With the flick of a switch, the world’s largest lithium ion battery was turned on and connected to South Australia’s power grid, delivering 129 MWh battery capacity in time for Australian summer, and putting more pressure on lithium suppliers to deliver.
Tesla Inc. (NASDAQ: TSLA) delivered the mega battery within CEO Elon Musk’s 100-day promise, while also sending a message around the world that lithium batteries are the future of power storage, and will give a much-needed boost to renewable energy sources, such as wind.
The milestone event carried with it another increase in lithium demands, signalling yet more incentive to bolster lithium supplies coming from lithium companies including NRG Metals Inc. (TSX.V: NGZ) (OTC: NRGMF), FMC Lithium (NYSE: FMC), Galaxy Resources Limited (OTC: GALXF), and Orocobre Limited (TSE: ORL) (OTC: OROCF)
The Tesla battery launch marks a movement towards major power companies pairing with renewables through the aid of energy-storage systems (ESS) designed to bridge energy gaps during peak demand periods.
The global ESS market was worth $2.6 billion last year—However, that’s projected to grow nearly 10x to $29.2 billion by 2025.
As more and more communities look towards large-scale lithium battery solutions to handle the pressures of peak demand periods, the pressure will shift onto lithium companies to kick in more lithium supplies—An already strained market, with the advent of the electric vehicle (EV) revolution already underway.
Despite the current dominance by a small handful of companies in the lithium space, look for up-and-comers to rise to the challenge and join the ranks of the biggest players in years to comes, such as NRG Metals Inc. (TSX.V: NGZ) (OTC: NRGMF). The Canadian-based junior company is developing two South American lithium-brine projects with very high potential, and have already drawn the support of Chinese offtake partners.
Further reliance on lithium producers to satiate a rapidly growing market that’s devouring lithium supplies at a record rate only should serve to boost the bottom lines of lithium companies across the board, including FMC Lithium (NYSE: FMC), Galaxy Resources Limited (OTC: GALXF), and Orocobre Limited (TSE: ORL) (OTC: OROCF).
ENERGY STORAGE SYSTEMS GAINING MOMENTUM
Coming in at just a little over 60 days after the deal was signed, Tesla delivered just in time for the first day of Australian summer—a season known for soaring power use, due to air conditioners.
In the event of a severe blackout, the battery has the capacity to power 30,000 homes, but is more likely to be used to boost supply during peak demand periods.
The moniker of “world’s largest battery” won’t last long for Tesla, as Hyundai has an even larger battery in the wings ready for rollout in the near future.
Hyundai’s order came from Korean company Korea Zinc for use at its Ulsan Refinery, set to deliver as a 150-megawatt system.
The contract prompted the world’s largest shipbuilder, Hyundai Heavy Industries, to spin off a new energy-storage wing in May, now known as Hyundai Electric & Energy Systems Co.
Hyundai joined Tesla, and the AES Corporation (NYSE: AES) as leaders in large-scale lithium battery manufacturers. They, along with analysts, believe there is a significant market demand coming for enhanced power storage to accommodate communities switching to more renewable sources of energy, and needing to secure their power grids from outages.
“Storage can respond within a fraction of a second. It can address those stability issues very quickly without needing to resort to using large power plants,” said Praveen Kathpal, VP of AES Energy, whose company was a runner-up to Tesla for the South Australia battery contract.
Kathpal is also chairman of the US Energy Storage Association, and believes that South Australia’s commitment to turn to energy storage was a significant milestone for the rest of the industry.
“We think that’s what’s really going to accelerate the uptake of energy storage in Australia,” said Kathpal.
NEW BATTERIES CAUSE NEW LITHIUM DEMANDS
As demand for energy-storage systems grows, so too does that of lithium—Even more so, when factoring in rising demand for smaller scale batteries for vehicles and electronics.
According to Bloomberg New Energy Finance analyst Claire Curry, lithium-ion battery sales are significantly higher, whereas their unit costs are nearly half what they were in 2014.
The same can’t be said for lithium carbonate prices, which have gone in the other direction—more than tripling since 2014.
And it’s a trend that may go on for the foreseeable future.
