Following an incredible 2022, the lithium sector has had a horrible 2023; however soon the pain should be over. The China lithium carbonate spot price is down 82.5% in the past year and is now below the marginal cost of production, meaning the lithium price fall should end very soon. This assumes the marginal cost producers continue to stop production and that EV sales continue to grow in 2024.

This means it’s now time to take a fresh look at the beaten down lithium stocks as we approach 2024. Today we look at 3 very well valued lithium juniors with high quality lithium projects likely to make it to production before 2027.

China lithium spot price 5 year chart showing the lithium price bottom has been reached or it should bottom very soon

Critical Elements Lithium Corporation (TSXV: CRE | OTCQX: CRECF)

Critical Elements Lithium is arguably the most undervalued advanced lithium junior globally. The Company is in the project funding stage for their 100% owned Rose Lithium-Tantalum spodumene Project in Quebec, Canada.

The Rose Project August 2023 Feasibility Study resulted in an after-tax NPV8% of US$2.195 billion and an after-tax IRR of 65.7% with average price assumptions of US$4,699 per tonne technical grade lithium concentrate, US$2,162 per tonne chemical grade lithium concentrate, and US$150 per kg tantalum pentoxide (Ta2O5). Initial CapEx is estimated at US$471 million and OpEx at US$617/t spodumene.

The Project achieved its mining license in September 2023 and in October 2023 ordered its long lead equipment for the Project construction. To achieve project funding Critical Elements is evaluating what they state as “continued interest from blue-chip strategic partners”.

Management is top tier with development and operational lithium experience, including the former Rockwood Lithium CEO and CFO (Rockwood was sold to Albemarle Corporation (NYSE: ALB) for US$6.2 billion in January 2015).

Possible 2026 lithium spodumene producer. Critical Elements Lithium trades on a market cap of C$200 million.

Critical Elements Rose Project in Quebec, Canada

Source: Critical Elements Company presentation

Frontier Lithium Inc. (TSXV: FL | OTCQX: LITOF)

Frontier Lithium 100% owns the PAK Lithium Project in northern Ontario, Canada. The Project has a tier one total Resource of approximately 58.5 Mt at high grades spread across the Spark and PAK deposits, as shown below.

The PAK Project 2023 PFS resulted in a post tax NPV8% of US$1.74 billion, 24% IRR, based on a lithium hydroxide selling price of US$22,000/t. Phase 1 CapEx (Mine & Mill) was estimated at US$468 million and Phase 2 (expansion and LiOH refinery) at US$576 million.

A key positive for Frontier Lithium is they can sell high quality technical grade at a high price in the first stage of the project. Another positive is that the PAK Deposit has a very high-grade zone of 657kt at 3.59% Li2O. Road access to the Project remains the main issue; however, the upcoming 2024 DFS Phase 1 is advancing the option of building the mine and mill using a winter road and for transportation of spodumene concentrates.

Frontier Lithium is targeting to commence spodumene production in H1, 2027. Frontier Lithium trades on a market cap of C$161 million.

Frontier Lithium has a tier one lithium resource at their PAK Project in Ontario, Canada

Source: Frontier Lithium company presentation

Lithium Ionic Corp. (TSXV: LTH | OTCQX: LTHCF)

Lithium Ionic owns two lithium projects in Brazil – Itinga Project (100%) and Salinas Project (85%). Itinga is near Sigma Lithium Corporation’s (NASDAQ: SGML | TSXV: SGML) Grota do Cirilo Mine and Salinas is adjacent to Latin Resources Limited’s (ASX: LRS) Colina Project. The current Resource Estimate of the Itinga Project is a M&I Resource of 16.69Mt @1.41% Li2O and an Inferred Resource of 16.21Mt @ 1.34% Li2O.

At the Itinga Project, the 2023 PEA Initial Phase (Bandeira only) resulted in a post-tax NPV8% of US$1.6 billion and an IRR of 121% to produce 217,700tpa of spodumene over a 20 year mine life. Despite being an underground mine the CapEx estimate was only US$233 million and the OpEx was US$349/t spodumene.

In some exciting news released on December 12, 2023, Lithium Ionic reported: “Widest and Highest-Grade Lithium Intercept to Date; Drills 1.72% Li2O Over 53.7m, incl. 1.87% Li2O over 39.5m at Bandeira, Minas Gerais, Brazil. This is one of the better drill results all year globally. Lithium Ionic CEO, Blake Hylands, stated:

“These results continue to emphasize the robustness of the lithium deposit at Bandeira, which currently represents around 90% of our total resource tonnage but only ~1% of our total property size pointing to the immense potential and scalability of our projects in this lithium-rich region.”

