Lithium. The New Gold Rush.
After seeing the performance of most mining stocks lately one can understand why a lot of long term investors have been throwing in the towel and taking their money elsewhere. I wrote in the past article here that a lot of old gold bug money held in family trusts was being taken out and going into the digital space of crypto currencies like bitcoin. One only has to look at data and charts like the one posted below that money for metal mining has been falling steadily. Some would argue that news mines are not needed like before because of new technologies in recycling of these metals. Those people who argue the recycling gig are only partially true because as the world continues to grow and expand, so do the materials needed for the infastructure.
Now if there is one place in mining that money will go, I believe that will be in the exploration and extraction of lithium. Whether it be clays, brines or hard rock, I believe that for those who position themselves now with good quality lithium miners and explorers will see their investments outperform any of the other types of resources whether it be exploration or extraction. Like it or not the green revolution that the greenies always wanted is coming and there are opportunities for juniors and investors to profit from it.
(Note: This is by NO means investment advise. I've been known to be wrong many times before and I will be the first to admit it.)
But my reasoning for this belief is in the numbers. Under the new Biden administration as well as governments around the world, the push towards electric cars is now in high gear. All auto companies are racing ahead to compete with each other in the EV space. While everyone in the western world though seems to focus on Tesla and it's giga factories in Nevada, China is building more cars than most of the entire world combined. According to the International Energy Agency in 2019 there were already 2.58 million battery electric vehicles in China, compared to just 0.97 million in Europe, and 0.88 million in the USA. Each of these cars needs a battery of some kind and the most popular batteries need a particular element and the element is lithium.
Now I am not saying to not invest in any of the lithium juniors that are working in places like Nevada. I myself have bought and sold some of those juniors and they have performed extremely well. Juniors like Neo Lithium TSX-V:NCL have seen their stock price up almost 800% this year. America Lithium TSX-V:LI has seen it's stock rise over 1000%. All of this is due to the fact that Tesla is looking to buy into a lithium deposit close to home and being that Nevada is home for Tesla it would only make sense to buy into a lithium mine a few miles away verses thousands of miles away. These Nevada based juniors still have a lot of upside in their value as far as I'm concerned but it's a big world out there.
As I mentioned earlier, Tesla is only a fraction of the EV auto market. Where is China, Korea or some other Asian based EV manufacturer going to get it's supply of lithium? Well the one place that stands out as first in line is Australia as it is at present the largest producer of lithium on the planet at this time. In 2019 the country produced 42,000 tonnes from hard-rock mining of spodumene - an ore that contains high levels of lithium, as well as aluminium.
The second largest producer is Chile. Chile accounted for for 18,000 tonnes of lithium production in 2019. Out of the three countries comprising the lithium triangle Chile, Bolivia and Argentina, Chile has has some of the world's third-largest reserves of the metal, totalling around nine million tonnes and has made the most successful progress in developing its vast natural resource to commercial scale.
Now believe it or not but China is the worlds third largest producer of lithium and produces about 7,500 tonnes a year as far as data available from 2019. Coming in fourth place is Argentina which produces 6,400 tonnes of the metal in 2019, taking fourth place on the list of the world's top producing countries. Argentina is home to the world's second-largest known reserves' with 17 million tonnes concentrated in vast salt flats in the north west of the country. It's within this lithium triangle that a few junior companies are exploring and looking to develope in the near future. This area where Argentina, Chile and Bolivia all border is the area known as the Lithium Triangle which is host to some of the richest lithium brines in the world. Once developed and producing this lithium can easily be exported to Asian and other global markets as location to sea ports is just a short distance away.
One company working in Chile at present is Lithium Chile TSX-V:LITH This company has 71,900 hectares covering sections of 10 salars and two laguna complexes in Chile. It also has a gold, silver & copper property In Chile. At present the company is raising $3.5-million for drilling and sampling.
The second company is Alpha Lithium TSX-V:ALLI and is active in Argentina. Alpha holds a 100% ownership of +27,500 hectares (67,954 acres) of the Tolillar Salar. Early stage investigations have shown Lithium concentrations up to 504 mg/L in borehole samples. Alpha is an agressive company with active drilling. In a news release in October 2020 the company applied for drilling permitts. By the end of October the company had started drilling. Mid November they announced a significant brine discovery. Mid January the company announced a 10 million bought deal and later the same day increased it to 20 million. Following day the company decides to add a second drill rig to the program. This current drill program is an additional step towards the completion of a 43-101 resource estimate.
At present worldwide demand for lithium is over 350,000 tonnes. Conservative estimates for 2025 and based only on increased EV units worldwide would be over 1,000,000 tonnes. This is the equivailent shortfall of 650,000 tonnes which translates to 26 lithium mines worth of production. These figures are based on just a 14% increase in EV sales. So you can see now that lithium could very well become the new gold that miners will want to go out and explore for. Problem is there is a very limited amount at present.
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Added note: The author of this article holds postions in all the above at the time of this writing. The author may buy or sell any time going forward.