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Changes in the Lithium Market Drive Growth in Canadian Mining

NetworkNewsWire Editorial Coverage: Growing demand for powerful batteries, coupled with attempts to break China’s hold on the market, are leading to growth for Canadian lithium explorers.

  • Lithium is essential for batteries used in personal electronics and electric vehicles.
  • The recent rise of electric cars, together with faster than expected production of other electric vehicles, is creating a huge rise in demand.
  • The market’s current top global suppliers are China and Chile.
  • Emerging companies in Canada are starting work on alternative sources of lithium that could reduce reliance on these two countries.

One of the companies setting up new Canadian mines is QMC Quantum Minerals Corp. (OTC: QMCQF) (TSX.V: QMC) (FSE: 3LQ) (QMCQF Profile), which is using existing infrastructure in Manitoba to quickly get production up and running. Albemarle Corp. (NYSE: ALB), the world’s largest lithium manufacturer, has seen a surge in production that has almost doubled its earnings. Nemaska Lithium, Inc. (OTC: NMKEF) (TSX: NMX) is setting up mining and processing facilities in Canada as well as establishing supply agreements for when that work is completed. Sociedad Quimica y Minera S.A. (NYSE: SQM) is diversifying its lithium production, adding mining to brine extraction operations. All of this is driven by the work of companies such as Tesla, Inc. (NASDAQ: TSLA), whose electric cars are responsible for much of the demand.

The Changing Lithium Market

In the past 20 years, lithium has become one of the most sought-after commodities in the world. Lithium-ion batteries, which are used in everything from smartphones to electric trucks, are increasingly ubiquitous. Lithium is essential to their production, and as a result, demand for the mineral has soared. Mining companies around the world are rushing to set up lithium extraction facilities to get the precious metal to market.

This urgent need is leading to unexpected shifts in global markets. China, already a strong player in the lithium market, is attempting to corner its production. Previously neglected mines are being revived as sources of lithium. Countries that previously weren’t players in the market are emerging as potentially significant lithium producers. One of those countries is Canada.

Driving Up Demand

Recent years have seen a surge in lithium companies. Whether this growth is by established players or by the emergence of companies such as QMC Quantum Minerals Corp. (OTC: QMCQF) (TSX.V: QMC) (FSE: 3LQ), one factor appear to be driving this — electric batteries.

Most of the chargeable batteries now used in personal electronic devices are lithium based. Mobile phones, tablets and laptops all rely on lithium to stay charged, sparking a surge in demand since the turn of the millennium. This demand is now being driven to stratospheric levels by another source — electric vehicles.

All electric cars use lithium batteries, and the vehicles require far more of the mineral than do smartphones. A Tesla Model S might need a hundred pounds of lithium in its batteries compared to a phone, which needs only a few grams. Becoming ever more common, electric cars are increasingly seen on the roads as environmentally conscious consumers try to get away from fossil fuels. Major manufacturers such as Volkswagen and BMW are spending millions on developing electric cars, all of which need the lithium that QMC and others can produce.

Production of electric trucks and buses are coming more quickly than expected, causing demand for lithium to further outstrip supply. With recent mandates by several cities, governments and car manufacturers, such as Volvo and Volkswagen, the demand for lithium continues to surpass production. Navistar has developed electric dump trucks while BYD (Lithium Battery Company) is producing electric buses.

Global lithium production is already at 600,000 tons per year and demand is expected to grow by another 600,000 to 800,000 tons over the next decade. Prices have risen 30 percent over the past few years and are likely to continue their ascent. This increase is great news for QMC. As the owner of a 1.2 million-ton lithium oxide deposit in Manitoba, which the company regards as a historical resource, QMC appears to be in a position to profit from this growth. As an emerging company, QMC may be especially appealing to investors, who can buy its shares for a fraction of those in more established mining companies.

Competing with Chinese Lithium

The fact that QMC’s deposit is in Canada is particularly important at this stage in the development of the lithium industry.

The two largest lithium producers in the world are currently in China and Chile, with Australia coming in third. China controls 30 percent of lithium production and is making moves to gain control of more. Chinese manufacturers recently tried to buy a large stake in one of Chile’s major lithium producers, only to be blocked by the Chilean government until the two parties could reach an agreement that granted the Chinese 24 percent of the company. As a major manufacturer of electric cars, this important move supports one of China’s growth industries; however, it’s also a strategic move, ensuring that China has access to supplies of a resource with significant uses in infrastructure and military equipment.