Catalysts in 2024 include further drill results, an updated Bandeira Resource and FS due early 2024, and project construction approvals (mid 2024).

A possible 2026 lithium spodumene producer. Lithium Ionic trades on a market cap of C$203 million.

Closing remarks

Commodity prices go in cycles. For lithium, the 2022 price boom was due to a temporary deficit in the market as global plugin electric car sales surged 56% higher that year. In 2023 we are likely to see a slowdown to ~28% sales growth, which has allowed lithium supply to catch up again with demand, hence the huge lithium price fall in 2023. 2024 is open for debate. If we get similar global plugin electric car sales growth as 2023, then the lithium market should be reasonably balanced and lithium prices a lot more stable. Looking out to the second half of this decade it is hard to see lithium supply keeping up with demand as the EV boom takes off with ever increasing numbers of sales. This means lithium juniors that can make it to production after 2025 may enjoy a very favorable lithium market.

Our top 3 best valued quality lithium juniors with near term production potential are Critical Elements Lithium Corporation, Frontier Lithium Inc., and Lithium Ionic Corp. Let’s check back in 2027 and see how they are doing.

Lithium demand continues to surge each year, despite some year on year (“YoY’) volatility in demand and prices. In 2021 the IEA forecast lithium demand to increase from 13x to 42x from 2020 to 2040. Trend Investing forecasts lithium demand to increase 35x from 2020 to 2037 as we move to a 100% electric vehicle world. Rio Tinto Group (NYSE: RIO | LSE: RIO) forecasts that the world will need 60 new lithium mines the size of Jadar. BMI forecasts that we will need 78 new lithium mines from 2022 to 2035.

The massive demand wave coming for lithium makes for a perfect royalty play in the sector. The key advantage of royalty companies is broad exposure to many companies’ potential revenue streams. Today’s company gives investors exposure to 32 royalties across 7 countries.

Lithium Royalty Corp. (TSX: LIRC) (“LRC”)

LRC is a pure-play battery metal royalty company with a focus on lithium royalties. LRC has been steadily acquiring royalties since 2018 with a focus on safe mining jurisdictions. The large majority are lithium royalties in mines/projects located in South America, Canada, and Australia (see charts below).

Lithium Royalty Corp. (“LRC”) global portfolio of 32 royalties with a focus on lithium

LRC lithium royalty revenues with more set to potentially come online in the near term

Looking at the list in the chart above we see that LRC already has several revenue streams from key lithium producers including Allkem Limited‘s (ASX: AKE | TSX: AKE) Mt Cattlin Mine, Core Lithium Limited‘s (ASX: CXO) Finniss Mine, and SIGMA Lithium Corporation‘s (NASDAQ: SGML | TSXV: SGML) Grota do Cirilo Mine plus others potentially to follow in the near term including Zijin Mining Group‘s Tres Quebradas Project, Ganfeng Lithium Group‘s Mariana Project, and Delta Lithium Limited‘s (ASX: DLI) Yinnetharra Project.

Also, all going well, by ~2027 Winsome Resources Ltd.‘s (ASX: WR1) Cancet and Adina Projects (potential ~50Mt resource in the making) look very promising based on drill results so far, as does Sayona Mining Limited‘s (ASX: SYA | OTCQB: SYAXF) Moblan JV which already has a Total Resource of 51.4Mt @ 1.31% Li2O. Both projects are in Canada.

LRC’s portfolio is advancing well with 20% in production

LRC’s portfolio has grown since 2018 to now include 32 royalties.

Country exposure of the LRC portfolio is South America (42%), Canada (30%), Australia (14%), USA (9%), and Europe (4%). This would be considered a safe mix of countries, noting the South America exposure is mostly Argentina and Brazil.

Portfolio value is nicely diversified with 42% of the portfolio in the others category. The largest holding by value is the Zijin Mining’s Tres Quebradas Project (25%); however, the next largest is only at 11%.

LRC’s royalty portfolio has good long-life assets averaging 19 years.

Hard rock spodumene assets dominate the portfolio at 52% which is seen as a positive considering they are usually faster and cheaper to bring into production than other lithium projects.

