Lithium, Fuelling the New Millennium

NetworkNewsWire Editorial Coverage: Lithium stocks are on fire. Ignited by demand for lithium-ion batteries for mobile phones, laptops and electric vehicles, lithium stocks have soared since the beginning of last year. Surging demand and inadequate market supply are driving up price and intensifying the search for more lithium by major producers and junior miners like 92 Resources Corp. (TSX.V: NTY) (FSE: R9G2) (OTCQB: RGDCF) (92 Resources Profile).  This growth is further evidenced by how the three largest lithium producers have performed since January 2016: FMC Corp. (FMC) is up over 160%; Albemarle Corp. (ALB) is up over 180%; and Sociedad Quimica y Minera de Chile (SQM) surged a scorching 260%-plus. Despite these gains, the market for lithium batteries still has untapped upside potential, but the decision by Tesla, Inc. (TSLA) to build a $5 billion Li-ion Gigafactory to meet its requirement of lithium-ion battery packs sharpens the focus on the shortage of lithium and the tight supply of Li-ion energy storage technology.

There’s a worldwide scramble to find more lithium. Sales of lithium salts are estimated at $1 billion annually, but with burgeoning global demand, both sales and price could spike even more dramatically. In fact, in 2015, the price for 99% pure lithium carbonate imported to China spiked to more than $13,000 per ton, more than double the prior year’s price.

92 Resources Corp. (TSX.V: NTY) (FSE: R9G2) (OTCQB: RGDCF) is focused on capitalizing on the global lithium shortage. The junior mining company is positioning to be at the vanguard of the renewable energy market and holds several lithium mining properties that are showing positive results from all initial indicators.  The company began work at its Hidden Lake Lithium Project site this summer with a grant awarded under the Northwest Territories Mining Incentive Program. A maiden drill program for the project, now underway, has shown exceptional results. The project was undertaken to determine if industry standard lithium extraction techniques applied to typical spodumene (lithium aluminum silicate) concentrates could also be applied to concentrates produced from the pegmatites at Hidden Lake. The company reported that scoping test work was highly successful with an overall extraction of 97% achieved (http://nnw.fm/Cuqn9).

“The Project has now been significantly de-risked through the high quality, low-iron spodumene confirmed to be present at Hidden Lake, as well as the high lithium extractions that may be expected using standard methods,” 92 Resources president and CEO Adrian Lamoureux stated in the press release.

Hard rock lithium, the same type derived from the spodumene-bearing lithium pegmatites at Hidden Lake, accounts for about one-third of global reserves.

92 Resources also recently acquired three more highly prospective hard-rock lithium properties located in the James Bay region of Quebec, Canada (http://nnw.fm/c98zB). The Corvette, Eastmain, and Lac du Beryl properties consist of a combined 115 mineral claims totalling over 14,000 acres, complementing the company’s existing portfolio of assets. Each project was the subject of due-diligence site visits prior to acquisition, which included the examination and sampling of known pegmatite occurrences. Pegmatites are also known as extreme igneous rocks because they contain exceptionally large crystals and minerals, such as lithium, that are rarely found in other types of rocks. A small area of each property was evaluated during the site visits, and, most importantly, pegmatite outcroppings were confirmed present on each property.

Furthermore, a significant spodumene (lithium aluminum silicate) bearing pegmatite was discovered and sampled at Corvette, with spodumene crystals up to one meter in length, within an outcrop measuring approximately 150 meters by 30 meters.

“As we continue to aggressively advance our flagship Hidden Lake Lithium Project, we feel it is critical to maintain a pipeline of additional high-quality, early-staged, lithium pegmatite projects, each with potential as stand-alone opportunities. We are very excited by these new additions to the company’s already high-quality portfolio of assets,” Lamoureux stated in a press release.

92 Resources is clearly fast on the trail of the next great lithium deposits and expects to announce more developments in the near future.

Lithium has a myriad of essential uses and is crucial in rechargeable batteries for mobile phones, laptops, digital cameras and electric vehicles. The increasing demand for rechargeable devices and electric vehicles has created a dependence on lithium sparking a global search for new lithium fields. The success of Tesla Inc. (TSLA), a first mover in electric vehicles, is a harbinger of the entire automotive industry. At full-capacity, Tesla’s new Li-ion Gigafactory is expected to have an annual output of 35 gigawatt-hours, equivalent to the entire world’s battery production capacity. The demand for Li-ion batteries will explode as the grid begins to modernize to handle a massive influx of mainstream electric vehicles. The lithium dependent electric-vehicle (EV) market could reach 30 percent market penetration in the next dozen years, according to the International Energy Agency. Morgan Stanley analysts forecast the production and use of electric cars to rise to 81% of new auto sales by 2050.

