FN Media Group Presents OilPrice.com News Commentary
We”re facing an imminent crisis in global lithium markets. Demand is growing exponentially, and lithium consumers are facing a 100,000-ton shortfall by 2025.
Traditional lithium brine projects take too long to put into production. At up to 48 months, they won”t be able to close the supply gap on their own. Mentioned in today”s commentary include: Pengrowth Energy Corp. (NYSE:PGH), Franco-Nevada Corporation (NYSE:FNV), Cameco Corporation (NYSE:CCJ), Ballard Power Systems (NASDAQ:BLPD), Hydrogenics (NASDAQ:HYGS).
They”ve recruited the world”s top lithium pegmatite expert and invested in next generation 3D modelling for what could be the largest drill campaign of its kind for lithium today.
With results expected in a matter of months and a fully funded ongoing drill program – Power Metals is the biggest, under the radar lithium story to watch for 2018 and beyond.
- Runaway Lithium Prices.
- The New Opportunity In ‘Hard Rock‘ Lithium.
- Exciting Exploration Play.
- Their Secret Weapon: The Queen Of Lithium Pegmatite.
- Incredible Ontario Tax Advantages.
We”re Nearing A Major Crisis Point In Lithium
Lithium is in the midst of an unprecedented boom. Since 2015, the price per ton has soared from $6,500 to over $20,000, and demand shows no signs of stopping.
In fact – with explosive demand growth for smartphones, EV”s and home storage batteries – we might soon hit the physical limits of our lithium supply chain.
Companies like Power Metals stand to attract major investor attention.
According to reports – the crisis is about to get a lot worse.
Analysts at UBS Securities expect us to hit a critical milestone in 2018 – as electric cars finally hit cost parity with the internal combustion engine.
That event should trigger a wave of EV adoption across the globe.
Electric car batteries require a staggering amount of lithium to produce.
The Tesla (NASDAQ:TSLA) 70kWh Model S battery pack contains 63Kg of lithium, equivalent to the amount of lithium in 10,000 cellphones.
Oil major Total predicts we”ll see 20 million electric vehicle sales by 2030. That”s the lithium equivalent of building 200 billion iPhones.
That would require up to 1,200,000 tons of lithium, or 6x current global production.
Morningstar predicts a 100,000-ton annual shortfall in supply by 2025.
By 2030, today”s lithium prices might look incredibly cheap.
Power Metals Opportunity In ‘Hard Rock‘ Lithium
Global lithium supply is concentrated in relatively few locations. Lithium brine deposits in Argentina and Chile represent nearly 60 percent of global production.
These deposits are time consuming to put into production.
It can take 12-24 months to set up a facility. Then it takes another 12-24 months for the evaporative extraction process to produce usable lithium.
It may literally be impossible to scale up production in time.
Many Pegmatites are known to have much higher lithium concentrations than brines.
Unlike brine, high-grade lithium pegmatite can be processed into a higher quality battery-grade lithium hydroxide, where consumers like Tesla (NASDAQ:TSLA) are lining up to buy it. The low-grade lithium produced from brine operators produces a lower grade lithium carbonate which is far less valuable.
All of this makes the hard rock method much more attractive to battery manufacturers.
And, while hard rock lithium projects were once viewed as prohibitively expensive – they”ve become very lucrative at $20,000 per ton lithium sales prices.
Credit Suisse analyst John McNulty estimates ‘Lithium from minerals or ores costs about $4,200-4,500/tonne (€2,800-3,000/tonne) to produce.’
That could potentially deliver $15,800 per ton in gross profit.
Exciting Lithium Exploration Play
It”s not in the Atacama Desert, or deep in Central Asia.
This lithium bonanza is located near the Gigafactory in a politically stable Canada.
Power Metals currently controls three properties in Ontario, each of which has vast exploration upside. The most important of the three is Case Lake.
Case Lake is located near established gold mining camps in the Abitibi Greenstone Belt. All season access roads surround it on all sides.
It consists of a total of 38 mining claims with 7136 hectares of land. Multiple pegmatite outcrops were historically identified on the property.
In 2017, Power Metals started with a drill program for 5,000 meters. On their 8th hole they high grade lithium and tantalum. See PWM”s November 2, 2017 news release for grade numbers.
To put that into context – a 1 percent grade is considered high for hard rock deposits.
Lithium grades on some cores ran as high as 3 times that.
Over 15,000 meters of drilling is budgeted and funded for 2018. And, the team at Power Metals has a secret weapon for their upcoming drill campaign.