20% of the LRC royalty portfolio is already in production, 35% are in the construction stage, and 45% are in the development stage.

The overall quality of the portfolio looks solid with most companies standing a good chance at being producers by 2030.

A summary of LRC’s royalty portfolio characteristics

Source: LRC company presentation

Some advantages of royalty companies include – Diversification across a large portfolio is much lower risk than just owning a few lithium miners and exposure to the underlying commodity price (lithium) with minimal project execution risk.

LRC’s Q2, 2023 financial results

LRC announced Q2, 2023 results on August 14, 2023, which included royalty revenue up 98%, gross profit up 280%, and a small loss of C$0.02 per basic share. LRC’s royalty income for Q2 was C$838k. The announcement gives a lot more details on their royalty portfolio, including the newer acquisitions, and mentions a new credit agreement with the National Bank of Canada for C$25 million.

Closing remarks

The lithium boom looks to be very well established and still has about 2 decades to run as the world transitions to sustainable energy (energy storage with Li-ion batteries) and electric vehicles.

Buying a lithium royalty portfolio is a safer way to gain broad exposure to a number of companies. The main risk is that if the royalty portfolio companies don’t make it to production. Valuation is not an easy task so investors may need to rely on analyst’s price targets.

Lithium Royalty Corp. trades on a market cap of C$688 million. The August 2023 company presentation stated LRC’s net asset value at C$1,061 million.

LRC looks like a good quality royalty play on lithium. The key will be lithium prices and how the underlying portfolio of companies perform. Stay tuned.

In this video, Critical Minerals Institute’s (CMI) Co-founder and Chairman Jack Lifton talks about the growing lithium demand from the electric vehicle industry. Discussing the current state of domestic American lithium supply, Jack explains why the target outlined by President Biden of 50% electric vehicle sales share in 2030 with 100% domestic content is impossible to achieve.

Speaking on the United States’ Inflation Reduction Act, Jack discusses how the automotive industry has failed to accept the problem of an adequate domestic American lithium supply chain. He goes on to say, “If it is not even possible to buy enough lithium to make enough batteries in the United States for half of our own production, what about the rest of the non-Chinese world?”

To access the full episode, click here

Don’t miss other InvestorIntel videos. Subscribe to the InvestorIntel YouTube channel by clicking here.

About The Critical Minerals Institute

The Critical Mineral Institute (CMI) is an international organization for companies and professionals focused on battery materials, technology metals, defense metals, ESG technologies and practices, the general EV market, and the use of critical minerals for energy and alternative energy production. Offering an online site that features job opportunities that range from consulting roles to Advisory Board positions, the CMI offers a wide range of B2B service solutions. Also offering online and in-person events, the CMI is designed for education, collaboration, and to provide professional opportunities to meet the critical minerals supply chain challenges.

Investors are starting to realize the lithium boom is likely to last the next 1-2 decades. EV manufacturers are now facing a generational challenge to secure enough lithium supply to keep their factories running.

In 2021, the IEA forecast that the world will need 13-42x more lithium by 2040 (from 2020 levels). The 13x increase was based on the stated policies track (as of 2021) and the 42x increase was based on the sustainable development scenario (we move rapidly towards a world of zero emissions). Just this past week Benchmark Mineral Intelligence forecast: “Lithium has to scale twenty times by 2050 as automakers face generational challenge”. This was based on 2021 levels. Our exclusive research at Trend Investing forecast a 35x increase in lithium demand from 2020 to 2037.

As of October 2022, the best positioned EV manufacturers are Tesla & BYD Co, and perhaps Ford & GM. These companies have made good preparations including multiple lithium off-take agreements and investments in the lithium companies or projects. Examples are Ford’s July 2022 off-take and A$300 million debt facility agreement with Australian lithium junior Liontown Resources Limited (ASX: LTR), and the August 2022 GM off-take and US$198 million pre-payment deal with Livent. Both these recent deals show the new reality of what it takes to secure future lithium supplies.

Who are the lithium leaders?

The lithium leaders are those lithium companies that are currently the leading producers and who have potential to significantly ramp their lithium production this decade.

Sociedad Quimica y Minera S.A. (NYSE: SQM) – A Chile company with a 51% share of the world’s best lithium brine mine at the Atacama Salar in Chile. They also own 50% share of the Mt Holland spodumene project (with Wesfarmers) set to begin production in Q4, 2023. SQM is targeting lithium carbonate equivalent (“LCE”) sales in 2022 of 150,000t, 210,000t in 2023, and 240,000t in 2024.

