- Lithium demand is booming as phones and electric vehicle batteries increasingly turn to this high-quality metal for capacity and charging capabilities. Millions of new electric vehicles, and other alternative energy solutions, will drive this need over the coming decade
- America, and specifically portions of Nevada, may offer a new horizon for the mining industry. Tesla's Gigafactory is being erected in this region, and industry titans like Albemarle are already establishing beachheads here
- Emerging entrant Oroplata (ORRP) could be on the verge of market discovery as the company conducts their first major drilling exploration this spring and summer. With their first post-drilling analysis in the coming months, the stock could be set up for a big move higher as traders see these upcoming catalysts
Thanks to high-performance batteries and the rapid expansion of renewable energies, lithium has become one of the most in-demand minerals on earth today.
Electric vehicles make up a small fraction of vehicles on the roads in the U.S. today, but their share is growing. A single Tesla Model S, for example, requires more lithium than 10,000 smartphones, and lithium prices have ripped higher, rising to nearly $15,000 per ton in early 2018. Future demand for lithium will be significantly impacted by this new wave of energy-efficient vehicles.
Meanwhile lithium is seriously under-supplied, but the stranglehold on production may be changing as the "Big 3" producers get new competition. For years, most of the world's lithium was produced by an oligopoly of three major producers: Rockwood Lithium (owned by Albemarle (NYSE: ALB)), Sociedad Quimica y Minera de Chile (SQM) and FMC (FMC) in South America. That's changing, and new lithium reserves are getting attention in the United States.
Domestic lithium deposits have gained more and more interest in recent years. with a practical lithium rush in Nevada. This has been driven largely by Tesla's (NASDAQ: TSLA) lithium-ion battery gigafactory, which is likely to be the first of many. Albemarle's (NYSE: ALB) Nevada Silver Peak lithium mine is the only producing lithium brine operation in the U.S. - for now.
Undiscovered Oroplata (ORRP) is positioned to make a big splash in 2018 as they conduct exploratory drilling in the Railroad Valley region of Nevada, which has similar geographic qualities to Albermarle's existing operations. Their first post-drilling analysis could be out in months, which could send the stock soaring as the markets pick up on this un-partnered potential. The demand is there, and ORRP could be worth $0.30 or more.
Lithium Demand Increasing and Big 3 Could Be Losing Their Grip As Sole Suppliers
To meet rising energy demands the world over, advanced batteries are made from lithium. Lithium-ion batteries are increasingly replacing lead-acid and similar older batteries due to the fact that lithium is both the lightest of all metals, giving it a portability advantage, and has the highest electrochemical potential of all metals. It's apparent in the trends: Deutsche Bank at the end of 2017 forecast demand growing from 214 kilotons in 2016 to 452kt in 2020, and 775kt in 2025 after revising their 2025 estimate higher by nearly 50%! Fears of a lithium shortage almost tripled prices, to more than $20,000 a ton, last year, and demand for the metal isn't likely to abate soon.
Batteries are a major contributor, and much of the recent demand can be chalked up to electric vehicle production. According to a UBS survey last year, one in six cars sold in the world by 2025 will be electric, or 16% of all cars. Goldman Sachs has this number at 25% of all new cars, and total new vehicle sales that year are projected to rise to 120 million. Depending who you ask, that could mean 19 to 30 million electric vehicles being sold that year. From a minute 199K in 2017 according to InsideEVs, and just 26K in 2016, this could mean a HUGE spike in battery and lithium demand is around the corner. As a result, UBS predicts, lithium needs will triple by 2025.
So where will all of this lithium come from?