At its current pace, demand for lithium is growing at 10 percent annually. However, it’s easily conceivable that demand could soar even more as new technological uses come into play. In 2015, Goldman Sachs stated that “lithium is the new gasoline.”  It’s increasingly obvious that we’re in the midst of an energy transformation where lithium battery technologies will have the potential to dramatically impact nearly every aspect of life. Immense opportunities are already unfolding with the adaption of electric vehicles and stationary energy storage systems. To profit from this new energy transformation, investors should have direct or indirect exposure to lithium and/or lithium batteries.

The largest lithium producer in the world, Albemarle Corp. (ALB), has long been a global leader in the specialty chemical business. Albemarle’s lithium business segment mines lithium and converts it into different forms along the value chain, like lithium carbonate and lithium hydroxide, or value-added specialties like butyl lithium and lithium aluminum hydride. With its acquisition of Rockwood Holdings in 2015, the company now controls one of the only operating lithium brines in North America and operates another lithium brine located in Chile. Albemarle also holds a 49% share in the spodumene mine of Talison Lithium in Australia and is expanding production in 2019 under a joint venture. Albemarle has locked up long-term supply agreements with their customers, but this advantage will erode over time as customers on expiring contracts leave to buy from the lowest cost producers. Given that the stock is trading at an elevated multiple due to its lithium growth profile, any shock to growth expectations will lead to a rapid repricing.

Headquartered in Chile, Sociedad Quimica y Minera S.A. (SQM) is among the largest producers of lithium in the world, producing over 45,000 tons of lithium carbonate equivalent per year. SQM says it plans to expand its lithium carbonate capacity in Chile to 63,000 metric tons by 2018. In addition to lithium, the company produces specialty plant nutrients, iodine derivatives, potassium chloride, potassium sulfate and industrial chemicals. With the sky-rocketing demand for lithium batteries in 2017, shares of SQM surged from 2014 trading lows to knock on all-time highs and are now above $58 a share. The company inconsistently pays a moderate dividend yielding around 3% and carries a hefty PE ratio over 45.

FMC Corp. (FMC) through its lithium division, owns and operates a 17,000+ tons per year lithium brine facility in Argentina, where political upheaval has sparked discord, riots and rampant inflation. FMC is a large and diversified multinational chemical company servicing global agricultural, consumer and industrial markets, and lithium represents only a small portion of company revenues. The company operates in three business segments: FMC Agricultural Solutions, FMC Health and Nutrition and FMC Lithium. Over $90, the company’s shares are trading at an all-time high with a PE ratio over 58. The company does pay a quarterly dividend of 17 cents per share, which yields less than three-quarters of one percent on an annual basis. As with most established lithium producers, shares of FMC have trended much higher since 2016. Looking to boost lithium revenues, FMC says it plans to increase lithium hydroxide capacity to 30,000 metric tons per year by the end of 2019 after increasing to 18,000 metric tons this year.

None of these chemical conglomerates are pure play lithium-focused companies, which does offer investors some reduced investment risk since overall company performance is tied to other chemicals and metals. However, each of these lithium behemoths are trading at or near all-time highs and don’t provide the direct exposure or maximum upside to the lithium market that a junior mining company could offer.

Leaders in international metals and minerals research, industry consultants at Roskill have estimated that in just eight years over 785,000 metric tons per year of lithium carbonate equivalent will be needed to meet global demand (http://nnw.fm/riS7f). That equates to a 26,000-metric-ton shortfall from expected supply in 2025. Compared to 217,000 tons of demand and 227,000 tons of supply this year, many other analysts expect even greater demand, even larger lithium deficits and further price increases for this new millennium fuel. Given driving demand, supply deficits, technological advancements and expansive need, investors in lithium could be more than amply rewarded.

For more information on 92 Resources Corp. visit 92 Resources Corp. (TSX.V: NTY) (FSE: R9G2) (OTCQB: RGDCF)

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