Albemarle Corporation (NYSE: ALB) – An American company often seen as the lithium leader. They own 49% of the Atacama Mine (with SQM JV) and 49% of the world’s best spodumene mine Greenbushes in Australia. They also have a 50% JV ownership (with Mineral Resources) of the massive Wodgina Mine in Western Australia, which recently began producing again with plans for a large ramp ahead. The JV also has a recently completed hydroxide conversion plant (60% ALB; 40% MIN) in Kemerton, WA. Albemarle’s production is targeted to increase from ~130,000t LCE in 2022 to ~220,000t LCE in 2025.

Ganfeng Lithium Group Co., Ltd. (SHE: 002460 | HK: 1772 | OTC: GNENF) – A Chinese lithium company focused on lithium refining, however now has multiple projects around the world including 49% of Mt Marion in WA and a 50% JV with Lithium Americas at the massive Cauchari-Olaroz project in Argentina due to start production soon. Ganfeng aims to boost production from ~90,000t in 2022 to 200,000tpa by 2025.

The other leaders with large projects include Pilbara Minerals Limited (ASX: PLS) with their massive Pilgangoora Mine in Western Australia (~90,000tpa in 2022/23), Mineral Resources Limited (ASX: MIN), Tianqi Lithium Corporation, Livent Corporation (NYSE: LTHM) and Allkem Limited (ASX: AKE | TSX: AKE).

Together the names above represent the biggest eight lithium producers and they produce most of the world’s lithium today.

Some others such as AMG Advanced Metallurgical Group NV and a few smaller Chinese producers make up the balance of global lithium production.

The next or near term producers set to come online include (in rough order) Argosy Minerals Limited (ASX: AGY), Lithium Americas Corp. (NYSE: LAC | TSX: LAC), Core Lithium Ltd (ASX: CXO), – SIGMA Lithium Corporation (NASDAQ: SGML | TSXV: SGML), Sayona Mining Limited (ASX: SYA | OTCQB: SYAXF)/Piedmont Lithium (Nasdaq: PLL | ASX: PLL) (NAL Project in Canada), and Liontown Resources Limited (ASX: LTR).

There are also a bunch of other very promising lithium junior miners with potential to become new lithium producers after 2025. Three of the biggest projects could be in Canada with Critical Elements Lithium Corporation (TSXV: CRE | OTCQX: CRECF), Patriot Battery Metals Inc. (TSXV: PMET | OTCQB: PMETF) and Frontier Lithium Inc. (TSXV: FL | OTCQX: LITOF).

Closing remarks

It may seem like there is a lot of lithium supply coming online in the next few years, but of course demand is rising faster than supply, assuming EV sales growth continues at a 50%+ growth rate as expected.

Could there be some periods of short term oversupply? Yes, but only likely if EV sales falter. Either way the decade or two ahead looks set to be a very exciting time for lithium investors and the lithium leaders discussed in this article.

Disclosure: The author is long Tesla, BYD Co and most of the lithium stocks mentioned in the article.

Disclaimer: The editor of this post may or may not be a securities holder of any of the companies mentioned in this column. None of the companies discussed in the above feature have paid for this content. The writer of this article/post/column/opinion is not an investment advisor, and is neither licensed to nor is making any buy or sell recommendations. For more information about this or any other company, please review all public documents to conduct your own due diligence. To access the InvestorIntel.com Disclaimer, click here

The past two years has seen lithium prices rise about ten times from US$7,000/t to US$70,000/t both for lithium hydroxide and carbonate. Meanwhile, the lithium spodumene price has enjoyed a similar 10 fold increase from US$500/t to US$5,000/t. This has been caused by EV sales booming, resulting in a huge demand wave for lithium that literally swamped the small lithium industry.

The lithium carbonate price has risen as EV demand has taken off – Currently at CNY 510,500/t (~US$70,000/t)

Source: Trading Economics

What’s next for the lithium sector?

Conventional commodity booms typically follow a rather fast boom and bust cycle as the cure for deficits is high prices, thereby encouraging new supply. However, every once in a while we get a commodity supercycle. That’s where the demand wave is so big that it takes as long as a decade for supply to eventually catch up or for demand to subside. New mines can take 5-10 years to come online, yet a new EV and battery factory can be built in 1-2 years.

