Lithium: Oil of the 21st Century

PALM BEACH, Florida, June 7, 2018 /PRNewswire/ -- News Commentary 

Oil has created historical wars. Why? The king of energy has long been the driver of geopolitical and economic power. Now, the smart money is taking notice of a new energy king of the 21st century…. whose demand is set to rise 20% in 2018. In fact, Tesla's Model 3 and Powerwall models will double the demand for this metal alone- and that doesn't include the billions of smartphones, laptops, and tablets that will also be thirsting for this metal. As such, junior explorers Lithium Chile (TSX-V: LITH) (OTC: LTMCF), NRG Metals (TSX-V: NGZ) (OTC: NRGMF), Millennial Lithium (TSX.V: ML) (OTC: MLNLF), and Global X Lithium & Battery Tech ETF (NYSE: LIT) have placed major bets on meeting the surging lithium demand of industry giants like Tesla (NASDAQ: TSLA).

Fossil Fuels Will Be Supplanted By the So-Called Energy Metals Within This Century

This movement away from fuel-based vehicles to electric vehicles is as big a deal as when mankind put its horses out to pasture, did away with carriages and got behind the wheel of a car. This forever removed hay and straw from the fuel supply and firmly entrenched carbon as the new way forward.

The world is once again at the beginning of a new era, with a massive shift in the global energy mix expected; a move away from traditional carbon-based fuels towards a cleaner, lighter, lithium-propelled world. The market has grasped this fact, with the value of lithium increasing 45% year-on-year since the start of 2018 to peak at $16,500/tonne.

The fact that the current prices have support from Tesla Inc. is a great sign for 2018. The company negotiated additional supplies from top global producer SQM in January, putting Chilean lithium assets firmly back on the map and reassuring investors that lithium remains far from its peak.

Naturally, development of Chile's lithium-rich brines has accelerated, with more capital finding its way into salt flats than ever before. Lithium Chile (TSX.V: LITH.V) (OTCQB: LTMCF) , for instance, has fortuitously acquired over 152,900 hectares of Chilean salar, with much of it adjacent to projects operated by none other than SQM. To put the size of into perspective, Lithium Chile has the largest lithium exploration property outside of the Chilean government.

Decades Have Been Spent In Search For a New Fuel 

Arguably, the Western World has sought an alternative to oil since the formation of OPEC in 1960. Originally founded by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, OPEC forever broke the stranglehold of the Seven Sisters, shifting control of the globe's most precious commodity to the Middle East and igniting a substitution race that continues to this day.

With relations between the Middle East and the USA once again strained, people have begun to fear a repeat of the 1973 oil crisis. Add this to the overarching megatrend towards cleaner, more efficient energy generation, and one can understand why oil has never been so unpopular in the West.

As more and more countries scramble to avoid fossil fuels, lithium is looking like the most promising emergent commodity in history. From any perspective, Chile is the obvious monarch in this scenario since it holds the largest volume of brine at the highest grade with the lowest production costs.

Plenty of Room at the Table 

Chile was dubbed "The Saudi Arabia of Lithium" by a number of industry leaders almost a decade ago. In terms of reserves, Chile accounts for 47% of the world's known lithium reserves or 7.5MT. However from a production perspective, Chile only accounts for a third of global production- 74,730 tonnes LCE. As such, one can understand that substantial capacity remains to be exploited, and the abovementioned Lithium Chile (TSX.V: LITH) (OTCQB: LTMCF) is already feeling the positive impact of having one of the largest Chilean portfolios, with 16% added to the company's share price since the beginning of April.

For decades, the Chilean Government granted production contracts entirely to SQM and Albermarle, but Government has since woken up to the urgency that more mines are needed in earnest, not just more explorers. Recently, the nation installed a new policy framework that finally allowed private investors to obtain exploitation and export rights, meaning that explorers such as Lithium Chile are in the enviable position of being in the right place at the right time, with some of Chile's most desirable lithium assets.

In the case of Chilean-based lithium assets, the smart money still needs to realise that SQM has been forced to share its stage, meaning all Chilean lithium plays should rerate. While predicting which company will grow most is nearly impossible, Lithium Chile's (TSX-V: LITH) (OTCQB: LTMCF) closest neighbor is the largest producing lithium mine in the world, and what's more, the company has no debt and owns its assets outright, as opposed to many of its peers who either partially own their targets or in many cases have a royalty arrangement.

