New York, New York (NetworkNewsWire) – Lithium stocks have
rocketed over the last 12 months propelled by the unabated demand
for lithium-ion (Li-ion) batteries. The world’s largest lithium
producer, Albemarle Corp. (ALB), has delivered a
77% return over the last year. During the same period
Sociedad Quimica y Minera de Chile (SQM) surged
150% and FMC Corp. (FMC) is up 95%. All three
major producers trade near all-time highs but cracks are beginning
to show. Respected investment bank, Baird, just downgraded
Albemarle to neutral, stating that near-term execution is already
priced into ALB’s stock and the shares are fully valued at current
levels (http://nnw.fm/a9WRJ). Despite continued massive upside
in the lithium market, the big three lithium producers may now be
over-crowded and already reached full value. To profitably exploit
market imbalance and burgeoning demand, rotation to prospective
junior lithium miners like Standard Lithium
Ltd. (TSXV: SLL) (FRA: S5L) (OTCQX: STLHF) and Nemaska
Lithium Inc. (NMX-CA) may be imminent.
Demand for lithium is certain to surge as vehicles become
greener and electricity becomes cleaner. Indicative of its
importance, Goldman Sachs has identified lithium as “the new
gasoline.” Worldwide sales of lithium salts are currently only
about $1 billion a year, but the element has become a crucial
component of Li-ion batteries that now power everything from
electric cars to power tools to smart phones. Lithium demand has
been projected to grow over 300% within the next eight years.
However, with evermore electric utility companies expanding solar
power capacity requiring high-density Li-ion energy storage,
lithium demand could soar exponentially. As example, Duke Energy
recently halted a proposed nuclear power plant in Florida and
instead plans a $6 billion solar and battery infrastructure
investment (http://nnw.fm/gp4RD). The unrelenting demand for
rechargeable batteries and high-density energy storage has created
an escalating dependence on lithium which has sparked a global
search for new lithium fields.
Standard
Lithium Ltd. (TSXV: SLL) (FRA: S5L) (OTCQX: STLHF) is
in the thick of the hunt for new lithium sources. The company is
intensely focused on further exploration and the immediate
development of its Bristol Dry Lake, Brine Project located in the
Mojave region of California. With the signing of its mineral lease
agreement with National Chloride Corporation of America — a
Permitted Brine Producer — for the exploration of lithium, Standard
Lithium’s Bristol Lake project now encompasses approximately 25,000
acres of placer mineral claims and private property. The company’s
geophysics team recently concluded a comprehensive gravity survey
over the entire basin, and initial interpretation of the data
indicates that the basin is deep and expansive. Historical drilling
and sampling to total depths of approximately 500 feet has produced
brine samples with lithium values over 100 mg/L for the entire
drilled interval.
For nearly 100 years National Chloride and others have surfaced
mined the area to produce chloride for various industrial
applications. Subsequently, the area has excellent mining
infrastructure, which addresses the primary challenges in cost
effective lithium mining and production - location, access and
infrastructure. Standard Lithium’s location already has easy road
and rail access, abundant electricity and water sources, and is
permitted for extensive brine extraction and processing activities.
There is electric power and water on the property with a major
paved road on the western edge and a rail siding nearby.
The strategic relationship with National Chloride, allows
Standard Lithium immediate access to conduct exploration brine
sampling and extraction, evaporation and processing activities, and
enable a fast-tracked project development schedule. The project is
in a friendly, clean energy development jurisdiction with proven
near surface brines which provide for efficient geophysical
exploration drilling programs. The company anticipates selective
lithium recovery through a combination of membrane, chemical
precipitation and solvent extraction. With a market cap of only $62
million, successful strategy execution could easily propel Standard
Lithium to new heights as a significant low cost domestic producer
of battery grade lithium materials.
To exceed objectives and market expectations, Standard Lithium
has established a world class Scientific Advisory Council of
lithium extraction scientists and process engineers that are in
charge of the lithium extraction process testing work (http://nnw.fm/NmC1U). As Robert Mintak, CEO of
Standard Lithium stated, “Standard Lithium has a very clear
focus…we have the ideal team with a blend of experience, knowledge,
technical agility and pragmatic problem-solving abilities, to
develop optimal process solutions for Standard Lithium’s
world-class assets.” There’s little doubt of Standard Lithium’s
intent to produce low cost domestic lithium and capitalize on the
immense global market imbalance.
