The future of the world’s second largest lithium producing country is in question. An impending election in Chile threatens to severely restrict the country’s mining industry— A shift that could cause new regions to have to step up.
Companies with operations outside of the country could stand to benefit from any added Chilean lithium restrictions—This would include companies like QMC Quantum Minerals Corp. (OTC: QMCQF) (TSX.V: QMC) in Canada, Millennial Lithium Corp. (OTC: MLNLF) (TSX.V: ML) and FMC Lithium (NYSE: FMC) in Argentina, and Lithium X Energy Corp. (TSX.V: LIX) (OTC: LIXXF) in Argentina and the United States.
According to a report from Geopolitical Intelligence Researchers, Stratfor, one of two potential results from the December 17th election could see the creation of a state-owned lithium company, heavy restrictions on raw lithium exports, and ultimately put Chile behind other lithium-rich nations.
Should Chile go down this route, Stratfor predicts, “A decision to limit exports of raw lithium from Chile could only help increase investment in other lithium producers elsewhere.”
Currently as the largest producer in South America’s “Lithium Triangle” that includes Argentina and Bolivia, Chile could be about to inadvertently deter billions of dollars in foreign investment.
That investment could very well flow to other countries such as Argentina, Canada, and the United States, and many of the lithium companies with projects within them—including FMC Lithium (NYSE: FMC), Lithium X Energy Corp. (TSX.V: LIX) (OTC: LIXXF), Millennial Lithium Corp. (OTC: MLNLF) (TSX.V: ML), and QMC Quantum Minerals Corp. (OTC: QMCQF) (TSX.V: QMC).
CHILE’S LONG ROAD TO LITHIUM INDUSTRIALIZATION
Set for December 17th, the Chilean presidential election has narrowed down to a run-off between the final top two finishers from the first round of balloting—center-right candidate Sebastian Pinera, and center-left candidate Alejandro Guillier.
Despite two relatively centrist candidates being in the running, an unexpectedly strong showing from the candidate from the left-wing coalition (dubbed “Broad Front”) seems to have shifted the debate to the left, with each remaining candidate looking to secure a win by appeasing some of the coalition’s most ardent supporters.
In particular, it’s Guillier that can see a path to victory by winning the coalition’s backing—by incorporating Broad Front’s economic proposals, which could have a major impact on Chile’s energy and mining industries.
During the first round, Pinera won 36.6%, compared to Guillier’s 22.7%. However it was the Broad Front candidate that won 20.2%, showing the coalition’s rising political sway. The result has been speculation that Guillier will move further to the left, and force a need to cover the added cost of inflated public spending that includes promises for free universal education and health care in Chile.
Many speculate that in order to secure new sources of tax revenue, Guillier will have to throw the government more heavily into the country’s copper and lithium industries.
As it stands, 25% of Chile’s national revenue comes from copper, and the lithium industry grows at a faster rate every year due to increasing demand from electric vehicles (EVs) and other lithium-ion battery manufacturing.
So far Guillier has proposed to tighten raw lithium exports, and to create a state-owned company to control lithium production.
The potential for Guillier’s win has already started to cause economic shockwaves. The day after the first round of the election’s results were announced, Chile’s stock market dropped nearly 6%.
And already there’s a cascade effect happening in South America’s “Lithium Triangle”, including a shift from Chile’s largest lithium producer Sociedad Quimica y Minera de Chile (NYSE: SQM).
Amid an EV boom led by automakers such as Tesla and Mitsubishi, SQM is looking to establish a foothold in a fourth country of operations.
Currently SQM is operating in Chile, Argentina, and Australia.
Of the countries that SQM could potentially invest its resources and capital into, are the USA (brine), Canada (hard rock), Mexico or Serbia.
But of the leading potential regions that look to absorb the added investment that would come from a pullback of activity in Chile, Canada is a leading candidate due to its mining history, favorable tax regimes, and fairly administered logical environmental regulations.