The Queen Of High Grade Hard Rock Lithium
Power Metals has retained Dr. Julie Selway, as Vice President of Exploration. She has co-authored twenty-two scientific journal articles on lithium pegmatites.
Her expertise is so highly regarded, she”s known as the Queen of Lithium Pegmatites.
She worked for the Ontario Geological Survey during the tantalum boom in the early 2000”s. During this time, she visited about 90 percent of the pegmatites in the province.
Dr. Selway has worked on properties including Case Lake, Georgia Lake, Seymour Lake, Crescent Lake and Separation Rapids pegmatite fields.
She”s the co-author of twenty-three NI43-101 reports.
Now she”s leading Power Metals new exploration campaign.
There are several reasons to get excited about the upcoming program. First, PWM uses a 3D model to target every single drill hole they punch.
They set the coordinates of 2-3 proposed holes at a time, rather than blindly setting up locations for 30 holes at the beginning of the program.
Extraordinary Tax Benefits In The Ontario Jurisdiction
Sociedad Química y Minera de Chile and Albemarle were recently forced to sign new royalty agreements with the Chilean government.
SQM was paying 6.667 percent and now must pay a base of 20 percent. The payments are on a sliding scale and top out at 40 percent if the price hits $25,000/tonne.
They”re also required to sell a portion of their product at a below market price to local Chilean entities to promote value-added industries in Chile.
Albemarle signed a similar deal in 2017.
This dramatically changes the economics of Chilean lithium brine production.
By contrast the Ontario mining royalty is a flat 10 percent – with no royalty on the first $10 million
CDN of sales per year for the first three years of the life of a new mine.
With taxes low and lithium prices rising – the economics of Ontario pegmatite have never been more attractive than they are today.
The world is starving for lithium. Global consumption will nearly double by 2025, soaring to 422,000 metric tons – worth $8.4 billion at today”s prices.
We simply won”t achieve that production with brines alone. That”s why pegmatite deposits like those being developed by PWM are so critical.
They have the properties. They have Dr. Julie Selway. They have a smart exploration system. More importantly, they”re moving right now.
Each of those drill programs represents a major potential catalyst for the stock.
Other miners and energy companies to keep an eye on:
Pengrowth Energy Corp. (NYSE:PGH): Another company that looks to have halted its falling stock price and is now preparing to ride the bullish sentiment in oil markets. Having shed a lot of excess weight this year in massive asset selloffs, investors can expect a much leaner and meaner Pengrowth in 2018.
Franco-Nevada Corporation (NYSE:FNV) specializes in securing precious-metal streams, but the company also works in the oil and gas industry. With key assets in some of North America”s most desirable oil and gas plays, including Texas, Oklahoma and Alberta, it is clear that the company has amazing potential in the coming years.
Cameco Corporation (NYSE:CCJ) Cameco is one of the largest global producers and sellers of uranium and nuclear fuel. Its operating uranium properties include the McArthur River/Key Lake, Cigar Lake, and Rabbit Lake properties located in Saskatchewan, Canada.
Ballard Power Systems (NASDAQ:BLPD) Ballard develops and produces hydrogen fuel cell products for markets such as heavy-duty motive, portable power, material handling and transportation. Ballard”s stock price jumped a whopping 27% in September as the company announced a new way to manufacture fuel cell batteries.
Hydrogenics (NASDAQ:HYGS): Hydrogenics Corp is a Canadian firm, which designs and manufactures hydrogen generation products based on water electrolysis technology, and fuel cell products based on proton exchange membrane (PEM) technology.
By. Ian Jenkins
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This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that prices for lithium will retain value in future as currently expected; that PWM can fulfill all its obligations to maintain its property; that PWM”s property can achieve drilling and mining success for lithium, that the lithium extraction process being developed will be cost effective and can work much more quickly that other extraction technologies; that the process can be commercialized for large scale production; that PWM can use the newly developed process, if successful, to reduce its costs of production; that high grades found in samples are indicative of a high grade deposit; that high-grade lithium is in sufficient quantities at surface to keep drilling costs down; that batteries and EVs will continue to use large amounts of lithium; and that PWM will be able to carry out its business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company may not be able to finance its intended drilling program, aspects or all of the property”s and the new process development may not be successful, mining of the lithium may not be cost effective, PWM may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumptions based on limited test work with further test work may not be viable; competitors may offer cheaper lithium; more production of lithium could reduce its price; alternatives could be found for lithium in battery technology; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the minerals cannot be economically mined on its properties, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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