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Lithium Chile Inc. (TSX.V: LITH) (OTC: LTMCF) Eyes China’s Electric Vehicle Battery Market

  • Rising EV output fueling lithium demand from battery makers
  • Chinese battery manufacturers hold dominant market position
  • Lithium Chile output offers competitive balance to North American battery makers

Lithium Chile Inc. (TSX.V: LITH) (OTC: LTMCF) may be based in the Americas, but its eyes are cast to the East, where, according to Andrew Bowering, a director of the company, “China is ‘building battery manufacturing plants in anticipation of supplying batteries to what drives everything these days… from lawnmowers, to cell phones, to cars… now to buses, to 18-wheel trucks for Tesla.” (http://nnw.fm/41r5T). Chinese companies, already major players in lithium mining, are set to dominate the global electric-vehicle battery industry.

Planned battery plant production in China (approximately 130 GWh) is about three times the rest of the world combined. To stay in the game, battery manufacturers in the West are going to need outfits like Lithium Chile to secure supply. The company has the largest land package of any private lithium miner, with some of the highest sample grades recorded in Chile. Flush with cash and run by a highly experienced management team, Lithium Chile may help North American battery makers stay competitive despite China’s accelerating drive to lead the EV pack.

Reuters recently highlighted observations made by Bowering, founder of Millennial Lithium (TSX.V: ML) and director of Lithium Chile, with a report that “an unheralded maker of electric-vehicle batteries is planning a $1.3 billion factory with enough capacity to surpass the output of Tesla and dwarf the suppliers for battery-powered cars by GM, Nissan and Audi” (http://nnw.fm/Te316). The story was referring to Chinese manufacturer Contemporary Amperex Technology Ltd (“CATL”), which already sells the most batteries to the biggest electric-vehicle makers in the world’s biggest EV market, China. The facility would make CATL “the world’s largest electric-vehicle battery cell manufacturer, ahead of Tesla, Warren Buffett-backed BYD Co. in China and South Korea’s LG Chem Ltd.”

Since 2015, China has been the world’s biggest market for electric cars. Sales of new-energy vehicles, including battery-powered, plug-in hybrid and fuel cell units, were 777,000 in 2017, and market sales are expected to reach one million units in 2018. Although there have been no official prescriptions, Chinese battery manufacturers are expected to purchase their lithium from Chinese-owned sources, according to Reuters. There’s no doubt that North American and European battery producers will have some catching up to do.

Like China, they will turn to the Lithium Triangle, an area in South America that includes parts of Argentina, Bolivia and Chile. The Lithium Triangle has 70 percent of the world’s lithium, with Chile alone being home to 52 percent of the global supply. Bolivia does not allow any foreign ownership, and Argentina’s lithium grades and reserves are significantly lower than Chile’s, which results in less opportunity, says Bowering. All told, Chile is the place to be, and that’s where Lithium Chile has its extensive portfolio of properties.

The company’s land package extends over approximately 152,000 hectares (586 square miles), the largest held by any private pure-play lithium operator. Moreover, the claims were purchased at approximately $3 per hectare, a steal of a deal compared to current prices of $1,500-$2,000 per hectare. In addition, soil samples have been consistently reported above the 1,000 mg per liter of lithium mark. This compares very favorably with production grade in the U.S., which is typically just 190-200 mg per liter of lithium.

Lithium Chile’s properties encompass 14 salars, or mineral salt flats, and one laguna complex. The portfolio includes 66 square kilometers on Chile’s largest mineral salt flat, the Salar de Atacama, which is currently the source of about 35 percent of the world’s lithium production and hosts the world’s highest concentration of lithium brines. The projects at Atacama, Coipasa, Helados, Ollague Turi and Talar have taken center stage because of their promise. For example, at the 2,200 hectare Ollague, the water table is just 40-50 cm deep, with at least one sample returning around 1,400 mg per liter of lithium.

Naturally, such high concentrations at such shallow depths reduce production costs. “Lithium brine production in Chile is the cheapest in the world and it’s less than half of our nearest competitors. Brine production here (is) in the order of $1,500-$1,800 per ton, while hard rock mining costs $5,000 per ton,” Terry Walker, VP Exploration and Chief Geologist, stated in a news release. The company has also identified an area of 58 square kilometers, at Coipasa, as a high-priority target (http://nnw.fm/30sVy).

Operating in Chile, where infrastructure is already in place, and with a very experienced management team at the reins, Lithium Chile seems to be holding a good hand. “We flew beneath the radar screen to amass the land position we have,” added Steve Cochrane, President and CEO, “but now we’re about to let everybody know that we’re to be taken seriously”.

For more information, visit the company’s website at http://nnw.fm/LTMCF

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