- Lithium demand is increasing globally, and just a few regions, like South America, have for years had a stranglehold on mining and production
- New projects in the Western United States are gaining traction, with Tesla (NASDAQ:TSLA) committing to their Gigafactory not far from the Clayton Valley and the first producing lithium mine in the nation. With more players eyeing this region, it's a potential hotbed for new commercial activity
- Oroplata (ORRP) just launched an exploratory drilling program in a similar, potentially massive lithium reserve not far from this area. The stock is on the verge of a major pivot point with their first mining data, and with results possible in the coming months, this junior miner could continue rallying
With exploratory drilling underway, a new lithium project from Oroplata Resources, Inc. (ORRP) in Nevada could be on track to rival the United States' only other lithium-producing mine, owned by the mega-miner Albemarle Corporation (ALB). Initial exploration data is on its way for ORRP, and as a result, this stock could be set for a major move higher.
This particular project, located in the Western Nevada Basin, could rival other massive production regions globally, like Clayton Valley a few hundred miles away and the Lithium Triangle of South America. Lithium demand isn't going away, and a promising new location could put ORRP on the map of many high-profile investors and companies, including battery makers like Panasonic, in the coming months.
Lithium Powering Everything, Demand Increasing Globally
To meet rising energy demands the world over, new advanced batteries are made from lithium. Lithium-ion batteries are 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.
This is obvious in the trends: Deutsche Bank at the end of 2017 forecast demand doubling from 214 kilotons in 2016 to 452 kilotons in 2020, and 775 kilotons five years later. This is AFTER the analysts revised their 2025 estimate higher by nearly 50%!
Amazingly, last year fears of a lithium shortage almost tripled prices to more than $20,000 a ton.
Batteries are a major contributor to this demand, and most of the recent buying can be chalked up to electric vehicle production. According to a survey from the bank UBS 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. Total new vehicle sales that year are projected to rise to 120 million. That could mean 19 to 30 million electric vehicles being sold annually in less than ten years from today. In 2017, only 199,000 electric vehicles were sold in the United States according to InsideEVs, and only 26,000 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.
(The Global X Lithium ETF (LIT) has doubled since 2016!)
New Sources Needed, Oroplata's Ambitious Project Could Be Worth Millions
Most of the mineable lithium on earth today, nearly 90% according to the US Geological Survey, is found in Salty brine lakes underground. The other 10% or so is contained in hard rock mineral deposits, which are hard and expensive to mine. Lithium brines, despite a long evaporation process, are by far the preferred method of lithium mining and refinement.
The largest lithium deposits are found in the Lithium Triangle of South America, where more than half of the lithium produced in 2015 originated. This region is controlled mostly 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 material for years.
That could be changing. New potential lithium brine aquifers are being discovered, and one of the most promising locations is just being explored and mined in Nevada.
LithiumOre, a wholly-owned subsidiary of the public company Oroplata Resources, Inc. (ORRP), is about to begin drilling in the coveted Railroad Valley, a large topographically closed playa (a dry Salt Lake bed) basin located in East-Central Nevada. This region closely matches the geologic criteria for the United States Geological Survey deposit model for Clayton Valley, a region just over 100 miles away that's home to the first producing lithium mine in the U.S., the Silver Peakl mine, owned by Albermarle. This is also where Tesla (TSLA) is building their lithium-devouring Gigafactory for new high-capacity batteries.
The company has partnered with the respected 3PL group for initial exploratory drilling, and three drills sites will be underway before the end of June. Within 60 to 90 days they should learn just what this lithium brine looks like in terms of production potential and quality. That could be a huge turning point for the company as they begin to shop these mineral rights.
Stock Could Move As Pivot Events Approach
ORRP is comparable to a junior miner, with major potential upside if the right lithium concentrations can be found, and with the right partnerships in place. But risks exist, and this is a micro-cap stock for a reason - it could also be worth nothing without proper execution and financing.
ORRP is getting increased investor attention as the Railroad Valley project gets underway, and the stock could see continued traction with drilling imminent. The drilling program is scheduled to initially drill three holes to a depth of 3,300 feet each, collecting brine samples at intervals along the way. Oroplata has rights to 260 accepted lithium mineral claims, totaling 5,200 acres, making them one of the larger operators in the region. With mineral results in hand, they could be on their way to some very compelling partnerships or commercial plans in the second half of 2018, and the current $10 million market valuation looks quite inexpensive.
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