Analyst says lithium boom still in infancy, be on look-out for integrated producers
The lithium rush remains in full swing into 2018, and the market is becoming increasingly tight. Global production has grown year-on-year in order to meet new demand for mobile power storage, but many new mines must still come online over the next decade, lest prices escalate to the point where lithium becomes unattractive to manufacturers. Thankfully, there is a relative abundance of lithium in-ground, and while economical extraction is difficult, successfully bringing a resource to market during a boom period is a lucrative affair indeed.
This has attracted a number of hopefuls into the space, and the resulting intense competition has pushed many to create vertically integrated lithium operations in order to gain direct access to end-users by processing milled material into battery grade products in-house or via joint venture. Ultra Lithium Inc. (TSXV: ULI) (“Ultra Lithium”), for instance, recently signed an MoU with Beijing based Cadavisa Technologies Corp (CTC) to use their proprietary crystallization processes to selectively separate ore material into battery grade lithium carbonate.
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CTC is constructing a plant in China with an annual capacity of 25,000 tonnes of battery grade lithium carbonate. While some companies have gone for ‘mine to mobile’ offerings by becoming directly involved in the manufacturing processes of individual battery components (cathodes, anodes, electrolytic materials), the established mining giants will be looking for straight-up supply when shopping for acquisitions, and taking oneself out of that market would be somewhat limiting.
All of the lithium majors are currently undertaking expansion efforts, with the majority of focus on Argentinian brines. In March, 2017, Jiangxi Ganfeng Lithium, along with Albemarle and SQM, announced they were looking to expand existing operations in Argentina. This year, Ganfeng announced a RMB 277 million battery project to extend the capacity of lithium-ion battery technologies, as well as a joint venture with International Lithium to spend a combined total of US$17 million on ongoing brine exploration in Salta, Argentina. Similar efforts are being undertaken by FMC in Argentina over the next few years, and annual output is expected to exceed 40,000 tonnes of lithium carbonate equivalents.
Vertical integration may provide maximum potential for profit, but it is worth very little without a quality feedstock to maintain the economics of production. Ultra Lithium currently owns seven properties in various stages of exploration, including 100% interest in five brine deposits covering over 25,000 hectares of land in Catamarca Province, Argentina, as well as two North-American projects (Ontario Canada and Nevada, USA).
Recent exploration results have been positive. A second round of sampling at the company’s Salar Laguna Verde discovery in Argentina has returned values of up to 1,178 ppm, confirming the presence of high-grade lithium brines suitable for economical extraction at today’s prices. The results also suggest favourable magnesium to lithium ratios as low as 0.019, an important factor considering that magnesium is difficult and costly to remove.
We believe that the lithium boom is still in its infancy and the market has space for new that can economically provide battery grade material. If the world sticks to lithium-containing batteries, we will likely see continued growth in this sector for many years, during which time many of the most economical deposits currently known will go from “lithium hopefuls” to producing operations. Given the potential for new producers and therefore new competitors, being an integrated producer is paramount in order to ensure end-user customers.