With the world moving away from traditional fossil fuel power sources to more environmentally friendly alternatives, the changing economic dynamics could see a realignment of economic power. China has taken a crucial step to reposition itself as the economic power by moving to control reserves of what could prove to be the power source of the future; the silvery white metal called lithium.
Companies in the mining side of lithium are seeing gains as demand increases including QMC Quantum Minerals Corp. (TSXV: QMC) (OTC: QMCQF), Sociedad Quimica y Minera de Chile (NYSE: SQM), FMC (NYSE: FMC), and Nemaska Lithium Inc. (TSX: NMX) (OTC: NMKEF).
Lithium has become an exceedingly important industrial metal in the last few years as the production of electric vehicles has skyrocketed.
Lithium is used for the production of rechargeable EV batteries which are based on a technology known as lithium ion (li-ion) configuration.
Increased demand for lithium is already being projected to result in a supply shortfall as early as 2018. China is one of its biggest users.
Companies focused on lithium production have been expanding their efforts to create new supplies including junior miners seeking to bring on new lithium sources and resurrect previous mines.
QMC Quantum Minerals Corp. (TSXV: QMC) (OTC: QMCQF) is a relatively new player to the lithium supply race and is positioning itself to take advantage of Canada’s hard-rock lithium sector. The company is on course in a well-known region in Manitoba with very favorable mining logistics.
Major players in lithium already jumping to increase the production levels of lithium resources include Sociedad Quimica y Minera de Chile (NYSE: SQM), the largest producer of lithium, FMC (NYSE: FMC), which has large lithium interest in South America, and Australia’s Orocobre Ltd. (OTC: OROCF), which is well on its way to expanding production this year.
CHINA OUT IN FRONT
China has been leading the EV revolution in terms of volumes sold. In 2017, 700,000 electric and hybrid cars were sold in China, with that number expected to rise to 7 million by 2025.
Outside china, a similar outlook is predicted, with 25 million EVs expected to be on the roads globally by 2030.
In order to secure lithium resources needed to drive this expansion, Chinese companies, goaded on by the government, have acquired substantial stakes in lithium mines across the world. China already has about 20% of the world’s lithium reserves, but it has acquired up to 40% of global reserves according to Nikkei Asian Review.
China has been particularly aggressive in the South American region, which has more than half of global deposits. Both BAIC Group and BYD, two of the largest Chinese automakers are reportedly in talks with Chilean mining entities for deals to cooperate in lithium mining and battery manufacture.
Great Wall Motor meanwhile has been eyeing Australian reserves having acquired 3 percent of Australia-based Pilbara Minerals.
It appears that western carmakers have not been as aggressive as their Chinese counterparts in acquiring the mineral, which could leave them at the mercy of Chinese in accessing the mineral in future. However, western companies such as Tesla, maintain an edge in terms of battery technology, an area where Chinese will need to play catch up fast if they are to make their dominance count.
Prioritization of research over actual control of lithium resources, according to industry experts, could be the real game changer for Chinese NEV makers.
LITHIUM’S DIRECT PATH
The simplest and most direct path for lithium to come online is for producers and near term producers to step up timetables.
Roughly two-thirds of proven reserves of lithium are concentrated in a small area of South America located at the intersection of Argentina, Bolivia, and Chile known as the “Lithium Triangle.”
These are strongholds for the lithium giants like FMC and SQM, but for the juniors, these are politically and financially complex mining jurisdictions to operate under.
The other major lithium supplies are found mostly in Australia, which is a historically strong mining jurisdiction. Lithium companies there are also being buoyed by the new demand.
A select few miners recognized that domestic North American lithium production could offer some distinct advantages. QMC Quantum Minerals is right on top of this.
QMC QUANTUM MINERALS’ IRGON MINE ON FASTTRACK
Miners for lithium need to take a direct approach to develop known resources. There’s little time to delay for permitting, lengthy approvals or red tape.
QMC Quantum Minerals tapped into this with their current project in the Province of Manitoba. The mineral region is now ranked as the 2nd most favorable mining district in the world according to the Fraser Institute, displacing Australia and others.
QMC Quantum began its efforts in 2016, acquiring a known lithium property –the Cat Lake Lithium Property, formerly known as the Irgon Mine.
Its property is in good company. The location is just 20km from the world class Tanco Mine Property, which was previously North America’s largest and sole producer of spodumene (Li).
A predecessor to QMC drilled 25 holes into the property’s Irgon Dike in the 1950s and reported a historical resource estimate of 1.2 million tonnes grading 1.51% Li20 over a strike length of 365 meters and to a depth of 213 meters.
QMC Quantum’s geological team agrees with the accuracy of those historical drill results and so they’ve started a drilling and assessment program to verify the results. The company just reported samples with greater than 2% Lithium within the property and is expanding the sampling.
In order to keep pace with the demands being placed on lithium from China and around the world, direct to production sources like QMC Quantum Mineral’s Cat Lake Project could be critical.
CHINA DRIVING PRICES TOO
The result of China and others’ acquisitions is that lithium prices have been on an uptrend, hitting a record high $24,041 per ton in mid-November.
As it stands, not enough investment has been put into lithium mining to meet the growing demand. So, despite there being enough lithium deposits to last hundreds of years, existing production levels cannot sustain EV growth beyond a few years from now. This lag has been attributed to a lack of economic incentives when the price of lithium was still low.
However, with the recent rising prices, investments now make economic sense and mining juniors stand to make a killing.
Analysts contend that this is part of a commodity supercycle which comes from underappreciated demand and price outlooks. Based on current lithium prices, by 2030, the lithium export market will be worth at least $50 billion, at par with the copper market today.
Look for China to take a new position in this globally shifting market for automotive and power supremacy.
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.
Nemaska Lithium Inc. (TSX: NMX) (OTC: NMKEF)
Nemaska Lithium intends to become a lithium hydroxide supplier and lithium carbonate supplier to the emerging lithium battery market that is largely driven by electric vehicles, cell phones, tablets and other consumer products. The Corporation is developing in Quebec one of the most important spodumene lithium hard rock deposit in the world, both in volume and grade. The spodumene concentrate produced at Nemaska Lithium's Whabouchi mine will be shipped to the Corporation's lithium compounds processing plant to be built in Shawinigan, Quebec. This plant will transform spodumene concentrate into high purity lithium hydroxide and carbonate using the proprietary methods developed by the Corporation, and for which patent applications have been filed.
For a more in-depth look into QMC you can view the in-depth report at USA News Group: http://usanewsgroup.com/2017/12/12/how-to-play-the-stock-markets-january-effect/
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