If the twentieth century was the age of oil, will the twenty-first prove to be the era of lithium?
It is certainly shaping up to be.
The lithium market is one of the fastest-growing commodity markets in the world. Battery markets are set to become a $120 billion over the next two years, fueled by the immense new demand for electric vehicles (EV) and battery-powered technology.
Industry leader, Tesla, needs thousands of tons of lithium to feed its Gigafactory, which opened in January. But that’s only 30 percent of the U.S. EV market, and with demand for EVs likely to increase immensely in Europe and Asia, two regions that are hoping to end the sales of gasoline-powered cars in the next few decades, demand for lithium will rise right along with it.
The boom in renewable energy sources, which need lithium-batteries to compete at cost with fossil-fuels, is adding further fuel to the fire, so to speak.
Lithium is being sought after in larger and larger quantities, putting pressure on lithium miners to increase output and opening up the field to a new breed of hungry companies ready to get in on the action.
And the chances for securing fast growth are good, given the radical increase in lithium prices. Since 2002, the price per ton has skyrocketed, from $2000 to more than $9000. In the same period, costs have fallen for the major miners, as economies-of-scale have reduced per-ton production costs.
But while the big lithium players have some of the market cornered, the prospects for growth are bringing in a fresh crop of companies. Here are a few choice stocks to consider for investors hoping to take advantage of the lithium boom.
Lithium X (OTCQB:LIXXF)
Lithium X is a well-positioned miner in Argentina, with two brine assets at Sal de Los Angeles (SDLA) and Arizaro, both entirely owned by Lithium X. While both operations are still coming on-line, the company has been moving fast to get them into production, with SDLA estimated to produce 15,000 tons per year by Q2 of 2019.
SDLA has 2 million tons of lithium carbonate equivalent (LCE) ready for the taking, though the company has stressed that this is a historic estimate, rather than a current estimate. Should the figure prove accurate, however, it should translate into considerable revenues.
Based on low lithium carbonate prices ($5000/ton), the pre-tax net-present value (NPV) of the SDLA mine is set at $964 million, but if prices increased the NPV could be anywhere between $1.45 and $1.85 billion.
Once the potential of SDLA and Lithium X’s operation at Arizaro is realized, the company could rapidly increase in value.
The company benefits from a strong management team, including a number of renowned lithium miners with a strong track record in South American lithium mining.
Should its assets in Argentina prove their worth and production begins on schedule in 2018, Lithium X should see its price increase tremendously.
International Battery Metals (CSE:IBAT; OTC: RHHNF)
While most lithium stocks are in production/upstream activities, International Battery Metals (IBAT) is a tech stock with a bold new approach to lithium output, one that could potentially change how this mineral is produced and marketed.
Lithium carbonate equivalent is most often extracted from brine sources and spodumene mines. Once potent sources are found, solar evaporation is used to extract lithium from the brine and spodumene. That’s how it’s done in Chile and Argentina, two of the biggest lithium suppliers. Normally, solar evaporation takes months to extract lithium from salt brine, but IBAT has signed an LOI to acquire technology from North American Lithium (NAL) which has developed improved technology that can do process the brine in a matter of hours.
The proprietary method isolates lithium ions in the brine salt solution, removing lithium chloride while leaving the remaining salts behind. It’s a process that’s faster and much more environmentally friendly: no salt piles are left for farming, and no toxic ponds of brine are left to pool after extraction.
If proven on a commercial scale, it’s the equivalent of fracking for lithium: an improved method that could radically speed-up production times. Right now, it can take 4 years for a lithium brine mine to come on-line, and other 3-4 years before the full capacity is reached. IBAT’s technology could turn a mine productive and fully profitable in a fraction of the time.
Along with a quickened schedule, IBAT’s to-be-acquired technology should cut down on production costs. The company plans on using a highly-mobile extraction unit that can operate fully remotely; it doesn’t need teams of technicians and miners to monitor it, and the quick extraction times means no more 18-24 month-long tours.
Even without the massive capex of the big three lithium miners (Albermarle, Sociedad Quimica y Miner de Chile, and FMC), if everything works according to plan, IBAT could operate on a cost-per-ton equivalent. Once commercial production is proven using the improved technology and operations begin, the company could become profitable almost immediately.
Led by lithium pioneer John Burba, considered a genius in inventive lithium-extraction technology, IBAT entered the lithium field only this year. Already, it has evaluated three North American brine areas and secured one for potential lithium extraction. Plans for a pilot extraction facility for early 2018 are in motion, with possible new licenses on the table for March 2018.
IBAT has already signed an option agreement for a 37,500 acre play in the Woodbury Carper Lithium Resource Project in Illinois. If the soon to be acquired technology proves successful, it could auger a new North American lithium rush, as other miners try to get in on the action.
Suffice it to say, IBAT is an exciting company with some big, bold plans for the future. Its technology, if proved successful on a commercial scale could change lithium operations worldwide, paying off for any investor who believes that IBAT’s technology will win out.
Arotech Corp. (NASDAQ: ARTX)
Arotech has had a strange journey to becoming a lithium stock. Going public in 2001 under the name Electric Fuel Corp., the company couldn’t hack it as a battery manufacturer and tried instead to rebrand as a defense contractor. It acquired a training and simulation company as well as a military battery supplier and changed its name to Arotech.
Now, the company has two divisions, Training/Simulation and Power Systems. The latter division specializes in low-cost batteries used in military vehicles and weapon systems, utilizing lithium and zinc-air technologies.
