Led by the advent of electric vehicles (EVs) and followed by a society that is not only more mobile, but hungry for sustainable energy solutions, lithium, a key ingredient in rechargeable lithium-ion (Li-ion) batteries used in everything from mobile phones to EVs to powerwalls, has seen prices soaring in recent years. Most experts, including the researchers at Statista, predict demand to remain strong, keeping upward pressure on lithium prices going forward, as more and more EVs hit highways worldwide. As majors like SQM and Albemarle look to secure and add to their market dominance, smaller players, like QMC Quantum Minerals (TSX-V: QMC), are jockeying to take advantage of a supply/demand imbalance to capture market share of their own.
Supply Glut? Not Gonna Happen
Taking the role of devil’s advocate, Morgan Stanley (NYSE: MS) ruffled plenty of feathers in February with its bearish outlook on lithium. MS analysts said that supply would outstrip demand for a variety of reasons, including increased production from Chile and sluggishness in the evolution of electric vehicles. Plenty of pundits took issue with the outlook, quickly identifying reasons the hypothesis could be flawed.
As some have pointed out, mining for lithium is difficult and ratcheting up production isn’t as simple as it sounds.
It’s also worth mentioning that the EV revolution is not driven solely by consumer demand, but by government demand as well. Nearly 20 countries, including Norway, Germany, India, France, the United Kingdom, China and the Netherlands, have implemented laws banning fossil-fueled cars in the future.
For instance, by 2025, Norway will completely outlaw fossil-fueled vehicles and only permit the sale of all-electric or hybrid cars. China, the world’s most populous country and biggest EV market, last year banned 533 models of cars that don’t fall within their pollution parameters. In the same lane, China wants to see at least 20 percent of its national auto sales be electric cars and plug-in hybrids by 2025.
It’s these initiatives that underpin Statista’s forecast for lithium demand to rise from 234,778 metric tons of lithium carbonate equivalent in 2017 to 422,614 in 2025. According to the U.S. Geological Survey, supply during 2017 was approximately 236,000 tonnes, narrowly outweighing demand of 228,500 tonnes. And that’s with only about one percent of cars on the road being electric.
Pertaining exclusively to EVs, the MS prediction doesn’t account for the distinction of lithium production (and processing) to meet the very high-grade lithium compounds that EV batteries require.
As explained to Baystreet.ca in a phone call with QMC chief executive Balraj Mann, most of the world’s lithium today comes from processing spodumene mineralization via hard rock mining. Extracting lithium through the brine evaporation process can be challenging in many respects, including maintaining grade and its reliance on the proper weather conditions, amongst other things. “Producing lithium from brine is sometimes oversimplified to the public because it’s perceived to be a faster process; if it were that easy everyone would be doing it already. The fact is that it is a highly technical and chemical process and many young companies are going to experience serious teething problems figuring that out,” said Balraj.
Hard Rock the Way to Go
QMC, where Balraj also wears the hats of President and Director in addition to his CEO position, is focused on hard rock mining, which he says may be traditionally slower for bringing a mine on line, but far more predictable in grades. The Vancouver-based company’s flagship project is the Irgon Lithium Mine, a rare-metal deposit located immediately north of Cat Lake, Manitoba and only 20 kilometers north of Cabot Corp’s (NYSE: CBT) underground Tanco Mine, the largest producer of caesium in the world and biggest known pollucite deposit on the planet. Irgon and Tanco are both located in the prolific Cat Lake-Winnipeg River pegmatitie field of Southeastern Mantoba.
In the 1950’s the former owner of the Irgon Mine, The Lithium Corporation of Canada Ltd. (LCOC) drilled 25 holes in the Irgon Dike and reported an historical resource estimate (non NI 43-101 compliant) of 1.2 million tons grading 1.51% Li20 (lithium oxide) over a strike length of 365 meters and to a depth of 213 meters. Furthermore, historic metallurgical tests reported an 87% recovery from which a concentration averaging 5.9% Li2O was obtained.
Based upon the promising data, LCOC installed a complete mining plant on-site that could process 500 tons of ore per day and constructed a three-compartment shaft to a depth of 74 meters. At 61 meters, lateral development was extended off the shaft for a total of 366 meters of drifting, including seven crosscuts transecting the dike.
Despite all the mining prep work, stubbornly low lithium prices resulted in the mine being shuttered and the buildings removed in 1963 before a single ounce of lithium was produced. The plaque signifying where the mine was to be operating indicated that the mine would be on hold until there were more favorable lithium prices.
Even at MS’s bearish case, that day has come. As for the bull case of most others, it’s even blue skies ahead.
Another Greenbushes?
“We’re working vigilantly on proving-up and expanding the resource to NI 43-101 standards,” said Mann during the call. “Our 3-D modeling and interpretation of historical data strongly suggests a much larger resource than has been identified by LCOC. I’m not saying we have another Greenbushes or anything like that, but considering our neighbour (TANCO) and the quality of what is known, we feel good about the future.”
The massive Greenbushes Mine of Talison Lithium, is a joint venture between Albemarle and Tianqi Lithium Corp., in Australia. The mine is the largest spodumene lithium mine in the world, contains the highest concentration of lithium oxide available of any active mine worldwide and is the longest continually operating mine in Western Australia ever, producing lithium for over 25 years now.
Greenbushes has reserves in excess of 70 million tonnes of spodumene ore grading 1.2% lithium. The operations have two processing plants, one producing technical-grade lithium concentrates and one producing chemical-grade.
The QMC chief executive also referred to the latest 3-D modeling compiled from the historical drilling and underground work and the historical assays from the exploration that were recently disseminated by QMC. The assays showed strong lithium grades, regularly above 1.0% and ranging as high as 2.21% across 9.5 meters.
Most importantly, the historical data clearly shows that only a portion of the Irgon Dike has been explored. The company is planning a now-permitted drilling program that will aim to confirm and extend the strike length and test the mineralization below the depth of the historical drilling, which, in the company’s words, “will rapidly increase the resource tonnage above the currently reported historical tonnage of 1.2 million tons.”
QMC lent credence to its optimistic statement of an increased resource with channel samples results last month showing lithium grades up to 4.31%, 4.0% and 3.05% Li2O across short intervals (one meter) and another sample grading 1.43% Li2O over 18.0 meters, including 1.73% Li2O over 14.0 meters at the Irgon Dike.
Considering the geology of the Mayville-Cat-Eculid Greenstone Belt, the company also may get to enjoy the benefits of other metals contained in the rock. The channel samples identified Tantalum (Ta), Niobium (Nb), Rubidium(Rb), Cesium (Cs) and Beryllium (Be) grades of up to 319, 275, 2961, 567 and 325 parts per million, respectively, over one-meter sample intervals.
Work at the property surrounding the Irgon Dike adds to the value of overall project and dovetails with all the historic data at the project. QMC geologists have conducted limited exploration work, but what they have sampled and assayed points towards more lithium-bearing spodumene. Grab samples from Irgon South #1, #2, and #3 Dikes, confirmed that the dikes in this area host lithium up values up to 2.62% Li2O .
“While our immediate focus is to be on the Irgon Dike where LCOC conducted their historical development work with plans for QMC to move towards production here as quickly as possible, we also see a tremendous opportunity to expand the project in the future based upon early results of oue regional exploration program,” said Mann. “Outcrops, grab and channel samples tell us that there are at least three more dikes within the 6,538 acres of our property and I don’t think it would be a great stretch to expect there to be more.”
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