In the rush to advance the electric vehicle revolution, it appears China is taking an early lead in both adoption of EVs and securing the resources of lithium to power them.
Lithium producers and near term producers looking to immediately increase global lithium supplies include A.I.S. Resources Limited (TSXV: AIS) (OTC: AISSF), Galaxy Resources (OTC: GALXF), Sociedad Quimica y Minera de Chile (NYSE: SQM), and Lithium X Energy Corp. (LIX.V) (OTC: LIXXF).
Several major Chinese auto manufacturers are planning to increase their electric vehicle (EV) quotas dramatically in the next two years based on early success by EV makers there and the Chinese Government’s demands to abandon petrol fuel engines.
Combined with greater use of lithium in power grid storage, the demand is creating kind of “arms” race style competition for global lithium. So far China is ahead.
A new lithium junior player that could benefit directly from the Chinese appetite for lithium is A.I.S. Resources Limited (TSXV: AIS) (OTC: AISSF), which could answer the call to add new supplies from its South American lithium brine Guayatayoc project as early as 2019.
Other lithium companies that are poised to take-up the shortfall being fed by China’s consumption include Galaxy Resources (OTC: GALXF), Sociedad Quimica y Minera de Chile (NYSE: SQM), and Lithium X Energy Corp. (LIX.V) (OTC: LIXXF), all of which are in the process of expanding of their respective lithium resources to accommodate the major demand increase.
CHINA STEPPING ON THE PEDAL
China is already a leader in the adoption of electric vehicles, with more than 500,000 units being sold in the country in 2016.
Indeed, Chinese battery giant Contemporary Amperex Technology Co Ltd is planning a US$1.97 billion IPO to drive its expansion and meet soaring demand for electric car batteries.
And BYD, the Chinese electric car and bus company part-owned by Warrant Buffett, has talked extensively with South American lithium producers to secure supplies of the key battery material.
China, the world’s most active polluter has suffered for long due to toxic effluents and greenhouse emissions, hence is one of the countries at the forefront of adopting the Paris Agreement. But this process is lithium-intensive due to the millions of batteries required to power various processes particularly electric transportation.
China does not have substantial lithium mines within its own boundaries. Lithium resources tend to be located far away from the centers of industrial muscle in North America, Europe and Asia that utilize it in large quantities.
The main sources are brine pools in Chile, Argentina and Bolivia, as well as rocks in Australia.
Chinese companies have been rushing to acquire concessions in these countries, aided by the diplomatic power and financial muscle of the Chinese government.
Companies such as Ganfeng Lithium and Tianqi Lithium have seen massive growth, with their turnovers more than doubling in 2016.
Ganfeng Lithium strengthened their position by purchasing 2 million equity shares from International Lithium, increasing its shareholding in the company to 18%.
MORE AND MORE LITHIUM NEEDED
Although there are enough verified lithium resources to sustain a fully EV dependent world for hundreds of years, slow establishment of mining operations has meant that actual supply has lagged behind demand.
And now that the Tesla-led EV revolution has hit full gear, pressure on existing resources has grown by a considerable factor.
Entities that control these resources have gold (even that maybe an understatement) on their hands as the price of lithium keeps surging. China has been moving to do exactly that through government-sanctioned acquisition of supplies across the world.
If, as lithium consultant Sam Jaffe of Cairn ERA predicts, lithium-ion battery demand rises from 80 GWh this year to 750 GWh in 2026, it’s likely that the world is going to need every bit of lithium production that can be brought online.
In total, the projected increase would account for a massive 10-fold leap in demand within 10 years.
JUNIORS SEIZE THE OPPORTUNITY
Not to be left out of the competition, junior resource companies have grasped the seriousness of the demand for lithium and are moving to bring on supplies.
A.I.S. Resources Limited is one of these early movers with excellent prospects in South America’s productive regions.
Argentina is a major global lithium producer with significant additional potential, and a respected mining-industry history. The country has become well known for its many mineralized salars or salt fields, which include the Hombre Muerto and Salar Olaroz properties each producing significant lithium.
This is where A.I.S. Resources has staked its three main lithium projects, all of which are strategically located in the Argentina’s Puna Region.
In all, A.I.S. Resources has about 7,725 hectares and its flagship Guayatayoc property is well advanced with a mining permit in hand and drilling permits imminent.
Guayatayoc was sampled and returned Li ranging from 270-900 ppm in ponds that had aquifer flow, as well as 100-190ppm for brines sitting in the top layers. That’s considered very high grade and suitable for li-ion battery production.
The Guayatayoc is on its way to becoming a near term producer. The project will be fast-tracked, as chemistry and process work is already complete. The company expects that it can be in production as early as 2019.
And that comes from a highly skilled team of lithium mining veterans who have completed other recent lithium projects into production.
THE GAUNTLET IS THROWN DOWN
The race for lithium resources could leave EV companies such as Tesla short of the commodity if China manages to monopolize available sources, in a similar way as they have achieved with cobalt.
Already, Chinese companies control nearly all of Lithium Hydroxide reserves, which Panasonic uses to make lithium batteries for Tesla.
In what could be spell a gloomy outlook for Tesla, there are undertones about Chinese companies looking to build multiple super factories to rival Tesla’s recently opened Nevada gigafactory.
And while Tesla’s gigafactory is expected to produce 35 gigawatt hours of battery power annually, global production should rise from a little over 100 million gigawatt-hours to more than 273 gigawatt-hours by 2021. As much as 65% of this growth could be produced in China.
However, Tesla is not resting on its laurels either, with plans to build up to 4 factories reportedly in the pipeline.
An arms race can scarcely suffice to describe the competition between China and outsiders like Tesla.
Regardless if China moves ahead, lithium prices don’t appear to be abating any time soon so new lithium resources like A.I.S. Resources’ Guayatayoc project in South America are likely to bring tremendous value and aid in the move to electrify the auto market.
POTENTIAL COMPARABLES
Galaxy Resources (OTC: GALXF)
Galaxy Resources Limited is a lithium-focused resources company, with assets spanning Australia, Canada and Argentina. Galaxy is currently advancing plans to develop the Sal de Vida Lithium and Potash Brine Project (“Sal de Vida”) in Argentina, which is situated in the Lithium Triangle, a region where Chile, Argentina and Bolivia meet. Sal de Vida is a proven high quality resource has excellent promise as a future low cost production facility. Galaxy also owns the Mt Cattlin Spodumene Mine near Ravensthorpe in Western Australia and the James Bay Lithium Pegmatite Project in Quebec, Canada.
Sociedad Quimica y Minera de Chile (NYSE: SQM)
Sociedad Quimica y Minera de Chile S.A., is a producer of potassium nitrate and iodine. The Company produces specialty plant nutrients, iodine derivatives, lithium and its derivatives, potassium chloride, potassium sulfate and certain industrial chemicals. Its segments include specialty plant nutrients, industrial chemicals, iodine and derivatives, lithium and derivatives, potassium, and other products and services Lithium and its derivatives are used in batteries, greases and frits for production of ceramics. Potassium chloride is a commodity fertilizer that is produced and sold by the Company across the world.
Lithium X Energy Corp. (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 AIS you can view the in-depth report at Lithium News: http://lithium-news.com/2017/12/05/battery-hungry-world-turns-to-south-americas-lithium-triangle/
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