Future lithium supplier prepares for battery mania
2018 is looking like crunch time for battery mania. Heading into the era of energy storage, Critical Elements Corp. (TSXV: CRE | OTCQX: CRECF) (“Critical Elements”) has recently broken strongly upward of its two-year growth trend, and we expect the recent brief correction to have settled on the support around CAD$1.20. This could very well be the year that cements Critical Elements’ position as a future lithium and tantalum supplier.
The recent surge in interest is almost certainly due to the widely publicised market disruption expected from the energy storage world over the next decade or two. Additionally, Critical Elements was recently included in a rundown of stocks-to-watch in the battery space compiled by a leading smallcap news network that positioned the company as a clear leader in this initiative.
Critical Elements recently released a financial analysis based on indicated resources for its wholly-owned Rose Lithium-Tantalum project based on price forecasts of US $750/tonne for chemical-grade lithium concentrate (5% Li2O), US $1,500/tonne for technical-grade lithium concentrate (6% Li2O) and US $130/kg for Ta2O5 in tantalite concentrate, and an exchange rate of CAD/USD 0.75.
The internal rate of return (IRR) for the Rose Lithium-Tantalum project is estimated at 34.9% after tax, and net present value (NPV) is estimated at CA$726 million at an 8% discount rate. The estimated payback period is 2.8 years. The pre-tax IRR is estimated at 48.2% and the pre-tax NPV at CA $1,257 million at an 8% discount rate.
The life-of-mine (LOM) plan allows for open pit mining of 26.8 million tonnes of ore over 17 years, and the nominal production rate is expected to be 4,600 tonnes per day, with 350 operating days per year. The mill will process 1.61 million tonnes of ore per year to produce an annual average of 236,532 tonnes of technical and chemical grade spodumene concentrate and 429 tonnes of tantalite concentrate.
The future growth of the lithium market will clearly be dominated by Li-ion batteries but also increasingly by energy storage systems (ESS). With the declining cost of Li-cells, targets for 1 kWh being now very close to 150 USD, they are also becoming attractive for use in private installations combined with increasing use of photovoltaic roof-top electricity generation (PV). Even in the case of solid state batteries, lithium continues to be a necessary component.
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In Germany, too, all PV projects exceeding 1MW of power generation must have an energy storage system installed by 2025 in order to avoid peak energy use stressing the grid, a phenomenon which already pushes European systems to their limits during the summer months and increasingly so with the ongoing addition of new PV systems, commercial or private.
Moreover, electric vehicles (EV) are expected by many to comprise over 50% of all Li-ion batteries installed, which could lead to a lithium demand requirement of approximately 750,000 tonnes of lithium carbonate equivalent (LCE). This is an additional 550,000 tonnes of LCE required from 2017 till 2025, or the equivalent of almost 70,000 tonnes per year of LCE.
The long-anticipated demand for lithium is going nowhere soon, and the marketplace is selecting its players right now. Crucially, the recent correction in Critical Elements’ share price finishing above its previous trend gives me confidence that this company is going to have a role to play in the future of lithium and tantalum supply.