Welcome to the December 2018 edition of the lithium miner news. This past month saw China lithium prices continue to stabilize and the major lithium players on an acquisition spree (a US$4.1b lithium purchase by Tianqi and another large agreement to purchase of US$1.1b by Albemarle).
Lithium spot and contract price news
Metal Bulletin reports 99.5% lithium carbonate battery grade spot prices cif China, Japan & Korea of US$13-15/kg (13-15,0000/t), and min 56.5% lithium hydroxide battery grade spot prices cif China, Japan & Korea of US$15-17/kg (15-17,0000/t). Orocobre reported some price softening in their December quarter lithium carbonate sales at US$10,800/t (? if it was battery grade).
Lithium China Spot prices
Source: Lithium Americas November company presentation (about 1-2 months old now)
Lithium demand versus supply outlook
On November 26 Metal Bulletin reported:
The global market for electric vehicle [EV] batteries in 2025 could be 10 times bigger than in 2018, Swiss investment bank UBS said in a report published last week. This should help to increase lithium demand by as much as four times, to drive a 41% increase in nickel consumption, and to more than double the use of cobalt over the same period, the report added. The growing use of electric vehicles could drive lithium demand to 1.15 million tonnes per year by 2025, from 265,000 tpy in 2018, UBS said. Consumption of nickel for batteries would total 665,000 tonnes in 2025, compared with 60,000 tonnes currently, according to the bank. This would push total nickel use to 3.1 million tpy from 2.2 million tpy. And the UBS report said that demand for cobalt has room to grow to 260,000 tpy in 2025, from 120,000 tpy in 2018.
On December 20 Morningstar wrote:
Lithium price concerns result in buying opportunity. On Dec. 20, shares of all three lithium stocks we cover traded sharply lower as junior lithium producer Orocobre announced its outlook for lower prices into 2019. We already expected lithium carbonate prices on a Chilean export basis to fall from $12,000 per metric ton in 2018 to $10,000 per metric ton by 2020. However, we believe prices will recover thereafter. With our outlook unchanged, we maintain our $130 fair value estimate for narrow-moat Albemarle, our $18 fair value estimate for narrow-moat Livent, and our $65 fair value estimate for narrow-moat Sociedad Quimica Y Minera De Chile. All three stocks are trading at significant discounts to our fair value estimates. We think the market is overreacting to declining prices for lower-grade lithium carbonate.
Orocobre's recent lithium demand v supply chart showing supply to struggle to keep up with demand
Lithium market and battery news
On November 22 Benchmark Minerals tweeted: "Our view is no solid state batteries in an EV until >2023/4. Drones, watches and then cell phones will be first, 2019-2023. Still a lot of work to be achieved aside from commercial scaling. Significant potential however."
On November 23 Benchmark Minerals Caspar Rawles tweeted: "The @benchmarkmin Megafactory Tracker now totals 59 (will we make 60 before month end?!) plants with an excess of 1.2TWh of capacity by 2028. Astounding - in 2015 we had 3."
A recent interview from The Assay of energy metals expert Chris Berry has Chris Berry stating:
The investor disconnect in understanding between demand and spotty supply additions is as stark as any I had seen in the 20 years I was involved in financial markets. I think battery metals prices will remain essentially flat through H1 2019 owing to supply additions coming on stream from existing producers, while the EV markets will continue to gather steam due to government support and the mindset shift in consumers that EVs are a viable substitute for traditional ICE offerings.
And regarding lithium Chris Berry states:
Supply and demand will remain tight going forward as I see no dents in the demand armor, while supply will increase slower than many expect from Western Australian spodumene producers. The challenges that Albemarle is having with Chilean authorities, SQM’s delayed ramp up in the Atacama, Galaxy’s production challenges, and Orocobre’s continued underperformance are only the latest examples of how utterly ridiculous the oversupply thesis has become. The anticipated supply additions from brine operations in South America and hard rock additions from Western Australia are likely priced into the market, but there are some extremely compelling undervalued opportunities with respect to lithium equities, leading me to believe that the sell-off is overdone.
Next-generation solid-state batteries in production in China. Chinese start-up Qing Tao (Kunshan) Energy Development Co. Ltd, led by Nan Cewen, a member of the Chinese Academy of Sciences, has invested 1 billion yuan (144 million U.S. dollars) on the solid-state battery project. The production line is capable of producing 0.1 GWh solid-state batteries per year, which have an energy density of over 400 Wh/kg. Nan announced the line's operation on Monday, saying the batteries would first be utilized on special equipment and high-end digital products. He said the company has engaged with a number of large automobile manufacturers to produce batteries for electric vehicles by 2020, when the company's annual production capacity is expected to reach 0.7 GWh.