In the case of lithium, many EV metals experts agree we have only just entered a lithium supercycle. To better understand the size of the demand wave investors need to get a feel for how much lithium will be needed to feed the electric vehicle boom.

A typical 50kWh battery electric car (roughly the global average size in 2022) requires about 45kgs of lithium carbonate equivalent. In 2022 global plugin electric car sales look set to grow by at least 50%+ year over year. Given 2021 global plugin electric car sales were 6.75 million, 2022 will likely end up at about 10.125 million, or 3.375 million additional new electric cars. This means lithium demand, only from plugin electric cars, will increase by roughly 152,000 tonnes (“t”) of lithium carbonate equivalent (“LCE”) in 2022 ((45/1000) x 3,375,000)). If we add in other sources of lithium the global lithium market will roughly increase by about 185,000t LCE in 2022, or about a 34% increase on 2021 levels of approximately 540,000t LCE.

Looking at lithium supply a typical new mine or mine expansion could possibly bring on 20,000t LCE in a year. This means the market needs about 9 new mines or expansion of existing mines, just to catch up with demand. This will be needed – and will grow larger – each year.

The scary part is that in a good year electric car demand can grow at 100%pa, as we saw with a 108% increase in 2021, which sent the lithium market into deficit. These days the demand is there but the supply is not, hence the global EV waiting list is now in the order of 3 million vehicles.

A lithium deficit can only mean lithium prices stay ‘stronger for longer’ this decade

Provided electric car sales growth remains at 30-50%+pa, all of this suggests we are likely to see constant lithium deficits this decade. Strong stationary energy storage sales are also pulling on lithium demand.

A lithium deficit can only mean lithium prices stay ‘stronger for longer’, meaning about US$50,000/t plus for lithium carbonate and lithium hydroxide and above US$5,000/t for spodumene.

Yet despite this, some analysts are forecasting lithium prices to fall over the next 5 years. This completely contradicts forecasts of continual lithium deficits this decade. In a deficit, prices do not fall.

A contradiction: Many analysts currently forecast lithium prices to fall as lithium deficits continue this decade

Source: Morningstar

What can go wrong with this forecast?

EV demand looks strong but in 2022 sales have been relying heavily on China, which has been responsible for 50-60% of global sales. This means any sales collapse in China will be heavily felt. European EV sales growth has weakened in 2022 due to events in Europe weakening their economy. USA EV sales have been growing quite well from a lower base, but the U.S economy is now slowing as interest rates are rapidly rising.

One plus for lithium demand is in the USA in 2023-24 we can expect to see new demand coming on from electric pickup trucks, which typically have a battery almost twice the size of an electric sedan, thereby requiring almost twice as much lithium.

Closing remarks

2022 has seen the West wake up to the need to source critical minerals and establish their own supply chain, or risk being left behind, as China grabs global electric car market share. The Inflation Reduction Act and the EU Critical Raw Materials Act are designed to address this problem and bring supply chains back home or at least with free trade agreement countries.

Again this is further evidence to suggest that the rest of this decade will see a fight to source critical minerals, none more important than lithium.

We may need to get used to lithium chemical prices at, or north of, US$50,000/t for the foreseeable future. This stronger for longer lithium pricing narrative should also flow through to the lithium miners many of which are currently priced at extremely low 2023 and 2024 earnings multiples, based on lithium prices falling back to US$20,000/t. If analysts become a little braver and use US$40-50,000/t in their models expect some very significant price target increases over the next year or two. Stay tuned.

Disclaimer: The editor of this post may or may not be a securities holder of any of the companies mentioned in this column. None of the companies discussed in the above feature have paid for this content. The writer of this article/post/column/opinion is not an investment advisor, and is neither licensed to nor is making any buy or sell recommendations. For more information about this or any other company, please review all public documents to conduct your own due diligence. To access the InvestorIntel.com Disclaimer, click here

With lithium demand projected to increase 10-11 fold this decade, there is a huge opportunity for successful lithium junior miners to prosper. Last year Rio Tinto was quoted as saying that “filling the supply gap will require over 60 Jadar projects”.

Then just last month Tesla CEO Elon Musk said (Tesla Q1 2022 earnings call transcript): “…can more people please get into the lithium business? Do you like minting money? Well, the lithium business is for you…” Musk also said on Twitter: “Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale unless costs improve.“

Of course, industry experts have been warning of EV metals supply deficits for some years, but it appears these warnings mostly fell on deaf ears. With this background in mind, today we take a look at some early-stage lithium junior companies with the potential to help fill the lithium supply gap in the second half of this decade.