China’s focus on controlling lithium has created two strong reasons for other countries to develop their lithium deposits. On the one hand, there is the possibility of these countries benefitting from Chinese investment, attracting the money that Beijing businesses are throwing at the lithium supply problem. In addition, there’s the desire to reduce reliance on Chinese lithium and provide additional options — and independence — to electric vehicle manufacturing around the world.

Manitoba, where QMC has its lithium claims, is rich with potential for lithium exploitation. Recognized as one of the world’s best mining districts, it has previously been a rich source of other minerals. Many of these deposits, such as those being explored on QMC’s Irgon Lithium Mine Project Property, were discovered decades ago but never exploited, as lithium wasn’t a profitable resource at the time. Now the old mining records are being dusted off, and work is commencing in these neglected claims.

Extracting Canada’s Mineral Wealth

QMC’s lithium operations show how companies outside of China and Chile can compete with the big players, despite working on a smaller scale.

QMC’s Irgon Lithium Mine Project is based around Cat Lake within the prolific Cat Lake-Winnipeg River rare-element pegmatite field of S.E. Manitoba. This year, the company acquired 18 new claims, taking its total in the area up to 22. The lithium sources include the former Irgon Mine, possibly the best and richest lithium deposit in the whole of Manitoba. The quality of lithium ore in the area is also particularly rich – 1.51 percent lithium oxide, one of the higher grades of any company’s deposits in the country.

The region’s old mining industry also provides opportunities. Past surveys have put QMC ahead of the game in mapping out and analyzing the available lithium. Existing infrastructure for power and access can be reused, speeding up the establishment of mines. QMC’s project is road accessible with  skilled workers readily available in the area.

The methods of mineral extraction used on these sites will be faster than those widely used in China and Chile. There, lithium is extracted from brines, with areas flooded, and the water evaporated to extract the minerals. In its Manitoba claims, QMC can simply mine and process the rock. This means a much faster turnaround time to set up extraction and see the results. Between its mining methods and the existing infrastructure, QMC is in a good position to quickly start extracting large quantities of high-quality lithium ore. Bottom line, QMC is poised to jump into the Lithium production market and could prove to be a big player.

Lithium Production across the Americas

The lithium industry’s importance in both North and South America is reflected in the growing number of companies and their wealth in the sector.

The biggest lithium manufacturer in the world, Albemarle Corp. (NYSE: ALB) has benefited enormously from the changes of the past few years. While it also produces bromine and catalysts for the chemical industry, lithium is now its most important resource. It produced 29 percent of the world’s lithium in 2017, thanks to its heavy investment in the Chilean lithium industry. This has led to stellar financial performance. During the second quarter of 2018, it saw a 16 percent rise in net sales on the same period for the previous year, producing a 197 percent increase in earnings.

Quebec-based company Nemaska Lithium, Inc. (OTC: NMKEF) (TSX: NMX) is working to set up lithium mining and processing facilities in Canada, with an aim of catering to the car market. Like QMC, it will be extracting lithium from mineral-rich ores. As of this month, work is on schedule to get the mine and processing plant up and running. Based on this, the company expects to start producing concentrate in the second half of 2019 and lithium salts in 2020. It already has a supply agreement with green battery manufacturer Northvolt, ensuring a market for some of its product.

Like Albemarle, Sociedad Quimica y Minera S.A. (NYSE: SQM) produces lithium from Chilean brine sources. As demand for lithium grows, SQM’s operations do as well. It is moving into lithium rock extraction, with mining at Mount Holland expected to begin in 2021. As the producer of 23 percent of the world’s lithium in 2017, it’s second only to Albemarle as a lithium producer while also manufacturing other industrial and agricultural chemicals.

One of the most prominent companies driving the demand for lithium is Tesla, Inc. (NASDAQ: TSLA). Famous for its work in electric and self-driving cars, Tesla has seen huge growth in demand for its vehicles, leading to a 40 percent rise in vehicle production in the first quarter of 2018.

Rapid growth in the electric vehicle market is leading to great demand for lithium batteries. Lithium producers that can quickly bring new sources online could profit tremendously from this surge.

For more information on QMC Quantum Minerals Corp., visit QMC Quantum Minerals Corp. (OTC: QMCQF) (TSX.V: QMC) (FSE: 3LQ)

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