On December 4 Forbes reported:
Chinese company says it will soon cross $100 battery threshold, slaying the gasoline car. Envision Energy will produce batteries for $100 per kilowatt hour by 2020, the Shanghai company's founder and CEO said at Stanford University, predicting the price will drop to $50 only five years later and end the reign of the internal-combustion engine.....Lei predicts fossil-fuel cars will disappear "overnight" when EVs become cheaper.
My view is that this is very significant news - It means EVs can be cheaper than ICE by 2020 (my model was forecasting 2021-22)....which if it occurs should cause a larger surge in EV sales in 2020, timing well with hundreds of new electric models...Also means BEVs will take further market share from hybrids. All great news for EV metal demand and EV metal miners.
Germany secures access to world's second-largest lithium deposit. ACI Systems will work with state-owned Bolivian Lithium Deposits (YLB) on installing four lithium plants in the Salar de Uyuni salt flats, which hold the world's second-largest lithium deposit. The partners expect to produce up to 40,000 tonnes of lithium hydroxide per year, beginning in 2022, over a period of 70 years. But the South American nation faces an array of challenges before being able to develop a lithium industry. Another issue is the purity of Bolivia’s lithium, which has higher levels of magnesium than found in neighbouring Chile and Argentina. Bolivia's salt flats are also subject to seasonal flooding, resulting in a lower evaporation rate that makes it more expensive and difficult to refine. A lack of infrastructure and investor confidence in the Bolivian government are other issues negatively affecting Morale’s hopes for a developed lithium industry. And then there is ACI Systems Alemania GmbH’s complete lack of mining experience.
On December 18 MarketWatch reported: "Lithium ion battery market is anticipated to grow US$ 69 billion by 2022 at a CAGR of 16% in the given forecast period."
Lithium miner news
On December 6 Reuters reported: "Albemarle pushes Chile to reverse lithium quota decision - filings. Albemarle Corp (ALB.N) has launched an aggressive lobbying campaign after Chilean regulators denied its request to boost lithium output, stressing the company’s importance to Chile’s economy and workers."
On December 14 Albemarle announced:
Albemarle announces definitive agreement with Mineral Resources Limited to form lithium joint venture in Western Australia. Albemarle Corporation, a leader in the global specialty chemicals industry, announced today the signing of an Asset Sale and Share Subscription Agreement (Agreement) with Mineral Resources Limited for a wholly-owned subsidiary of Albemarle to acquire a 50 percent interest in MRL's Wodgina hard rock lithium project (Wodgina Project) in Western Australia and form a joint venture with MRL to own and operate the Wodgina Project to produce spodumene concentrate and battery grade lithium hydroxide. (the agreed price was US$1.15b)
Subscribers of Trend Investing can view an interview I did with CEO Luke Kissam here.
Sociedad Quimica y Minera S.A. (NYSE:SQM)
On December 3 SQM announced:
Acquisition of SQM series A shares. Sociedad Química y Minera de Chile S.A. informs that the Santiago Stock Exchange has announced that 62,556,568 of the SQM’s series A shares, totaling 23.77% of the total shares of the Company, were sold for a total amount of US$4,066,176,920. According to press information, the acquisition is related to the purchase transaction announced by Tianqi Lithium Corporation last May.
On December 13 SQM announced:
Mt Holland tenement exemption. Sociedad Química y Minera de Chile S.A. informed today that the minister of mines and petroleum in Westerhjn Australia has granted Kidman Resources Limited, SQM's partner in the Mount Holland project, exemption from the relevant expenditure requirements in relation to mining tenements in Mount Holland project that were subject to exemption objections.
Investors can read the company's latest presentation here.
No news for the month.
(Chengdu) Tianqi Lithium Industries Inc. [SHE:002466]
On December 3 Nasdaq reported: "Tianqi buys stake in lithium miner SQM from Nutrien for $4.1 bln. China'sTianqi Lithium Corp has purchased a 23.77 percent share in Chilean lithium miner SQM from Canadian fertilizer giant Nutrien."
Construction is ongoing at their Kwinana lithium hydroxide plant in Western Australia, and is expected to be finished in late 2018.