China lithium carbonate spot prices – up about 6x over the past year due to lithium shortages

Source: Trading Economics

5 early-stage lithium junior miners to watch out for in 2022 (in no particular order)

1. Essential Metals Limited (ASX: ESS)
2. Green Technology Metals Limited (ASX: GT1)
3. Metals Australia Ltd. (ASX: MLS)
4. Lithium South Development Corporation (TSXV: LIS | OTCQB: LISMF)
5. Winsome Resources Limited (ASX: WR1)

Essential Metals Limited (ASX: ESS)

Essential Metals is an Australian exploration company with 9 projects (lithium, gold, gold JV, and nickel JV) all in Western Australia (WA). Three of the projects are 100% owned and 6 are JV’s with other companies, with ESS retaining a 20-30% interest (see below).

Essential Metal’s flagship project is their 100% owned Pioneer Dome Lithium Project in WA. The Project is located in a known lithium corridor and the gold-rich Eastern Goldfields region of WA, which contains the Mt Marion, Bald Hill and Buldania lithium mines/projects. The Project has a reasonable sized JORC compliant Total Resource of 11.2Mt at 1.21% Li2O, still with exploration upside. The Resource starts from or near surface. Drill assay results from the recent campaign are due out by the end of May 2022.

Essential Metals also has two other 100% owned gold projects in WA, namely the Golden Ridge Project (100% owned), 20kms from the Kalgoorlie super pit and the Juglah Dome Project, 60km east-southeast of Kalgoorlie. In addition, the Company has numerous JV projects including Acra Gold Project JV (25% interest), Kangan Gold Project JV (30%), Balagundi Gold Project Farmin/JV (25%), Larkinville Gold Project Farmin/JV (25% gold interest) (hosts a JORC Resource of 19,700 t @ 3.02 g/t for 11,600 oz. Au), Blair-Golden Ridge Nickel Farmin/JV (25% nickel interest) and Wattle Dam Nickel Joint Venture (20% nickel interest).

Essential Metals trades on a market cap of A$162 million.

Essential Metals summary showing the Pioneer Dome Lithium Project location near other successful lithium mines and projects in WA

Source: Essential Metals company presentation

Green Technology Metals Limited (ASX: GT1)

Green Technology Metals (GT1) has multiple lithium projects (options to acquire, some at 80% interest others at 100% interest) spread over 39,982 hectares in Ontario, Canada. GT1’s most advanced project is the Seymour Lithium Project with a JORC Total Mineral Resource of 4.8Mt @ 1.25%. Within the Seymour Project, drill results include an impressive 40m @ 1.54% Li2O. When combining all GT1’s Ontario Lithium Projects the target resource is 50-60 MT @ 0.8-1.5% Li2O.

An updated resource estimate is targeted for Q2, 2022. Management is top tier and highly experienced.

Green Technology Metals trades on a market cap of A$212 million.

GT1’s portfolio of multiple lithium projects in Ontario Canada

Source: GT1 website

Metals Australia Ltd. (ASX: MLS)

Metals Australia is an Australian junior miner with several projects. Their most advanced project is the Lac Rainy Nord Graphite Project in Quebec, Canada with an Indicated and Inferred Resource of 13.3Mt at 11.5% TGC for 1.529M tonnes of contained graphite.

With regards to lithium, Metals Australia 100% owns the promising Manindi Lithium and Zinc Project in WA. The Project has several lithium-cesium-tantalum (LCT) pegmatites spread over a total 3km strike length. Individual pegmatites have strike lengths of over 300m and widths of up to 25-30m. Past drilling includes intersections of 15m @ 1.2% Li2O, 117 Ta205 from 34m. Drilling is ongoing notably at the Foundation pegmatite where consistently high grade lithium grab samples (1% Li2O and >0.4% Rb) have been detected over the entire 500m strike length. Assay results are expected shortly. Manindi also has an existing JORC 2012 Resource estimate of 1.08Mt at 6.52% Zn, 0.26% Cu and 3.19g/t Ag.

Metals Australia trades on a market cap of A$54 million.

