Chinese company Ganfeng Lithium, the country’s largest producer of battery raw material, threw its hat in the ring recently with the announcement that it is filing for an Initial Public Offering.
Lithium demand is already a driving force for companies hoping to tap greater supplies including Critical Elements (TSX: CRE), Pilbara Minerals Ltd (OTC: PILBF), Lithium X Energy Corp. (TSX: LIX.V) (OTC: LIXXF) and NRG Metals Inc. (TSX: NGZ) (OTC: NRGMF).
The EV revolution is already proving to be an unstoppable force that will completely revolutionize the transport industry. With that transformation, lithium is emerging to take the place of petroleum as the king of the energy industry.
Forecasters are already predicting that the increase in demand by automakers, power storage systems and new high tech applications will create a potential significant shortfall and major players are gearing up.
Leading lithium companies are seeing their share values also increase based on the new demand and outlook for metal including LSC Lithium Corp. (TSX: LSC), Critical Elements (TSX: CRE), and Lithium X Energy Corp. (TSX: LIX.V) (OTC: LIXXF).
NRG Metals Inc. (TSX: NGZ) (OTCMKTS: NRGMF) is one of the junior companies making significant exploration progress in South America. The Company just released drill results from it’s strategically located Hombre Muerto North Lithium Project, and preliminary test results are exciting. In addition, NRG is also drilling a 29,000 hectare project called the Salar Escondido. They presently have three drill rigs turning, two at Hombre Muerto, and one at Salar Escondido.
GANGFENG LITHIUM A HUGE PLAYER
The scramble for lithium resources, which is already in full swing, is definitely a race to control the future and China seems to have taken an early leap ahead of the rest of the pack.
Chinese company Ganfeng Lithium, the country’s largest producer of battery raw material, is seeking to raise $1 billion worth of capital through an initial public offering on the Hong Kong Stock Exchange.
The company is among a host of miners looking to quickly identify lithium projects that can be developed into production, in order to meet growing demand from electric car makers.
German carmaker BMW is also reported to be in the process of signing a lucrative five to ten-year supply deal for lithium and cobalt as it looks to change its fleet into hybrid and electric cars.
According to insiders familiar with the deal’s unfolding, Ganfeng could overshoot their target by up to half a billion dollars.
The company plans to use the money to finance acquisitions, further exploration of lithium reserves and expansion of capacity to meet growing demand of the metal.
The deal is being spearheaded by financer Citi Group.
Ganfeng, which is headquartered in Shanghai, is the third largest producer of lithium behind American company Albemarle and SQM of Chile. The company also produces batteries and recycles lithium from discarded gadgets.
Aside from exploration activities, Ganfeng is contributing to the EV revolution by developing solid state batteries in which the liquid electrolyte is replaced with solid lithium metal. These batteries promise faster charging times and higher driving range, and could also be safer than conventional li-ion batteries.
Ganfeng could use some of the proceeds from the IPO to fund Lithium Americas, with whom the company has a $125 million line of credit and is developing a project in Argentina. Creating lithium production is their priority.
CREATING CONFIDENCE IN LITHIUM PLAYS
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NRG Metals, a player focused on the exploration and potential development of lithium brine assets in Argentina, has recently attracted a Chinese battery material producer, Chemphys Chengdu. Through closing on a $1.4 million private placement to fund ongoing exploration activities in Argentina, Chemphys became the largest single shareholder of NRG. In addition, NRG and Chempys agreed to an off-take agreement on all potential future lithium production at the Hombre Muerto North project.