The demand for Li-ion batteries will likely explode as grids
modernize to handle the massive influx of mainstream electric
vehicles, battery devices and ever more electric utilities that
require more high-density energy storage systems. Investors need
direct or indirect exposure to lithium and/or lithium batteries to
profit from this energy revolution.
Another prospective junior miner, Nemaska Lithium (TSX:
NMX-CA), is an exploration stage lithium miner focused on
supplying the essential element to the battery industry through
exploration and development of hard rock lithium mining and the
processing of spodumene (lithium aluminum silicate) into lithium
compounds. The company has yet to produce lithium and claims a
proprietary process to produce lithium hydroxide and lithium
carbonate for which patents have been filed. For the three months
ended in March 2017, unaudited financial statements show a net
operating loss of over $2 million for Nemaska, and, in a testament
to escalating lithium demand, the company carries a lofty $430+
million market capitalization.
Of the three major lithium producers, Albemarle Corp.
(ALB) is the largest and derives nearly 39% of its total
revenue from lithium sales. Long a global leader in the specialty
chemical business, Albemarle’s lithium business segment mines
lithium and converts it into different forms along the value chain,
like lithium carbonate and lithium hydroxide, or value-added
specialties like butyl lithium and lithium aluminum hydride. With
its acquisition of Rockwood Holdings in 2015, the company now
controls one of the only operating lithium brines in North America
and operates another lithium brine in Chile. ALB also holds a 49%
share in Talison Lithium in Australia and is expanding production
there in 2019 under a joint venture. Given Baird’s recent downgrade
of the stock to neutral “with little opportunity seen for near-term
upside” investors looking to deploy capital in the lithium market
may want to consider other options at this time.
Sociedad Quimica y Minera S.A. (SQM) is part of
the global scramble to secure supplies of lithium to feed battery
producers and other end-users. Headquartered in Chile, SQM produces
over 45,000 tons of lithium carbonate equivalent per year. With
hints of shadowy connections, recent revelations show a Chinese
state-controlled firm may bid for part of a controlling stake in
SQM in conjunction with China’s attempts to secure continuous
supplies of this vital raw material (http://nnw.fm/XKkK4). SQM plans to expand lithium
carbonate capacity in Chile to 63,000 metric tons by 2018. Shares
of SQM surged to all-time highs in 2017 and are now a frothy $56
per share. The company is inconsistent in paying dividends that
yield around 3% and carries a hefty 42+ PE ratio.
FMC Corp. (FMC) owns and operates a 17,000+
tons per year lithium brine facility in Argentina, where political
upheaval has sparked rampant inflation and social discord. FMC is a
large diversified multinational chemical company servicing global
agricultural, consumer and industrial markets, and lithium
represents only a small fraction of company revenues. The company
operates in three business segments: FMC Agricultural Solutions,
FMC Health and Nutrition and FMC Lithium. FMC’s shares trade near
all-time highs with a PE ratio over 56. Looking to boost lithium
revenues, FMC plans to increase lithium hydroxide capacity to
30,000 metric tons per year by the end of 2019. As with most
established lithium producers, shares of FMC trended much higher in
2017.
Investment risk in these three chemical conglomerates is
mitigated since overall performance is tied to other chemicals and
metals. However, each of these lithium behemoths are trading near
all-time highs, may be crowded and fully valued, and don’t provide
the pure play direct exposure to the lithium market that a junior
mining company may offer.
In spite of its downgrade of ALB, Baird stated that it
“continue(s) to believe lithium is in a multiyear growth cycle.”
It’s estimated that in just eight years over 785,000 metric tons
per year of lithium carbonate equivalent will be needed to meet
global demand (http://nnw.fm/riS7f) compared to 227,000 tons of
supply this year. Many other analysts are even more bullish
expecting greater demand, larger lithium deficits and further price
increases for this essential element. New sources of lithium are
necessary to meet the insatiable demand. For the foreseeable
future, well positioned lithium investors should be richly
rewarded.
For more information on Standard Lithium please visit: Standard
Lithium Ltd. (TSXV: SLL) (FRA: S5L) (OTCQX:
STLHF)
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