QMC’S STABILITY ADVANTAGE
As foreign investors (including Chilean lithium giant SQM) look for safe, stable jurisdictions to operate outside South America’s current uncertainty, Canada (in particularly its Prairie provinces) is now among the best places for mining in the world according to Fraser Institute’s global ranking.
Operating out of one of the world’s most stable, and mining-friendly districts, junior explorer and developer QMC Quantum Minerals Corp. (TSX.V: QMC) (OTC: QMCQF) is an example of an up-and-coming company that’s working towards developing a major lithium production outside of Chile and South America’s “Lithium Triangle”.
QMC’s flagship operation called the Cat Lake property resides within the Canadian prairie province of Manitoba, which based on a global survey was the second-best mining district in the world.
With business-friendly incentives—such as competitive tax regimes, smooth, efficient, and fair permitting procedures, along with consistent and logical environmental regulations and land-claim handling—Manitoba is a mining company’s dream.
Since QMC strategically acquired the Cat Lake discovery on a property formerly known as the Irgon Mine back in 2016 the company has steadily developed the property towards its true production potential.
Historical drilling on Cat Lake dating back to the 50s discovered a massive resource estimate of 1.2 million tonnes—that showed grades of 1.51% Li20 over a 365-meter strike length, and to a depth of 213 meters.
QMC recently sent over 100 samples from the former Irgon Lithium Mine property to SGS Labs in Lakefield, Ontario for geochemical analysis.
They’re currently drilling and stripping their way towards bringing the 1.2 million tonnes of historical resource up to today’s compliance standards.
With the historical drilling, and recent sampling, there’s going to be plenty of data that will allow QMC’s technical team to believe the company is sitting on a very significant amount of lithium—1.2 million tonnes or more is a plausibly large enough amount of lithium to be feasibly be brought to production, especially through today’s rising lithium prices.
The team’s belief is that with more development work, not only will they prove up Cat Lake’s historical lithium resource into modern compliance, but they’ll also be able to extend the known strike length, and increase the project’s overall tonnage.
As large-scale foreign investors and corporations look for alternatives to Chile for lithium investment, an alliance with QMC to bring Cat Lake to production could speed up the process and get production ready in time to fully capitalize on the current flurry of lithium buying.
QMC’s Canadian operations represent one of multiple options for the global lithium market to look at, should Chile’s path lead away from lithium-friendly investment.
Other countries that could also see investment would be Argentina, the USA, Serbia and Mexico, while other much larger companies will also continue to draw interest in the sector. However, QMC is showing a lot of promise as a legitimate alternative outside of the “Lithium Triangle.”
POTENTIAL COMPARABLES
FMC Lithium (NYSE: FMC)
FMC Lithium is a subsidiary of the FMC Corporation, which is a diversified chemical company, that provides solutions, applications, and products for the global agricultural, consumer, and industrial markets. FMC Lithium offers lithium for use in batteries, polymers, pharmaceuticals, greases and lubricants, glass and ceramics, and other industrial uses. FMC Corporation was founded in 1884 and is headquartered in Philadelphia, Pennsylvania.
Millennial Lithium Corp. (OTC: MLNLF) (TSX.V: ML)
Millennial Lithium engages in the acquisition, exploration, and development of lithium mineral properties and oil and gas resource properties. It primarily holds 100% interest in the Pastos Grandes Lithium Project located in Salta Province, Argentina. Millennial Lithium Corp. was incorporated in 2005 and is headquartered in Vancouver, Canada.
Lithium X Energy Corp. (TSX.V: LIX) (OTC: LIXXF)
Lithium X is a resource company operating as a lithium explorer and developer in Argentina and the United States. The company owns a 50% interest in the Sal de los Angeles project comprising 8,156 hectares located in Salta Province, Argentina, and 100% interest in the Clayton Valley South project consisting of 477 federal placer mining claims covering approximately 9,540 acres located to the southwest of Tonopah, Nevada. Lithium X Energy Corp. was founded in 1997 and is headquartered in Vancouver, Canada.
For a more in-depth look into QMC you can view the in-depth report at USA News Group: http://usanewsgroup.com/2017/12/12/how-to-play-the-stock-markets-january-effect/
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