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.

There has been a lot of talk about Lithium (Li) over the last several months. We are all familiar with Lithium-Ion batteries in our laptops, cell phones, tablets, power tools and of course electric cars. But have you ever wondered why that is or are you like me (until now) and just took it for granted. Turns out Lithium has the highest electric output per unit weight of any battery material which is why it is the standard material for lithium-ion (high energy-density rechargeable) batteries. It also happens to be the lightest of all metals making for a pretty good one-two punch to be used in battery technology. The point is, until there is a material technological breakthrough, Lithium will be leading the charge towards electrification of our society.

To that end, the demand side for Lithium looks to be skyrocketing over the next several years/decades. Here’s some great information on this courtesy of InvestorIntel’s own Jack Lifton in this article. As well there is a whole lot of supply chain questions that have been raised by both the pandemic and Chinese dominance of many of the critical battery materials leading to a noticeable shift towards “home grown” supply. Jack Lifton covers this issue in a video that’s also worth a view here, where he discusses how the policy of the US government is to prioritize the production of critical materials either in the United States or in friendly countries that are allied with the US. Additionally, at this year’s virtual PDAC Canada announced its own list of minerals (including Lithium) considered critical for the sustainable economic success of Canada and our allies. Canada’s Minister of Natural Resources is quoted as saying “Canada’s list signals to investors where Canada will focus and where Canada will lead. Critical minerals will get us to net-zero.”

Needless to say, there should be a bit of a premium to North American BEV (battery-powered electric vehicle) manufacturers to have a convenient and stable source of this important material. Perhaps even more importantly, critical minerals and their development has the support of the Federal government. Enter Critical Elements Lithium Corporation (TSXV: CRE | OTCQX: CRECF). A Quebec based junior mining company with its flagship Rose Lithium-Tantalum project located in James-Bay, Quebec. The company has one of the most advanced Lithium projects in Canada and one of the purest lithium deposits globally. The company recently announced an update to its draft environmental impact assessment report in which the Committee concludes that the project is not likely to cause significant adverse environmental effects. This moves the Rose project one step closer to obtaining the final authorization and keeping Critical Elements on pace to start mine construction in 2021 and see first production by late 2022/early 2023.

In 2017, Critical Elements completed a feasibility study on Rose Phase 1 for the production of high quality spodumene concentrate with an internal rate of return for the project estimated at 35% after tax, a net present value estimated at C$726 million (8% discount rate) and a three year payback. Those are some robust numbers but it’s going to be expensive to bring this project into production. The initial capital cost is estimated at C$341 million including all infrastructure with a 10% contingency. Correspondingly, in January 2021, the company announced it has engaged Cantor Fitzgerald Canada Corporation to pursue, engage and evaluate global strategic partners and investors to advance the Rose Project to production. Given the outlook for Lithium, it’s plausible to conceive that Critical Elements will be able to pick and choose the best deal for themselves to get the project financed (has anyone put a call into Elon Musk?).

In addition to the appeal of owning a company that could have a world class Lithium mine in full production by 2023 (and a meaningful rerating opportunity that goes with that), there is still some speculative upside from the companies 8 other projects. Even better, Critical Elements just announced an option agreement that gives Lomiko the right to acquire up to a 70% interest in the Bourier project. This agreement will allow the Bourier property to be explored in detail for battery minerals discoveries, such as Lithium, Nickel, Copper and Zinc while Critical Elements stays focused on goal #1 – the Rose Lithium-Tantalum project. However, with roughly $8 million dollars in cash, a financing decision has to be made to continue moving this exciting North American Lithium mine moving forward.

In a recent InvestorIntel interview, Tracy Weslosky speaks with Eric Zaunscherb, Chairman of Critical Elements Lithium Corporation (TSXV: CRE | OTCQX: CRECF), about their flagship Rose Lithium-Tantalum project located in James-Bay, Quebec. Eric starts with “Lithium ion batteries are ramping up in terms of demand driven by e-mobility and energy storage systems.” And then proceeds to discuss the Critical Elements’ vision, which is to be a global leading, responsible supplier of lithium hydroxide to the emerging electric vehicle and energy storage industries. Discussing the value of their First Nations relations, and the advantages relating to management with experience in taking a project to operations, Eric discusses how Critical Elements is well-positioned to play a significant role in the lithium market with one of the highest purity spodumene deposits in the world. Adding that “We aspire to be a large responsible and sustainable provider of lithium to the lithium ion battery industry.”

To watch the full interview, click here

About Critical Elements Lithium Corporation

Critical Elements Lithium Corporation is a junior mining company in advance exploration stage. The company’s flagship project is the Rose Lithium-Tantalum project located in James-Bay, Quebec with a good geographic location, on-site access to infrastructures like: powerline, roads, airport, railway access and camp. Primero Group recently completed the first phase of its Early Contractor Involvement agreement with the Corporation and provided a Guaranteed Maximum Price for the engineering, procurement and construction of the wholly-owned Rose Lithium-Tantalum project on a lump sum turnkey basis that is in line with the Project’s feasibility study published November 29, 2017. The project feasibility study is 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 US $0.75/CA $. 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.

To learn more about Critical Elements Lithium Corporation, click here

Disclaimer: Critical Elements Lithium Corporation is an advertorial member of InvestorIntel Corp.