On December 6 International Lithium Corp. announced: "International Lithium Announces Positive Preliminary Economic Assessment Results for the Mariana Lithium Brine Project, Salta, Argentina." Highlights include:
- "25-year mine life producing 10,000 tonnes per year (“TPY”) Lithium Carbonate Equivalent (“LCE”) plus 84,000 TPY Sulphate of Potash (“SOP”).
- The estimated CAPEX and OPEX are for a conventional brine extraction facility, solar evaporation ponds and SOP processing with a level of accuracy of -30/+50%.
- CAPEX estimated at US $243 million for 25-year mine life.
- NPV of US $192 million after-tax at 10% discount rate, IRR of 20% post-tax.
- Project results remain positive, even with important negative variations on the driver variables, indicating project strength and resilience; thus, the PEA study indicates Mariana’s proposed 10,000 TPY LCE concentrated brine and 84,000 TPY SOP fertilizer operation has the potential to generate strong economic returns."
On December 21 Neometals announced:
Neometals agrees the sale of Mt Marion equity for $A104 million and retains offtake rights. Neometals to sell its Mt Marion project equity to Ganfeng and Mineral Resources for ~A$104 million. ‘Life of Mine' offtake option rights for 57,000 tpa of spodumene concentrate. Strategy to produce higher value lithium chemicals underpinned by certainty from proven feed supply. Balance sheet strengthened to support project development financing and offtake processes.....At completion of the Mt Marion Divestment, Neometals’ cash balance is expected to be approximately A$130million."
Note: The Mineral Resources agreement with Albemarle to sell 50% in Wodinga for US$1.15b was discussed above under Albemarle.
Investors can also read my recent article, "Ganfeng Lithium Looks To Be A Great Buy."
Investors can also read my article on International Lithium here.
Orocobre [ASX:ORE] [TSX:ORL] (OTCPK:OROCF)
On November 28 Orocobre announced:
Cauchari drilling update. The Phase III infill drilling and resource conversion program is close to completion in the NW Sector and continues in the deep sand unit in the SE Sector. The program is currently on track to upgrade the current Inferred Resource to Measured and Indicated Resources by early 2019.
On December 13 Orocobre announced:
Orocobre signs agreements with Toyota Tsusho Corporation. Orocobre Limited is pleased to announce the signing of three pivotal agreements with joint venture partner Toyota Tsusho Corporation [TTC] Members of the Orocobre Executive Management team have this week visited TTC’s office in Tokyo, Japan to finalise and sign a new Olaroz Shareholders Agreement, Sales and Marketing Agreement and Orocobre Management Agreement (for management of the Olaroz Joint Venture).
On December 13 Orocobre announced:
Cauchari Definitive Feasibility Study commences. Orocobre Limited is pleased to announce that Advantage Lithium Corp. ("Advantage Lithium") has engaged engineering consultants GHD, Chile S.A. to commence early engineering geared towards the completion of a Definitive Feasibility Study [DFS] on its flagship Cauchari Project in Jujuy, Argentina. The DFS is expected to be completed by 1HCY19.
On December 20 Orocobre announced:
Olaroz Lithium facility update. Sales of lithium carbonate are expected to be approximately 5,000 tonnes for the December half year at a price of US$12,470 per tonne, down approximately 8% on the June half. Production is expected to be approximately 6,000 tonnes for the half year and remains in line with previous guidance for FY19. The pricing achieved recently has been affected by soft market conditions in China having a direct impact on shorter term contracts resulting in December quarter prices of approximately US$10,800 per tonne on sales of approximately 2,850 tonnes.
Upcoming catalysts include:
H2 2020 - Olaroz Stage 2 (42.5ktpa) commissioning.
H2 2020 - Naraha lithium hydroxide plant (10ktpa) commissioning.
You can read the latest investor presentation here., or an "Orocobre market update online briefing". Subscribers of Trend Investing can view an interview I did with ex-CEO Richard Seville here. Investors can read my recent article "An Update On Orocobre."
Galaxy Resources [ASX:GXY] (OTCPK:GALXF)
On November 28 Galaxy Resources announced: "Mt Cattlin update-exploration drilling hits thick, high-grade intersections outside known resource." Highlights include:
- "A total of 25,555m of reverse circulation [RC] drilling and multi-element assay has been completed in support of mining operations and resource re-estimation.
- A new pegmatite lode has been intersected beneath known lode in NW zone, both remain open at depth and to the west
- Resource and reserve update work commenced, outcomes expected in Q1, 2019.