While both divisions attract contracts and a proven record of profitability, T&S can’t match P&S for growth potential. In 2016, the company attracted some activist capital and underwent significant re-tooling.
Arotech now has a strong profile and some healthy prospects for growth, having seen its share price grow from $2.95 in March to the current price of $4.30. The company expects year-over-year earnings to exceed 200 percent for the current quarter and 28 percent for the year, according to Nasdaq.com.
Orocobre Limited (ORL.TO)
An Australian miner with a major operation underway in Argentina, Orocobre experienced some serious set-backs in the first half of 2017. Last fiscal year the company missed its projections and posted a $22 million loss, chiefly due to cost overruns.
But now it’s turned its game around. In August the company posted a profit for the year of $19.4 million. While the figure was boosted by a $14.8 million asset sale, stocks responded favorably and Orocobre is now back on its feet. In FY 2017 the company sold more than 12 thousand tons of LCE for sales equaling $120 million.
After its struggles in 2016, the company is now one of the lowest-cost producers around, with gross operating margins of 62 percent and lithium production costs of just $3,700 per ton.
Shares in Orocobre in September gained momentum, rising from $3 to $4.30 and catching investors off-guard. The rise came as most lithium producers saw their shares boost off the news that China was hoping to increase the number of EVs in circulation, but Orocobre’s price rose faster and higher than its contemporaries thanks to its recovered profitability.
With current production at 11,000 tons LCE and a nameplate capacity of 17,000 tons LCE, the company has strong prospects for growth, and if its August earnings report is anything to go by, has escaped the doldrums of last year.
Galaxy Resources (ASX:GXY) (OTCPK:GALXF)
With three separate lithium projects in three different countries and a steadily rising production profile, Galaxy Resources is certainly a lithium stock to watch.
At Mt. Cattlin in Australia, Galaxy’s mine is set to produce 160kt in 2017 of spodumene. With costs factored in the off-take for Mt. Cattlin is $905/t for 6 percent spodumene, making the mine a considerable source of funds for Galaxy’s operations elsewhere.
The company’s flagship project, Sal de Vida in Argentina, is one of the largest concentrations of lithium carbonate equivalent (LCE) yet discovered. Low concentrations of magnesium and sulphate means the cost of production should be low, making SDV another gold-mine (so to speak) for Galaxy and its investors.
Sales took off in the second half of 2017 and should increase in 2018, according to company projections. Right now Galaxy is trading at just above $2.60 on the ASX, up from $1.75 in early September.
If the company’s three mines meet expectations, high-level production at low costs should turn Galaxy into a significant player in upstream lithium.
Other companies to watch in the lithium and tech space:
Canada’s Ivanhoe Mines (TSX:IVN): IVN has recently said it plans to develop the DRC-based Kamoa-Kakula deposit, thought to be one of the biggest high-grade copper discoveries in the world. Cobalt will be a lucrative by-product.
Next to lithium, cobalt has been one of the bottleneck minerals. EV manufacturers continue to struggle to get their hands on ethically sourced cobalt as most of the blue mineral is mined in conflict areas.
eCobalt Solutions (TSX:ECS) is an established mineral exploration and development company based in Canada. It is a leader in the cobalt industry which is just as important as the lithium space in this energy revolution. Moreover, eCobalt prides itself on providing ethically sourced commodities. Its primary asset is in prime territory in Idaho.
Backed by strong leadership and a forward-thinking attitude, eCobalt is expecting feasibility study results in Q2. This is shaping up to be one of the most exciting belts in the US, and investors are definitely taking notice.
Fortune Minerals (TSX:FT) is another player in the cobalt space. Operating in Canada’s Northwest Territories, Fortune is eyeing status as a major Canadian producer of battery-grade cobalt chemicals--but it’s also got copper and gold bismuth upside. And it’s getting a boost from the government in terms of mining infrastructure.
Fortune’s modest market cap and low buy in make it a great stock for investors looking to get a piece of the electric vehicle revolution. The company’s value has increased significantly over the past year but it hasn’t yet reached its peak.
Nemaska Lithium Inc. (TSE:NMX) is a smart company which realizes that lithium will be used in nearly every major tech-leap in electric vehicles and consumer products using batteries the coming years. With a looming lithium supply squeeze coming, Nemaska has a unique technology and great government support. Nemaska explores and develops hard rock lithium mining properties and related processing in Quebec.
It’s small, and its shares are trading right now under $1, but it’s the government support you should look out for. Smart investors know a good thing when they see it and will be sure to follow Nemaska in the coming years.
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Forward-Looking Statements
This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that IBAT will complete its announced transaction with North American Lithium and acquire NAL’s technology and IP; the Lithium extraction process will be cost effective and can work much more quickly that other extraction technologies; that the process can be commercialized for large scale production; that the NAL team which knows the NAL technology will join IBAT; that IBAT will use a mobile unit that needs little labor; that the NAL technology can be licensed worldwide; that IBAT plans to set up a pilot extraction facility in early 2018, and then secure additional licenses for other high-grade lithium brines by March; that by 2020, IBAT anticipates becoming a supplier of various battery metals; that IBAT plans to secure 3 tin properties in 2018; and that it plans to acquire high value tantilum properties. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company and NAL may not agree on the final agreement terms, aspects or all of the process development may not be successful, the process may not be cost effective, the Company may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumption based on limited test work and by comparison to what are considered analogous deposits that with further test work may not be comparable; high value mineral properties may not be available for IBAT to acquire, or IBAT may not be able to afford them; competitors may offer better technology than NAL’s lithium extraction technology; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of the project, that the minerals cannot be economically mined with the NAL technology, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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