With lithium prices skyrocketing beyond wildest expectations, talk heating
up about acquisitions and mergers in this space and a fast-brewing war among electric
car rivals, it's no wonder everyone's bullish on this golden commodity that
promises to become the "new
gasoline".
Moreover, land grabs, rising price predictions, and expectations of a
major demand spike are leaping out of the shadows of a pending energy
revolution and a new technology-driven resource era.
For once, we have agreement across the board on a commodity: Demand for
lithium will continue to rise throughout the year--and beyond--spurred by the
rise of battery mega/gigafactories and a burgeoning energy storage business
that will change the way we live.
That's why Goldman
Sachs calls lithium the "new gasoline". It's also why The
Economist calls it "the world's hottest commodity", and talks
about a "global scramble to secure supplies of lithium by the world's
largest battery producers, and by end-users such as carmakers."
In fact, as the Economist notes, the price of 99%-pure lithium carbonate
imported to China more than doubled in the two months to the end of December
-- putting it at a whopping $13,000 per ton.
But what you might not know is that this playing field is fast becoming a
battlefield that has huge names such as Apple, Google and start-up Faraday
Future throwing down for electric car market share and even reportedly gaming
to see who can steal the best engineers.
Apple
has now come out of the closet with plans for its own electric car by
2019, putting it on a direct collision course with Tesla. And Google, too, is
pushing fast into this arena with its self-driving car project through its Alphabet
holding company.
Then we have the Faraday Future start-up -- backed by Chinese
billionaire Jia Yueting--which has charged onto this scene with plans for
a new $1-billion factory in Las Vegas, and is hoping to produce its first car
next year already.
Ensuring the best engineers for all these rival projects opens up a second
front line in the war. They've all been at each other's recruitment throats
for months, stealing
each other's prized staff.
And when the wave of megafactories starts pumping out batteries -- with
the first slated to come online as soon as next year--we could need up to
100,000 tons of new lithium carbonate by 2021. It's an amount of lithium we
just don't have right now.
The war is definitely on, and lithium prices are the immediate and
long-term beneficiary. It all depends on batteries, so it all depends on
lithium.
The Lithium Oligopoly Ends Here, In Nevada
This is where the lithium oligopoly ends. It's where new entrants to the
lithium mining game step in to forge a very lucrative future.
Right now, lithium isn't even traded as a commodity; rather, it is managed
through an oligopoly of three or four major global suppliers who have managed
supply and demand for decades. That's why everything is priced on a contract
basis.
This year could see that change, which makes it a prime time to get in on
lithium.
"The few major suppliers who have so far been responsible for all
lithium supply and demand are not going to be able to meet new demand. This
is why 2016 will be a very interesting year for anyone with the foresight to
see the end of this oligopoly and the potential decoupling of lithium from
other commodities," Dr. Andy Robinson, COO of Pure Energy Minerals (OTMKTS:HMGLF), told
Oilprice.com.
Producers are now working quickly to stake their claims and position
themselves strategically to become key suppliers.
So far, so good. Pure
Energy, for one, is the only player in Nevada that has managed a
conditional agreement with a company building the world's largest battery
factory, which is located only four hours from Pure Energy's proposed mine.
There has been other movement in this space as well--broader, global
movement that gives us even more reason to be bullish on lithium.
The fourth quarter of 2015 and the beginning of this year have seen a lot
of talk about Australia's mining giant Rio Tinto considering entering
the hot lithium space.
A Major Long-Term Game
This is an energy revolution that is still in its early days, but it's
such a hot commodity right now that chances to get in on the long-term game
are narrowing by the day. And Nevada -- ground zero in this revolution--is
already raking in the benefits because it is the only U.S. state that both
produces lithium and holds vast new resource potential.
In
2013 alone, Nevada doubled lithium production capacity, according to the
USGS--and that is just the tip of the iceberg given all of the new
exploration going on and the fast and furious land-grabbing.
The next wave of battery factories are expected to increase global battery
capacity by some 150% by 2020. Within this prediction, electric vehicles will
have a projected 20-30% compounded annual growth rate through 2025, so the
demand for lithium appears endless.
Some say the lithium market is already at a supply
deficit, and the rising prices make new projects even more attractive.
The lithium oligopoly is already a dinosaur, and new lithium projects on
highly prospective land forwarded by companies with lower market caps and
strong management are what investors will be looking for.
The brine is the place to be, and right now Pure Energy has the only brine
resource in North America. It is also directly adjacent to the only producing
lithium mine in North America, Albermarle Silver Peak Mine (NYSE:ALB).
Lithium sourced from brine, or salty water, is the most cost-effective out
there because it is easier and cheaper to extract.
There are billions of reasons to be bullish on lithium, and bullish on
Nevada. Goldman
Sachs gets it. Not only will lithium feed massive portable energy storage
applications, but it will be a "key enabler of the electric car
revolution and replace gasoline as the primary source of transportation
fuel."
This commodity that isn't yet a commodity in trading terms is about to break
free from the oligopoly. Get there first.
