TORONTO (miningweekly.com) – In the wake of Tesla Motors' introduction of the 'Model 3' mass-market electric vehicle (EV), lithium development and exploration company share prices have exploded.
This was despite Tesla not having sold (or even built) a single Model 3 yet. Tesla would also not have it on the road for years, and the company continued to haemorrhage money, according to Chris Berry, writer of the Disruptive Discoveries Journal.
“The $1 000 refundable reservation fee is simply a free option for a potential car buyer and gives Tesla an opportunity to defray dilution,” he stated in a recent market commentary.
Berry noted that in the wake of this news, lithium developers were “making hay while the sun shines” through some truly impressive capital-raising efforts.
According to his year-to-date estimates, the lithium mining industry had raised a collective $198-million with multiple offerings oversubscribed. “For an industry that only generated $1-billion in revenues last year, this is impressive. Especially when you consider the overall funk in the commodity sector and that no major lithium producer is included in this total,” Berry advised.
It also appeared that lithium majors outside of China were positioning for accelerated demand with the joint venture announcement between NYSE-listed SQM and TSX-listed Lithium Americas, for example.
Berry expected that the lithium market had not formed a bubble yet. The demand sources were widespread and growing, and production was not controlled by a single country, as it was in the case of rare earths. “I expect lithium compounds prices to remain elevated for the next 18 months as supply will struggle to maintain the pace of demand growth,” he stated.
Since the start of the year, contemporaries Western Lithium, Nemaska Lithium, Rock Tech Lithium, Dajin Resources, Nevada Sunrise Gold and others had all seen their listed stocks double, and even triple, in value.
ADVANTAGE LITHIUM X
With the world entering the "rechargeable revolution", boosted by the unexpectedly well received launch of the Tesla Model 3 stimulating future demand, it came as no surprise that investors were panicking about where lithium supply for all these new batteries was going to come from.
One beneficiary of this vibrant interest in the lithium market was Vancouver-based first-mover Lithium X. Less than six months old, the company was the brainchild of 28-year-old entrepreneur, CEO Brian Paes-Braga.
Having already secured an advanced-stage world-class lithium brine project in the ‘lithium triangle’ in Argentina, which had already seen more than $16-million spent on development, the company was potentially poised to become a global leader in solving this lithium supply conundrum. It also held the largest land package next to the only North American lithium brine operation, in Clayton Valley, Nevada, located about three-and-a-half hours away from Tesla's gigafactory.
In just a short few months, the company had attracted investment of more than $13-million.
The management team that he managed to pull together had done it before, Paes-Braga told Mining Weekly Online in a recent interview. “The Lithium X team has created several multibillion-dollar companies from scratch and has access to a global network of business, government and philanthropic leaders,” he advised.
Back in October, Paes-Braga’s British Columbia-incorporated numbered company entered into a private placement with Frank Giustra and Royce Resources as they entered into the lithium space.
In November, Paul Matysek joined Lithium X as executive chairperson and became the largest initial financing participant. Lithium X had raised C$1.85-million at C$0.15 a share with its initial financing end-November, before raising another C$3.2-million at $0.30 a share with follow-on financing. In March, it raised another C$8.5-million at C$1.02 a share.
Despite the company’s TSX-V-listed stock on Monday trading down more than 10% at C$2.12 apiece, it was still reflective of exponential growth for a junior stock. Lithium X’s market cap started around C$10-million and is now about C$100-million, meaning early investors have already seen 500% returns, or more.
In addition to being on the front lines of the lithium supply story, Paes-Braga actually drove a Tesla himself.
According to Paes-Braga, not only did the Model 3 usher in a new era of automotive engineering for Tesla as a brand, it proved to the world that a low-cost, long-distance EV was possible and affordable for the masses.
“Pretty much all the major car companies – even some tech companies – are already developing their own version of a Model 3, so the demand surge for lithium is undeniable,” he said.
According to Paes-Braga, demand for lithium would continue to outstrip supply by 25% by 2020.
Prices of lithium carbonate had jumped about 250% in China in the past year which, at Rmb160 000/t, was equal to about $24 500/t.
He noted that the cost of raw lithium was not a significant factor in the price of modern batteries, however, lithium prices could increase dramatically without noticeably affecting retail prices of consumer electronics, electric vehicles or large storage batteries. This had also prompted lithium supplier FMC Lithium to recently implement a 15% mark-up for its products.
While lithium was not commoditised, there was a lack of investment vehicles that gave play exposure to the growth of the lithium market, stated Paes-Braga, explaining that the market was dominated by three big large-cap, diversified chemical companies. However, lithium generated only a small portion of revenue for the multibillion-dollar companies Albemarle, SQM and FMC.
Lithium X, which had an option to earn 80% into its flagship Sal de los Angeles project, had land-holdings in Argentina’s Salta province covering about 8 156 ha, casing the nucleus of Salar de Diablillos. While Lithium X was working on a preliminary economic assessment, the project already held a historic resource of 2.8-million tonnes of lithium carbonate equivalent and 11.3-million tonnes of potassium chloride. The deposit held high-grade brine of 592 mg/ℓ lithium on average, with a high-grade core of more than 640 mg/ℓ.
Meanwhile, Lithium X had received the necessary work permits from the Nevada Bureau of Land Management to complete four drill holes at its Clayton Valley North lithium project.
The Vancouver-based firm planned to drill two holes each at two different locations to test potential lithium-brine-bearing formations, including a basal aquifer below the valley.
The work formed part of the Phase 1 exploration programme at Clayton Valley North and results, if positive, would be incorporated into a maiden resource estimate. A third site, comprising two drill holes, would be determined based on the results of these first two drill sites, the company advised.