NRG Metals has two projects, with the most significant project being the "Hombre Muerto North Project" or HMNP. HMNP is located in the Salta and Catamarca provinces within the Hombre Muerto Salar, the location of FMC’s lithium producing Fenix Mine. The project comprises a total property package of over 3,000 hectares encompassing six concessions. NRG has two drill rigs working on this project right now. One is drilling a core hole to test for lithium grade. The second is drilling a large diameter pumping well hole to test for flow, if warranted by results. And results from the first 100 meters of the core hole are in, and quite interesting. The first 100 meters averaged 905 miligrams per liter lithium, with a low magnesium ( a contaminant that needs to be removed ) to lithium ratio. The NRG lithium team, well experienced in the exploration and development to production of lithium projects in Argentina, are very excited by the initial results. Chief Operating Officer Jose de Castro stated: “We are very excited about the exceptional results from the initial sampling. The lithium grades and low Mg to Li ratios exceeded our expectations. The high grades and favorable Mg to Li ratios have the potential to have a very positive impact on any future capital and operating costs should the economic viability and technical feasibility of the project be established. Mr. De Castro has actually mined lithium, having managed the Olaroz Salar to production for Orocobre, an Australian producer.
LITHIUM STILL VERY ATTRACTIVE
Lithium plays a critical role in the development of rechargeable batteries, with li-ion varieties being most popular with electronics manufacturers and EV makers. As demand for use in EV batteries continues to rise, lithium prices are poised to rise even further due to a constricting supply.
The price of lithium has already doubled in the last two years alone and industry experts believe the trend will continue for some time to come.
Since mining is generally an expensive and extremely complex undertaking, response to demand spikes is never instantaneous.
In order to ensure that their investments are adequately covered, mining juniors tend to allow demand forces to push up prices up before making a capital outlay on mining operations expansion. This results in cycles of supply constriction followed by corrective investment that are referred to by industry experts as supercycles.
Following this trend, and with the lithium industry poised to grow by leaps and bounds, investors are betting heavily on the lithium demand making miners and juniors in the space even more attractive.
Technical Disclosure: The preparation of this article was supervised by Mr. William Feyerabend, a Certified Professional Geologist and a member of the American Institute of Professional Geologists, and a Qualified Person as defined under National Instrument 43-101. Mr. Feyerabend approves the scientific and technical disclosure contained within this article.
POTENTIAL COMPARABLES
LSC Lithium Corp. (TSX: LSC)
LSC Lithium Corp. is an emerging lithium producer that has amassed a large portfolio of prospective lithium salars in Northern Argentina and is focused on becoming a significant player in the supply of high quality lithium product to global markets. On August 16th, the company announced that it will complete its previously announced private placement of common shares at an offering price of $1.10 or $0.87 U.S. per common share. In the aggregate, the offering is expected to consist of the issuance and sale of up to 18,181,818 common shares for gross proceeds of up to $20-million. The funds raised in the offering will allow LSC to further pursue the promising exploration results to date by the implementation of an accelerated and expanded exploration program for 2017.
Critical Elements (TSX: CRE)
Critical Elements Corporation, a junior mining company, acquires, explores, and develops mining properties in Canada. It primarily explores for copper, zinc, gold, silver, nickel, lead, lithium, niobium, tantalum, and platinum group elements. Its flagship project is the Rose lithium-tantalum property that consists of 500 claims covering a total area of 260.90 square kilometers, located in the Eastmain greenstone belt. The company was formerly known as First Gold Exploration Inc. and changed its name to Critical Elements Corporation in February 2011. Critical Elements Corporation is headquartered in Montreal, Canada.
Lithium X Energy Corp. (TSX: LIX.V) (OTC: LIXXF)
Lithium X Energy Corp. is a lithium exploration and development company with a goal of becoming a low-cost supplier for the burgeoning lithium battery industry. On July 11th, the company announced that further to its news release of June 29th, 2017, the Company has closed the definitive agreement with Aberdeen International Inc. for the purchase of Aberdeen's remaining 50% interest in Potasio y Litio de Argentina S.A., which controls 100% of the Sal de los Angeles Project. The project consists of 8,154 hectares covering 95% of Salar de Diablillos, and has an NI 43-101 mineral resource estimate of 1.037 million tonnes of lithium carbonate equivalent in the indicated category and 1.007 million tonnes of lithium carbonate equivalent in the inferred category.
For a more in-depth look into NRG Metals you can view the in-depth report at USA News Group: http://usanewsgroup.com/2018/03/12/analysts-predict-lithium-sector-is-growing-faster-than-any-other-sector-in-the-past-decade/
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