesel fueled cars in the world's fastest growing automotive market.
Macquarie Bank calls lithium "the new wonder resource in the mining sector," and says that demand is expected to systemically outstrip supply in a few years, driven by an estimated 31% CAGR of EVs to 2021.
Alongside the EV demand, 12 lithium ion battery "mega factories" are set to come on line (or expand) by 2020 including Panasonic, Tesla, LG Chem, Samsung SDI, BYD, and Foxconn, according to Benchmark Mineral Intelligence.
The reality is that the core group of producers of lithium who are increasing their production and refining capabilities will not be able to fulfill the new demands for lithium needed to power these markets.
The market is looking elsewhere.
GO WHERE THE LITHIUM IS
In this new paradigm, it makes sense for lithium mining companies to head where the lithium is located and pour on the gas.
This presents some serious challenges though since about two-thirds of proven reserves of lithium are concentrated in a small area of South America located at the intersection of Argentina, Bolivia, Chile known as the "Lithium Triangle."
These are politically and financially complex mining jurisdictions to operate under, and since they are very well established, the three major producers control most of the area plays.
The other major lithium supplies are found mostly in Australia.
Operating in that historically strong mining country has its advantages and its producers are seeing a major upswing in their value based on lithium demand.
Even better for up and coming companies looking to maximize their opportunity is the number two mining district in the world according to 104 top mining companies: Manitoba, Canada.
QMC'S SMART PLAY
QMC Quantum Minerals is a Canadian mining company that has jumped on the opportunity to operate the Manitoba mineral region now ranked 2nd in the world according to the Fraser Institute.
Manitoba just jumped to this spot, displacing Australia and others. The reason is Manitoba has competitive tax regimes, efficient permitting procedures and surrounding environmental regulations / land-claims. Top mining firms like to invest there.
QMC Quantum Minerals has been gathering mineral interests since 2010, but they've really made a brilliant move into lithium with the acquisition of the Cat Lake Lithium Property (formerly the Irgon Mine) in 2016.
Lithium Corporation of Canada Limited previously drilled 25 holes into the property's Irgon Dike between 1953-1954. They reported a historical resource estimate of 1.2 million tonnes (metric) grading 1.51% Li20 over a strike length of 365 meters and to a depth of 213 meters.
That is a significant lithium discovery by today's standards, with an excellent grade for production.
QMC Quantum's geological team says there's no reason to disagree with the accuracy of those historical drill results. The next step is to prove up the lithium through their drill program, which is underway.
The Cat Lake Property lithium prospect was good enough for the historic developers of the project to put in a 500 ton per day mining mill and sink a three compartment shaft into the site.
It's important to note that QMC's Cat Lake property is just 20km from the world class Tanco Mine Property. Tanco was previously North America's largest and sole producer of spodumene (Li).
If markets intend to keep pace with the huge demands being placed on lithium, new sources like QMC Quantum Mineral's Cat Lake, could be crucial. The markets are recognizing that too, and these small companies are also rising on the lithium tide.
POTENTIAL COMPARABLES
Sociedad Quimica y Minera de Chile (NYSE: SQM)
Sociedad Quimica y Minera de Chile S.A., is a producer of potassium nitrate and iodine. The Company produces specialty plant nutrients, iodine derivatives, lithium and its derivatives, potassium chloride, potassium sulfate and certain industrial chemicals. Its segments include specialty plant nutrients, industrial chemicals, iodine and derivatives, lithium and derivatives, potassium, and other products and services Lithium and its derivatives are used in batteries, greases and frits for production of ceramics. Potassium chloride is a commodity fertilizer that is produced and sold by the Company across the world.
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.
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 QMC you can view the in-depth report at American News Group: http://usanewsgroup.com/2017/10/16/lithium_is_positioned_perfectly/
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USA News Group
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