Lithium South Development Corporation (TSXV: LIS | OTCQB: LISMF)

Lithium South Development Corporation (Lithium South) is already quite advanced at their 100% owned Hombre Muerto North Lithium Brine Project in Argentina. The Project lies near several billion-dollar projects such as Livent’s lithium mine, Allkem’s Sal de Vida project, and POSCO’s quite new project purchased for US$280 million. Hombre Muerto is the premiere salar in Argentina, known for very high grade lithium and very low impurities.

The Hombre Muerto North Project has an M&I Resource of 571,000t contained LCE, with an excellent grade of 756mg/L, and a very low Mg/Li ratio of 2.6:1. Drilling is about to begin at their Alba Sabrina claim with results to follow most likely later in Q2, 2022. The Resource has potential to grow significantly from here.

Lithium South trades on a market cap of only C$68 million.

Winsome Resources Limited (ASX: WR1)

Winsome Resources is a lithium explorer focused on their 4, 100% owned, projects spread over 50,000 Ha in Quebec, Canada. The Projects are Cancet, Adina, Sirmac-Clappier, and Decelles (option to acquire 100%).

The flagship Cancet Lithium Project has had outstanding previous drilling success and boasts a JORC Exploration Target of 15-25Mt @ 1-2% Li2O + 100-250ppm Ta2O5. The past drilling includes 59 holes for 5,216m averaging ~70m drill depth defining a shallow high-grade lithium deposit. Drilling will continue in 2022 with a substantial maiden Resource estimated expected later this year.

Winsome Resources trades on a market cap of A$66 million.

Summary of Winsome Resources 4 lithium projects in Quebec, Canada

Source: Winsome Resources company presentation

Closing remarks

Investing in early-stage lithium juniors carries higher risk and reward.

Of the 5 companies discussed in this article three (Essential Metals, Green Technology Metals, Lithium South Development Corp.) already have a lithium resource, one (Winsome Resources) has defined a lithium deposit with a resource estimate due later in 2022, and the other (Metals Australia) has a graphite and a zinc-copper-silver resource with an exciting lithium project with drill results out soon.

I could also include Avalon Advanced Materials Inc. (TSX: AVL | OTCQB: AVLNF) in this group, but I already wrote on them recently here, discussing their lithium projects, lithium resource, and plans for a JV lithium refinery in Thunder Bay which were given a huge boost recently as you can read here.

Finally to answer Elon’s question: “Can more people please get into the lithium business?” The problem is it takes at least 5-10 years to build a lithium mine from scratch. I will finish with two key quotes last month from lithium market experts:

• Benchmark Mineral Intelligence was quoted stating: “Battery capacity is currently growing at twice the speed of lithium raw material supply.“
• Mr. Lithium, Joe Lowry was quoted stating: “I believe there will be a day in the future when lithium is in oversupply, but it won’t be in this decade…..You can build a battery factory in two years, but it takes up to a decade to bring on a lithium project.”

Disclosure: The author is long ALL the lithium companies mentioned in this article and intends to hold long term.

Understanding the looming lithium supply crisis is perhaps the cure for the environmentalists’ movement’s bipolar approach to the profligate use of critical materials. On the one hand, they want to believe that everyone can have an electric car and on the other hand they refuse to understand the practical and economic limits of natural resource recovery and fabrication for use.

The earth’s resources available to us are only those we can afford to recover because we get more value from them than the cost of obtaining them. Up until now the actual use per person of critical technology metals has been small enough so that the extremely high cost of obtaining them and processing them into useful forms can be distributed widely enough across their end-uses in the market to justify and recover that cost.

This distributed cost of critical technology metals has served to make the use cost per manufactured product low enough to enable the mass production and use of miniaturized electronic devices such as mobile phones, personal computers, and entertainment devices accessible almost universally across the contemporary economic classes of mankind.

The rechargeable lithium-ion battery and the miniaturization of electronics, so that on an individual basis they use very little power and very little material, and so can be kept operating for hours, even days, has severed the need for massive devices using large amounts of materials and needing to be wired to a main power distribution hub (a wired home, fed from the grid, with wall sockets).

Rechargeable batteries themselves underwent a long evolution from the lead-acid behemoths to nickel-iron, nickel-cadmium, nickel metal hydride (rare earth based), to today’s lithium-ion chemistry. Each step in the evolution of rechargeable batteries allowed for smaller lower mass devices delivering the same power.

