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Lithium Chile Inc. (TSX.V: LITH) (OTC: LTMCF) Sees Supply Contracts on the Horizon

  • Automakers signing deals to secure future lithium supply
  • At present, most lithium comes from costly “hard rock” sources
  • Lithium Chile offers low cost output from salars and lagunas
  • Company holds largest privately owned lithium claims in Chile

As the electric vehicle (EV) market continues to expand, battery manufacturers and automakers are attempting to assuage their anxiety about future supplies of lithium by signing long-term contracts. In June, Tesla declared that it had struck a deal with Kidman Resources of Australia. Meanwhile, Volkswagen already has agreements in place, to the tune of 40 billion euros ($48 billion), to purchase lithium batteries. However, the lithium referenced in these contracts is still buried in the ground or swimming in salars, and it won’t be available for many, many months. Kidman, for one, does not expect its processing plant to come on line until 2021. The concerns about future supply are likely to spark similar deals, driving nervous suitors to court lithium miners. If so, Lithium Chile Inc. (TSX.V: LITH) (OTC: LTMCF) stands ready. The company’s properties, ranging over 152,900 hectares, are the largest privately owned lithium claims in Chile. Remarkably, although acquired at low cost (0.2% of current market prices), they have proven to be of high quality (1,000 mg/liter), a combination that is likely to attract many overtures.

There’s no doubt that the dearth of lithium stock is causing concern. Tesla’s deal, ‘which is for an initial three-year term on a “fixed-price take-or-pay basis” from the first product delivery, features two three-year term options’ (http://nnw.fm/lTxk2). The poster child of the EV industry is making sure that planned production of 5,000 vehicles a week does not stall for want of lithium. Volkswagen’s angst is on a much larger scale. Every week, the German giant makes about twice as many cars as Tesla does in a year, which is why it has spent 40 billion euros ($48 billion), most of it within the last year, on supply contracts. In 2017, German automaker announced plans ‘to spend up to 70 billion euros (~$84 billion USD) in order to bring 300 electric vehicle models to market by 2030… most of the investment 50 billion euros (~$60 billion) will be in battery production’ (http://nnw.fm/at4K2). These developments show that reports of a lithium oversupply, a la Morgan Stanley, appear to have been greatly exaggerated, and, as the Tesla deal indicates, agreements may be signed far in advance of initial production dates.

Despite Australia’s dominance as a producer, there’s no better place than Chile for lithium production. Australian lithium is mined from ‘hard rock’ spodumene by a process than is about three times as costly as Chilean production from salars. Brine production costs in Chile are about $1,500-$1,800 per ton, while hard rock mining costs $5,000 per ton. Adding to this general cost advantage is one that is peculiar to Lithium Chile. The company was able to acquire its claims at very low cost before interest in lithium intensified. Acquisition price averaged $3 per hectare, a steal of a deal compared to current prices of $1,500 per hectare. Lithium Chile now has the largest land package, extending over about 140,000 hectares (540 square miles), acquired at very low cost, of any private lithium miner.

Lithium Chile’s claims extend over 14 salars (mineral salt flats), as well as one laguna complex (inland salt lakes). Its portfolio includes 66 square kilometers (25.5 square miles) on Chile’s largest mineral salt flat, the Salar de Atacama, which has some of the world’s highest concentrations of lithium brines. At present, Lithium Chile is focused on its projects at Atacama, Coipasa, Helados, Ollague Turi and Talar, because they promise ease of recovery, as well as high-grade salts. At the 2,200 hectare Ollague, for example, the water table is just 40-50 cm deep, and samples of 1,400 mg per liter of lithium have been obtained. Overall, the company is getting some of the highest sample grades recorded in Chile, with grades of 1,000 mg per liter of lithium reported consistently.  This compares very favorably with production grade lithium in the U.S., which is typically just 190-200 mg per liter of lithium.

Lithium Chile is now quoted on the OTCQB Venture Market under the symbol LTMCF. Being listed on the OTCQB gives Lithium Chile access to a diverse network of broker dealers that provide liquidity and execution services. In addition, the company has been made eligible for Depository Trust Company electronic settlement and transfer of its common shares in the United States.

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

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