- Assays included (results are downhole): Drill hole NERC056-20m from 44m to 64m @ 1.4% Li2O, including 6m from 48m to54m @ 2.1% Li2O."
On December 6 Galaxy Resources announced:
Sal de Vida update-final tenements assignment deed signed. Galaxy Resources Ltd is pleased to advise that the final transfer deed has now been signed under which the brine extraction rights held by the Company over five remaining Salta tenements are assigned to POSCO for consideration of US$15million (less any applicable with holding tax). These rights plus the main northern tenement package already transferred are the entire package of tenements being sold to POSCO. Following the registration of the transfer deeds a total amount of US$272 million is now payable to Galaxy by POSCO. Galaxy expects to receive these funds as soon as administrative registration procedures are completed in the respective Salta and Catamarca Mining Courts in Argentina. The registration process is now in its final stage.
Upcoming catalysts include:
- H2 2018 - POSCO deal should complete (bringing in ~US$280m to Galaxy)
- 2018/19 - Mt Cattlin resource upgrade. James Bay Feasibility Study.
- 2018/19 - Announcements to commence construction of Sal De Vida.
- 2021 - Sal De Vida production may begin.
Investors can read my article "Galaxy Resources Sal De Vida Project Is About To Be De-Risked After A Huge Cash Sale To POSCO, and my recent CEO interview here, and the latest company presentation here.
Alliance Mineral Assets Limited ("AMAL") [SP:AMS]/Tawana Resources (subsidiary Lithco) [ASX:TAW] (OTCPK:TWNAF)
On December 6 Alliance Mineral Assets Limited announced: "Merger update scheme of arrangement receives court approval."
On December 18 Alliance Mineral Assets Limited announced: "Confirmation of capital structure."
Altura Mining [ASX:AJM] (OTC:ALTAF)
No news for the month.
- 2018/19 - Production ramp up.
Pilbara Minerals [ASX:PLS] (OTC:PILBF)
No significant news for the month.
- 2018/19 - Production ramp up.
- Q4 2019 - Stage 2 commissioning planned.
AMG Advanced Metallurgical Group NV [NA:AMG] [GR:ADG] (OTCPK:AMVMF)
On November 28 AMG announced:
AMG Advanced Metallurgical Group N.V. Announces Strategic Segmental Realignment. AMG Advanced Metallurgical Group N.V. is pleased to announce that effective 1 January 2019, the Company will change its organizational structure. This change will result in two new strategic operating divisions, AMG Technologies and AMG Critical Materials.
- H2 2018 - Production to begin at the Mibra mine in Brazil (initially 90ktpa).
- End 2019 - Stage 2 production (additional 90ktpa) to begin.
No news for the month.
Investors can read my LAC articles:
- 2019 - Cauchari-Olaroz plant construction.
- 2020 - Stage 1 Cauchari-Olaroz lithium production of 25ktpa.
- 2022 - Possible 2022 lithium clay producer from Thacker Pass Nevada (full ramp by 2025).
NB: LAC now owns 62.5% of the Cauchari-Olaroz project.
Investors can read my recent article "An Update On Lithium Americas."
Nemaska Lithium [TSX:NMX] [GR:NOT] (OTCQX:NMKEF)
No significant news for the month.
Upcoming catalysts include:
- 2018 - Possible further off-take agreements.
- 2019 - Project construction.
- Q3, 2019 - Commence production and sale of spodumene.
- Q3 2020 - Plan to start lithium carbonate and hydroxide production.
Lithium hydroxide plants planned or under construction
2019 - Kwinana WA (2 x 24ktpa stages) - Tianqi Lithium - Under construction.
2020 - Shawinigan near Montreal Canada (23ktpa) - Nemaska Lithium.
2021 - Kalgoorlie WA (initially 10ktpa) - Neometals/? - Feasibility stage, may start by 2021.
2021 or after - Kwinana WA (45ktpa) - SQM/Kidman Resources
2021 or after - Near Bunbury WA (5 x 20ktpa stages) - Albemarle/?Mineral Resources.