America Could Be The Next Major Supply Destination
The vast majority of the mineable lithium on earth, about 87% according to the USGS, is found in salty, briny lakes underground. The remaining 13% is contained in hard rock mineral deposits. Extracing lithium from brine typically involves a lengthy evaporation process that lasts 8-30 months, but it's still much simpler and costs about half as much as mining hard rock. This is why most of the global lithium extraction companies frocus on brines, the largest deposit of which resides in the so-called "Lithium Triangle" of South America, where more than 50% of total 2015 lithium production originated. That region is controlled in large-part by the governments of Chile, Argentina and Bolivia, and by three major lithium producers: Albemarle (NYSE: ALB), Sociedad Quimica y Minera de Chile (SQM) and FMC (FMC). These are the godfathers of lithium extraction today, and they've had a stranglehold on the metal for years.
Increasingly, lithium miners are looking elsewhere for untapped extraction potential. Nevada presents one of the largest yet-untapped lithium resources, potentially, in the world. Clayton Valley has attracted numerous startups that have placed or leased claims in the region due to the lithium brine locked below the surface: Albemarle and junior players Pure Energy (PE), and Lithium X Energy Corp (LIX) (LIXXF) are all active. Clayton Valley's brines may have a slightly lower lithium concentration compared with other locations, but also a lower incidence other minerals, like magnesium.
Speaking volumes, Tesla's (TSLA) new Gigafactory is being built in Nevada. They and partner Panasonic (PCRFY) have said they plan to spend $4 to 5 BILLION on the project and employ up to 6,500 people at full capacity.
Less known but potentially equally lucrative is Nevada's similar Railroad Valley, 112 miles to the northeast of Clayton Valley. This region has many features similar to Clayton Valley geographically. No exploration has been done to date, making Railroad Valley an untested but promising target for lithium brine.
Orroplata Tapping A Virgin Resource, Stock Could Explode Higher With First Drilling Results
Oroplata Resources, Inc. (ORRP) is one of just a handful of companies with rights in the region, and they're moving quickly to drill and begin ramping up for full-scale production. The company's primary resource is the Western Nevada Basin project, a 5,000-acre property encompassing more than 260 mining claims; the company has an option to add another 22,000 acres and 600 more mining claims. The company has just begun their first drilling efforts, and this could be one of the first indications of this region's lithium production capabilities.
This emerging information could take Oroplata from undiscovered to mainstream in the coming months. Why? The company is about to begin Phase One exploration, their first exploratory sampling and analysis project across the project area from both volcanic horizons and underground Brines. News-flow around this effort is expected to begin imminently, important because the first hints at lithium potential could drastically change this little company's market value.
At $5.325 million in market capitalization, the upside from a successful lithium property is tremendous for ORRP based on recent transactions in this industry.
One of the most important transactions of last year was the acquisition of Lithium X by Chinese investment group Nextview for $265 million. Nextview is a Chinese resource company that has teamed up with Tibet Summit to establish a $1.5 billion investment fund for acquiring alternative energy resources. Lithium X, at the time, was a junior lithium exploration company focused on the previously mentioned Lithium Triangle and a similar project in Clayton Valley. The company had no revenue at the time, and was basically acquired for its indicated lithium reserves alone... at $265 million! Westwater Resources (WWR), for example, with a $21 million market capitalization, is a similar exploratory company pursuing alternative energy projects in the Columbus and Railroad Valley regions, and with no sales to date...the company is being valued on its mineral resource potential alone.
ORRP is hardly different, with significant value to possibly be unlocked in the coming months as their exploration projects in the Railroad Valley get underway. At $5 million in market value, this junior miner could be one of THE up-and-coming names in the new horizon of American lithium projects.
Risks exist, of course, and the company needs to raise capital before they can finalize their exploration projects in the basin. As a microcap company, thay may not be easy for the company, and possibly detrimental to their shareholders. A penny stock like this should be viewed as a high-risk high-reward trade on the booming lithium industry.
With the right execution and hints of quality lithium reserves in the coming months, ORRP could be due for a major correction higher as investors look for similar projects in the region through which to estimate fair value. Lithium X and Westwater offer compelling reasons why the stock could be worth 4 times as much as its market value today, and the answers are coming soon. At $20 million, like Westwater, ORRP could be a $.30 stock in no time.
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