But, with the advent of the battery-powered electric vehicle (BEV) a threshold has been approached. The barrier to the widespread manufacturing and use of BEVs is the need for kilograms, not grams, per BEV, certainly of lithium and probably of copper, nickel, cobalt, and the magnet rare earths, in that order. Moving one or two tons of steel up to 500 km before its power source needs to be refreshed requires an irreducible minimum of scarce raw materials. That “minimum” in the case of lithium is thousands of times more mass than are needed to power a mobile phone for days!

The accessible and economically available resources of those metals simply do not exist on the scale that would be required to convert even the contemporary global internal combustion engine (ICE) transportation fleets of 1.5 billion motor vehicles alone, to BEVs.

The case of lithium is the one I will discuss here because its supply is the necessary prerequisite for a BEV revolution.

There is not enough lithium produced today to convert more than a tiny fraction of the global fossil-fueled internal combustion engine fleet of cars, trucks, railroad engines, boats and ships, aircraft, home utilities (generators), and industrial equipment (earth movers, trains, lift-trucks, etc) to rechargeable battery electric power. In addition, the other existing uses of rechargeable lithium-ion batteries for personal electronics, such as mobile phones, personal computers, digital cameras, play stations, and other toys need a significant fraction of global lithium production, and the use of lithium-ion batteries for stationary storage also needs a growing fraction of global production.

So, how much lithium is there actually for BEV manufacturing now and in the future, and just where, geographically, can and will that manufacture take place?

The electronic properties of lithium require that it takes 160g of lithium, measured as metal, to have one kilowatt hour of storage. Therefore a 100-kWh lithium-ion battery needs 16 kg of lithium. This is the irreducible minimum amount of lithium required to move two tons of steel on low friction tires at 60 kph for 500 km.

Global production of lithium in 2020 was 86,000 tons, or 86,000,000 kg, measured as metal.

If ALL the lithium produced in 2020 had been used to make 100 kWh batteries for BEVs then a total of 5.375 million such vehicles could have been (but were not) built.

But, according to the USGS, the use of lithium for batteries in 2020 was just 65% of global production.

So, only 56,000,000 kg were turned into batteries, so if this were entirely devoted to 100 kWh units for vehicles then 3.5 million could have been built.

Global production of vehicles in 2020 was 78,000,000 units, but the average of the three previous years was 95,000,000, so 2020 was an anomaly due to Covid.

One more thing: What percentage of global lithium for batteries is available outside of China? The answer is 40%. China today processes 60% of global lithium into battery and other use grades and produces 82% of the Li-ion batteries manufactured.

Therefore, the world is today totally dependent upon Chinese owned or based manufacturers for its supply of lithium chemicals used in batteries and for lithium-ion batteries of all types for all uses!

It is predicted that China will produce only 50% of lithium-ion batteries for BEVs by the end of the decade, but predictions as to the percentage of lithium processing that will be done in China are less optimistic.

Today’s lithium producers say that they can double annual lithium production by 2025 to, perhaps, 200,000 tpa, measured as lithium. I’m going to predict that lithium used for vehicle batteries will reach 75% of that total by 2025. But China will still process 60% of all the lithium for batteries, so that if all of the Chinese lithium industry’s output were devoted to BEVs then the 120,000,000 kg of Lithium produced could be used to make 7.5 million vehicles leaving the rest of the world with just enough lithium for about 2 million BEVs.

The Chinese have mandated that 20% of their new vehicle production in 2025 be BEVs. This would be about 5 million BEVs. Thus the rest of the world will be left with just enough lithium to make 4.5 million BEVs. This means that Chinese BEVs as a proportion of total OEM automotive production will be 20% while the rest of the world will have an aggregate 7% proportion. I predict that the European and Japanese automakers will produce the lion’s share of non-Chinese BEVs with most of the American OEM domestic production being that of Tesla.

The nonsensical, really just ignorant, predictions of the financial analysts of skyrocketing production of lithium are not even remotely possible due to the unbearable costs of increasing production from declining grade deposits and the fantasies of large high-grade new deposits being miraculously found and developed. All of this while keeping lithium prices in line, of course.

The financialization of the stock market is now complete. Value has been divorced entirely from momentum.

Until politicians wake up to the fact that they are being played by the financializers investing in lithium and other “battery metals” will be a good idea, since the supply can never meet the (political) demand.

Rare earths, by contrast, will always be a good investment, because personal motor transportation will always use rare earth permanent magnets and to get the best mileage per kWh the lightest traction motors for vehicles will always be the rare earth permanent magnet type.

More on this next week….