Other lithium juniors
Other juniors include AIS Resources [TSXV:AIS] (OTCQB:AISSF), American Lithium Corp. [TSX-V: LI] (OTCQB:LIACF), Argentina Lithium and Energy Corp. [TSXV:LIT] (OTCQB:PNXLF), Argosy Minerals [ASX:AGY] (OTC:ARYMF), AVZ Minerals [ASX:AVZ] (OTC:AZZVF), Bacanora Minerals [TSXV:BCN] [AIM:BCN] [GR:1BQ] (OTC:BCRMF), Birimian Ltd [ASX:BGS] (OTC:EEYMF), Critical Elements [TSXV:CRE] [GR:F12] (OTCQX:CRECF), Dajin Resources [TSXV:DJI] (OTCPK:DJIFF), Enigri (private), Eramet (EN Paris:ERA) (OTCPK:ERMAY), European Metals Holdings [ASX:EMH] [AIM:EMH] [GR:E861] (OTC:ERPNF), Far Resources [CSE:FAT] (OTCPK:FRRSF), Force Commodities [ASX:4CE], Kidman Resources [ASX:KDR] [GR:6KR], Latin Resources Ltd [ASX: LRS] (OTC:LAXXF), Lithium Australia [ASX:LIT] (OTC:LMMFF), Lithium Power International [ASX:LPI] (OTC:LTHHF), LSC Lithium [TSXV:LSC] (OTC:LSSCF), MetalsTech [ASX:MTC], MGX Minerals [CSE:XMG] (OTC:MGXMF), Millennial Lithium Corp. [TSXV:ML] (OTCQB:MLNLF), Neo Lithium [TSXV:NLC] (OTC:NTTHF), NRG Metals Inc. [TSXV:NGZ] (OTCQB:NRGMF), Nemaska Lithium [TSX:NMX] [GR:NOT] (OTCQX:NMKEF), North American Lithium (private), Piedmont Lithium [ASX:PLL] (OTC:PLLLY), Prospect Resources [ASX:PSC], Rock Tech Lithium [CVE:RCK], Sayona Mining [ASX:SYA] (OTCPK:DMNXF), Savannah Resources [LSE:SAV], Standard Lithium [TSXV:SLL] (OTC:STLHF), Sigma Lithium Resources, and Wealth Minerals [TSXV:WML] (OTCQB:WMLLF).
Lithium & electric metals fund (ISIN DE000LS9L822) - Access via the Stuttgart stock exchange or wikifolio.com
The portfolio gives investors broad exposure across the EV metals miners covering lithium, cobalt, nickel, rare earths, and graphite. I help as an analyst for the fund. The certificate is endless (open fund) and listed on the Stuttgart Stock Exchange, so it can be bought via a broker that carries the ISIN or via Wikifolio. The ticker is DE000LS9L822 listed on the Stuttgart stock exchange and accessible from any German exchange.
Investors can view the portfolio holdings and learn more by accessing here.
December saw another rough month for investors as the risk-off sentiment due to the trade war and US equities decline took its toll. EV metals expert Chris Berry's comment below says it all.
My highlights for December were:
- Chris Berry - "The challenges that Albemarle is having with Chilean authorities, SQM’s delayed ramp up in the Atacama, Galaxy’s production challenges, and Orocobre’s continued under performance are only the latest examples of how utterly ridiculous the oversupply thesis has become....There are some extremely compelling undervalued opportunities with respect to lithium equities, leading me to believe that the sell-off is overdone."
- Envision Energy will produce batteries for $100 per kilowatt hour by 2020.....Lei predicts fossil-fuel cars will disappear "overnight" when EVs become cheaper.
- Tianqi buys stake in lithium miner SQM from Nutrien for $4.1 bln.
- Albemarle agrees with Mineral resources to buy a 50% stake of the Wodinga lithium mine in WA for US$1.15b.
- Neometals agrees the sale of Mt Marion equity to existing project partners Ganfeng Lithium and Mineral Resources for $A104 million and retains offtake rights.
- International Lithium PEA results for the Mariana Lithium Brine Project - post-tax NPV10% of US $192 million, post-tax IRR of 20%, CapEx US$243m.
- Galaxy Resources - "Mt Cattlin update-exploration drilling hits thick, high-grade intersections outside known resource."
As usual all comments are welcome.
Disclosure: I am/we are long NYSE:ALB, GANFENG LITHIUM [SHE: 2460], NYSE:SQM, ASX:ORE, ASX:GXY, ASX:PLS, ASX:AJM, TSX:LAC, TSXV:NLC, ASX:AVZ, ASX:NMT, TSXV:AIS, ASX:CXO, TSXV:PLU, TSXV:CYP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice. I may receive 50% of the profit from the Lithium & electric metals fund's (ISIN DE000LS9L822) management fee, due to providing analyst services to the fund.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.