That is why lithium companies have benefitted from all forms of positive developments in the battery sector, like that of Tesla’s Australian mega-battery announcement.
Share prices in companies such as NRG Metals Inc. (TSX.V: NGZ) (OTC: NRGMF) have risen as high as 500% since the summer months, as they’ve made significant gains in-step with the sector’s rapid pace.
The junior Canadian miner has secured a potential offtake partner already for its lithium development projects in Argentina’s portion of prolific South American region known as the “Lithium Triangle.”
Other companies in further advanced stages of development and production, such as FMC Lithium (NYSE: FMC), Galaxy Resources Limited (OTC: GALXF), and Orocobre Limited (TSE: ORL) (OTC: OROCF), have also seen gains over the year, albeit not to the same degree.
NRG METALS RIDING HIGH
While the Tesla announcement came out of the world’s leading lithium producer country, hard-rock-mining Australia, it’s South American lithium brine plays that have considerably higher amounts of lithium reserves, and are likely to hold the key to the future of the sector.
It was in foreseeing this potential in the “Lithium Triangle” that NRG Metals strategically acquired two significant projects in lithium-rich Argentina.
Through their flagship project, the Hombre Muerto North (HMN), NRG courted a major partner in the form of Chinese lithium producers, Chengdu Chemphys Chemical Industry Co., Ltd (“Chemphys”).
Chemphys instantly liked the HMN Project, and like what many other Chinese businesses have been doing recently, signed a strategic alliance deal that includes financial backing and a future offtake agreement on the project’s first lithium sales.
The partnership has already begun raising funds together, and are working towards their common goal of eventual production on the HMN—Which consists of 6 concessions totalling 3,287 hectares in the Salar de Hombre Muerto district that also hosts FMC’s Fenix Mine to the South, and Galaxy Resources’ Sal de Vida lithium project to the east.
The HMN Project has already returned samples with concentrations as high as 1,064 mg/L Li, and averaging 5877 mg/L Li, with seven samples over 800 mg/L Li.
Beyond the HMN, NRG’s second major project is even larger in surface area, with plenty of potential also. Covering roughly 29,180 hectares, the Salar Escondido Lithium Project also sits in Argentina’s corner of the Lithium Triangle.
Believed to hold a very large salar, with an area of at least 700 km2, the Salar Escondido project has plans for significant drilling and testing in order to prove the NRG Metals technical team’s optimistic theory. Should samples be returned in the concentrations seen at HMN, then a potentially larger partner could rise to the occasion.
NRG Metals has positioned itself to continue to benefit from the ongoing lithium demand growth, and to serve as a future producer aiding in bridging the gap in lithium supplies for battery manufacturers around the world.
POTENTIAL COMPARABLES
FMC Lithium (NYSE: FMC)
FMC Lithium is a subsidiary of the FMC Corporation, which is a diversified chemical company, that provides solutions, applications, and products for the global agricultural, consumer, and industrial markets. FMC Lithium offers lithium for use in batteries, polymers, pharmaceuticals, greases and lubricants, glass and ceramics, and other industrial uses. FMC Corporation was founded in 1884 and is headquartered in Philadelphia, Pennsylvania.
Galaxy Resources Limited (OTC: GALXF)
Galaxy Resources is a lithium-focused resource company that explores and produces lithium carbonate mineral properties. The company holds interests in the Sal de Vida brine project in Argentina; the Mt Cattlin spodumene mine in Western Australia; and the James Bay spodumene project in Quebec, Canada. Galaxy Resources Limited is based in Applecross, Australia.
Orocobre Limited (TSE: ORL) (OTC: OROCF)
Orocobre Limited explores for and develops lithium and potash deposits in Argentina. Its flagship project is the Salar de Olaroz lithium project located in north-west province of Jujuy. The company also produces boron minerals and refined chemicals. Orocobre Limited is based in Milton, Australia.
For a more in-depth look into NGZ you can view the in-depth report at Lithium News: http://lithium-news.com/2017/12/03/booming-lithium-sector-exploding-as-demand-grows-at-an-unstoppable-speed/
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