Lithium is poised to be the longest-running mining bull market of the century, and independent, junior minors like Millennial Lithium Corp. (TSX-V: ML) are having their stocks pushed higher and higher as this market gets ready to explode under a soaring demand and tight supply situation.
OilPrice.com Market Commentary: Lithium is poised to be the longest-running mining bull market of the century, and independent, junior minors like Millennial Lithium Corp. (TSX-V: ML) are having their stocks pushed higher and higher as this market gets ready to explode under a soaring demand and tight supply situation. Additional companies in focus today in the markets include: Berkshire Hathaway Inc. (NYSE: BRK-A), Orocobre Limited (OTC: OROCF), Lithium Americas Corp (TSX: LAC) and Rio Tinto PLC (NYSE: RIO).
The disruptive force of lithium in the energy market is unprecedented, with prices tripling this year and the fantastically tight supply prognoses promising explosive profits for new entrants. And the global ground zero is lithium-rich Argentina, where massive resources have combined with a new business-friendly political atmosphere to create a situation in which everyone is talking about a lithium cartel, and the rise of the next energy barons.
Here, in the heart of the 'lithium triangle' in Argentina, Millennial Lithium Corp. (TSX-V: ML.V) is on track to acquire 100% of the coveted Pastos Grandes project in the lithium-rich Salta province-and it could be put into full production in just three years. At about that time, projections are that lithium supply with be tighter than any other commodity-in history.
As we stare down the nose of an energy revolution that is already here and progressing aggressively, keep this in mind: The tripling of prices, the mounting panic among electric vehicle makers that new supply isn't going to come online in time for a major EV production surge and the feeding of a dozen battery gigafactories is only the beginning.
We are at the beginning of what is set to be the longest-running mining bull market the world has ever seen, and it's a junior game that will come down to the first few who reach the new supply finish line. Positioned right in the sweetest spot of the lithium heartland, Millennial Lithium is on track to get there first, with big league mining experience that is helping it carve out a place at the baron's table.
In this market that will wait for no one, here are 10 reasons to keep a very close eye on Millennial Lithium Corp. (TSX-V: ML):
1. A Bubble that Won't Burst
Lithium demand is rising fast, but those that understand the product lifecycle and development stages see that we are on the cusp of something much bigger. As more and more countries cross the electric vehicle chasm, demand will explode. This is not even considering grid storage, which is set to outstrip electric vehicle demand, and the rising use of consumer electronics.
The lithium ion battery market is forecast to expand to $46.2 billion through 2023, representing an 11% average annual growth rate. In view of the shortage that banks and market researchers are expecting, it is no wonder Warren Buffett is investing heavily in lithium.
Further down the supply chain, the Berkshire Hathaway, Inc. (NYSE: BRK-A) backed BYD has become China's single largest electric car manufacturer.
Europe is working towards mandating electric vehicles by law. The Netherlands has already laid down the law: All cars on the road have to be electric by 2025. Earlier this month, Germany's Bundesrat voted to ban the internal combustion engine by 2030.
China is again a powerhouse here, so investors should be keeping a close eye on developments there because this is a key driver of the "white gasoline" explosion. China's Tianqi Lithium Industries is gearing up to build a US$306-million battery plant in Australia, to open already in 2018.
2. Euphorically Tight Supply-Analysts Agree
As the acceleration of EVs into the mainstream picks up astounding momentum, the big question is: Where are the batteries to power these EVs going to come from? The answer is around a dozen battery gigafactories. Today's global lithium-ion cell production is only enough to supply 900,000 to 1 million EVs, or about 1% of the estimated demand of 100 million light EV sales, according to Evercore ISI analyst George Galliers. PriceWaterhouseCooper (PwC) also agrees that "supply will continue to trail until new projects come online in the next five years."
