Demand for lithium -- the hottest commodity on the planet and the only
commodity to show positive price movement in 2015 -- is poised to continue on
its upward trajectory, becoming the world's new gasoline and earning the
moniker of "White Petroleum". And the battle for market share in
and around this commodity has everyone from major tech players to
trend-setting investor gurus vying for a foothold.
Driven by the rise of battery gigafactories and game-changing Powerwall
and energy storage businesses, the world now finds itself at the beginning of
a lithium super cycle that is all about securing new supply, much of which is
poised to come from lithium superstar Argentina.
We have Tesla in the far corner, building its battery gigafactory in
Nevada, for which it needs tons of lithium at a reasonable price, and just
last week Tesla announced its plans for the Model 3, which has already hit
over 300,000 pre-orders. To give you an idea of just how meaningful this is,
Tesla produced less than 50,000 cars last year. Elon himself mentioned during
the unveiling that Tesla will be gobbling up much of the world's lithium
supply with plans to produce 500,000 EVs per year. "In order to produce
a half million cars per year...we would basically need to absorb the entire
world's lithium-ion production." Remember - this is one man, one
company. Tesla's soon-to-be-completed gigafactory will produce more
lithium-ion batteries than the rest of the world combined.
And opposite Tesla, we have some other major players shifting gears that
will affect the lithium space.
Chinese billionaire Jia Yueting is stepping onto Tesla's playing field
with its own electric car start-up, Faraday
Future, and Apple
is planning one too, by 2019. Through its Alphabet
holding company, Google is also getting into the game with plans for a
self-driving car.
They are fighting it out not only to be the first to capture the most
electric vehicle market share and the best engineers, but they are getting
down to the core of this arena, which is lithium -- the key element that will
make it all work.
This is D-Day for lithium miners, and it's all about new entrants to a
space that is about to change exponentially. Big investors are definitively
standing up and taking notice -- and even jumping into the game.
One of Canada's most noteworthy investors in the mining sector, Frank
Giustra, is the latest to see lithium for what it is -- the single-most
valuable commodity of our tech-driven future, and one that is already in
short supply.
The investor extraordinaire with a focus on big mining deals has thrown
his support behind Lithium
X which is exploring in the key "Lithium Triangle" area of
Argentina and is the largest
land holder in Nevada's Clayton Valley, the only producing lithium area
in the entire United States. Lithium X has over 15,000 acres in Clayton
Valley, near Albermarle's Silver Peak mine, the only American lithium
producer right now, and about three hours from Tesla's gigafactory.
"Right now, there is a lot of 'smart money' getting in on the lithium
land rush, and a mining legend like Giustra would never have been late to
this party in Nevada -- but the big attraction is our lithium plays in
Argentina, which is ground zero for the commodity in South America," Lithium X Chairman Paul Matysek told
Oilprice.com.
"At the end of the day, Frank, likes to get involved in a project if
he sees a massive shift in an industry's fundamentals," Matysek added.
"Lithium -- is certainly showing all the right signs!"
Floored by the 'White Petroleum' Fundamentals
The fundamentals here are impressive, and the catalysts for lithium prices
are spectacularly clear -- all of which is pushing prices up and creating an
aggressively competitive playing field that is likely to see a lot of
acquisition talk.
There are plenty of reasons to be bullish about what Goldman Sachs calls
the "new
gasoline" that will fuel our technology-driven resource era.
According
to The Economist, the ''global scramble to secure supplies of lithium by
the world's largest battery producers, and by end-users such as
carmakers", among other things, has seen the price of lithium carbonate
imported to China more than double just in November and December of last year
alone, when it reached an amazing $13,000 per ton. Some contracts in China,
according to Bloomberg, have seen over $23,000.
There is no denying that this is a euphorically tight market, with demand
rising steadily and expected to spike drastically, and suppliers struggling
to keep pace -- which means that the door for new lithium supplies is wide
open and this is now a fast-paced exploration and exploitation game.
And even without the battery gigafactories, a Powerwall and storage
revolution or streets lined with electric vehicles -- demand for lithium
would still remain steady just to keep up with consumer electronics.
For the electric vehicle industry alone, Goldman Sachs predicts that for
every 1 percent rise in EV market share, lithium demand will rise by 70,000
tons per year. Furthermore, Goldman Sachs predicts that the lithium market
could triple in size by 2025 just on the back of electric vehicles.
The Hunt for Lithium Is On...
The lithium that is currently being mined quite simply is not enough to
put a dent in the projected demand dictated by our hunger for consumer
electronics and the pending energy revolution. This means that the new market
is all about new players.
Right now, most of the world's lithium comes from Australia, China and the
"Lithium Triangle" of Argentina, Chile and Bolivia. In North
America, Nevada is the only player in this game, but more to the point, the
U.S. state has the best lithium there is to have -- lithium found in the
brine.
Lithium sourced from brines, or salt water, is the most cost-effective on
the market, and sourcing enough of it right at home would be a coup for all
sides in the battery, storage and EV game.
And while lithium has traditionally been controlled by a handful of major
global suppliers, spiking demand is changing this landscape drastically.
The four companies that currently control the lithium space -- Albermarle
(NYSE:ALB) in Chile and Nevada; SQM (NYSE:SQM) in Chile; FMC (NYSE:FMC) in
Argentina; and Sichuan Tianqi in China -- are about to make way for the new
entrants.
And when it comes to new entrants, the biggest market share will be
scooped up by those who can come up with the most lithium sourced from the
brine. That means getting in on the new game in Nevada, but perhaps more
importantly, securing positions in the bigger venues, particularly in
Argentina.
Within the Lithium Triangle, it's all about Argentina right now. Chile is not
granting any new concessions, and opposition in Bolivia has led to a
suspension of lithium mining. Argentina has recently announced a deal with
creditors to repay debt stemming from the country's 2001-2002 default, paving
the way for Argentina's return to global financial markets.
And the Argentina lithium rush is already
in full swing, with miners eyeing resources of up to 128 million tons of
lithium carbonate.
Investors have been pouring into this sector, according to Argentine
Mining Secretary Jorge Mayoral, who recently
noted that "all the big auto makers have been present in Argentina
trying to get a foot in lithium development", including Toyota,
Mitsubishi and Posco.
For those who come up with the next supply, the industry will come right
to them, and the sniffing around has already begun in full force.