But, Only Quality Will Endure

Market corrections can only help a company's stock price so far. At the end of the day, sustainable long-term growth is only possible if a company has a quality deposit.

In the case of lithium brines, the most important factors to consider are the lithium concentration and presence of magnesium, with high levels of the former and relatively low levels of magnesium (i.e. low Li:Mg ratio) being ideal.

In April, Lithium Chile revealed that it had identified target projects with near surface brine values of 1330 mg/l and 1440 mg/l, on par with Chilean production grades, the highest in the world. Furthermore, the fact that Lithium Chile (TSX.V:LITH.V) (OTCQB:LTMCF) has a relatively low Li:Mg ratio ranging from below 3 to 1, should be taken as extremely promising. For comparative purposes, the largest brine deposit- the Salar Uyuni in Bolivia has an Mg:Li ratio of 18.6 and the Salar de Rincon in Argentina has a ratio of over 8.

In terms of project attributes, Lithium Chile (TSX-V: LITH) (OTCQB:LTMCF) holds the largest lithium exploration properties held by any private company, including the Salar de Atacama, over a whopping 152, 900 hectares. The company's market cap has grown from $30 million to $90 million on rising land values alone in the last 18 months. For those investors who missed the beginning of oil in 1859, here's your second chance.

Other Active Lithium Mining Players  

Tesla (NASDAQ: TSLA) - Tesla develops, manufactures and sells electric vehicles and is considered a pioneer in the field of electric vehicle production. The company has recently entered into an offtake agreement with largest Chilean-based producer, SQM to provide lithium for its EV batteries. Analysts have agreed this offtake is insufficient to meet Tesla's long term plans, but assuming the agreement is successful, it would be natural for Tesla to establish similar agreements with other Chile-based mines.

Millennial Lithium (TSX.V:ML) (OTCQX:MLNLF) - Millennial Lithium is focused on developing lithium assets in the Pastos Grandes brine deposits of Argentina. The company has released its 43-101 Resource Estimate showing 2.1million tonnes of LCE of Measured and Indicated Resources and 878,000 tonnes of LCE of Inferred Resource. In April 2018, the company received its environmental permit to commence exploration of the properties, triggering a one year, $15.54 million (CAD$19.4million) exploration and development investment.

NRG Metals (TSX-V:NGZ.V) - Formerly known as Codrington Resource Corporation, NRG Metals is a exploration stage company currently active in Argentina. The company has identified two main lithium brine projects, situated in the Salar Escondido Lithium and the Hombre Muerto North Project.

Global X Lithium & Battery Tech ETF (NYSE:LIT) - Global X is an exchange-traded fund that seeks to replicate the price and yield performance of the Solactive Global Lithium Index. The fund invests at least 80% of its assets in the securities of the underlying index, and in American Depositary Receipts (ADR) and Global Depositary Receipts (GDRs) based on the securities in the underlying index.

The Beginning

Remember, these are very early days. The industry is still in the throes of building multi-gigawatt-hour production facilities that have the potential to increase demand for Li-Ion by 100 GW before 2022. Only a tiny fraction of what the world needs for a fully electric world has been built, presenting unprecedented opportunities for any new lithium mining company.

Chile's recently unlocked mineral wealth could see it promoted to the rank of major political player. But more importantly, opening the industry to private interests could propel developers such as Lithium Chile (TSX-V: LITH) (OTCQB:LTMCF) into becoming a potential major global producer in an incredibly short timeframe.

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The Article and content related to the profiled company represent the personal and subjective views of the Author (SS), and are subject to change at any time without notice. The information provided in the Article and the content has been obtained from sources which the Author believes to be reliable. However, the Author (SS) has not independently verified or otherwise investigated all such information. None of the Author, SS, FNM, or any of their respective affiliates, guarantee the accuracy or completeness of any such information. This Article and content are not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action; readers are strongly urged to speak with their own investment advisor and review all of the profiled issuer's filings made with the Securities and Exchange Commission before making any investment decisions and should understand the risks associated with an investment in the profiled issuer's securities, including, but not limited to, the complete loss of your investment. FNM was not compensated by any public company mentioned herein to disseminate this press release but was compensated forty five hundred dollars by SS, a non-affiliated third party to distribute this release on behalf of Lithium Chile


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