3. Prices Have Tripled, and Are Poised to Go Higher Still
Lithium prices have tripled-even before the battery gigafactories have got off the ground. Now that Tesla's has already opened in Nevada and 11 more are in play, the battery supply chain is exploding, and the math looks brilliant. Lithium battery production capacity is set to triple by 2020. Now we're staring directly at the next commodity barons. Quoting one of the most respected names in the lithium sphere, Joe Lowry: "We are in the beginning of a long term cycle of significant lithium demand growth and are ending a cycle of significant underinvestment in lithium supply. No matter what certain "experts" say - supply and demand are NOT in balance. If the market is adequately supplied, why are we having the current price run-up?"
4. A Sweet Spot in the Heart of the Lithium Triangle
There is a lot of lithium all over the world but most of these reserves are still untapped. What's more, the bulk of the world's lithium reserves are concentrated in just a few places.
Bolivia, Chile and Argentina, home of the Lithium Triangle, together hold more than two-thirds of the world's reserves.
Millennial has an extensive presence inside Lithium Triangle, in Argentina's lithium-rich Salta province. The company is on track to buy the 1,221-acre Pastos Grandes lithium deposit in full and will be ready to start production there inside three years. The company is also not wasting any time in further expanding its presence in this sweetest of all lithium spots and is negotiating the acquisition of another 4,236 acres in the province, quickly scrambling for equal footing with the biggest lithium miners.
5. Some Start from Scratch, but Not Millennial
Unlike many other potentially lithium-rich areas, the Pastos Grandes' reserves have been confirmed by geophysical surveys, exploration wells and even evaporation tests. In other words, the company has already made sure there is abundant lithium brine in its project - and very likely around it - and it is ready to proceed with production.
6. Best Brine Around
Lithium brines are the easier, cheaper to process form of the metal. Pastos Grandes is a lithium brine deposit and the grade of the metal content of the brines is as much as 4-5 times higher than the grades in Nevada's lithium heart, Clayton Valley. Millennial's lithium is low-cost to extract and high-quality, there is hardly a better combination for any miner.
7. Stable Political and Regulatory Environment
Argentina, where Millennial's lithium acreage is located, is welcoming foreign investors with open arms. Salta is bustling with lithium miners, and a change in political atmosphere means that not only is Argentina open for business, but it's even talking about an OPEC-style cartel for lithium. After years of mismanagement of the country's natural resources, Argentina's new President Mauricio Macri's administration has scrapped taxes on mining exports, allowing companies operating in its part of the Lithium Triangle to collect better revenues from their local operations.
8. Getting Lithium to Market-Already Secured
Transport and power infrastructure is a major concern for mining operations. Millennial has considered all aspects of the business picking acreage in close proximity to the biggest railroad in the region: the line from Salta to Antofagasta, on the Chilean Pacific coast. No additional investments will be necessary to build this infrastructure from scratch. There is also a reliable power line nearby and a gas pipeline, satisfying all needs of a mining operation.
9. Sky's the Limit as Millennial Eyes Wider Stake in Sweet Spot
Millennial is already planning for expansion, to match unbelievably bullish supply and demand trends. The company is currently studying the Cauchari East project, in the Jujuy province in northern Argentina. The 2989-acre property is in direct proximity to operations run by Orocobre Limited (OTC: OROCF) and Lithium Americas Corp (LAC.TO), established lithium producers. This proximity greatly diminishes any investment risk as the two companies have confirmed beyond any doubt the availability of lithium in the area.
10. A Junior with Big League Experience
Let's get to the heart of the matter-what matters beyond where you're mining and how far along you are. Lithium is a junior's game at this point. All the focus-and investor radar-is on the new entrants in this market and those poised to make it to the finish line first, and with the biggest bang. In this very particular game, management experience has to be big, and it doesn't get much bigger than Millennial. The company's VP of Exploration is Iain Scarr, a geologist with a number of major lithium victories under his belt. But what investors prize most is this: He is the former VP of Exploration for Rio Tinto (NYSE: RIO), one of the world's three biggest mining companies. Scarr is a mining industry vet who knows lithium-and Argentina--better than most, and the overall sentiment is that he not only has what it takes to bring this across the finish line, but he will.
It's a dream team on the junior lithium playing field-with a dream play that positions the company to potentially be one of the first to explode across this finish line.
By James Burgess of Oilprice.com
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