Just a few years ago, we would have scoffed at the idea that electric
vehicles could be mainstream anytime soon, or that the global appetite for
lithium-ion batteries and mass power storage would be so voracious, and so
sudden. Today, no one is scoffing, and lithium is being viewed as our new
super-mineral that will catapult us firmly into the next century.
Now Tesla has started buying up Nevada and building its battery
gigafactory, with competing gigafactories following suit and competing
electric vehicle (EV) manufacturers all throwing billions at this fast-moving
market that no one has been able to keep up with.
Not only has the EV taken its first major leap into the mainstream -- most
notably indicated by Tesla's phenomenal advance sales of its affordable Model
3 -- but it's gone beyond the mainstream.
Electric vehicles will be the rule rather than the exception; and lithium
the number one commodity of our time.
Germany has mandated that all
new cars registered in the country will have to be emissions-free
by the year 2030. And to make this a reality, the government has cut a
deal with automakers to jointly spend $1.4
billion on incentives to boost electric car sales. They're hoping to sell
500,000 EVs by 2020. So they're subsidizing the EV industry, and giving
lithium an automatic boost at a time when it doesn't even need it.
Norway is following suit as well, working on legislation to outright
ban the sale of gasoline-powered cars by 2025.
And in the U.S., the Wall Street Journal now reports that the mainstream
popularity of electric cars will reduce gasoline demand by 5% to 20% over the
next two decades, assuming that EVs gain more than 35% market share by 2035.
While our energy revolution got off to a slow start, better cars at more
affordable prices, tighter air-pollution regulations and a growing global
desire to halt climate change have pushed the revolution over the edge. It's
all powered by lithium, which has always enjoyed steady demand just from our
consumer electronics cravings -- but is now about to go where no mineral has
gone before.
Tesla Motors (NASDAQ:TSLA), Nissan Motor Co. (OTC:NSANY), Hyundai Motor
Co. (OTC:HYMTF) and Volkswagen AG (ETR:VOW3) are all putting out EVs, and
Ford Motor Co. is planning to invest $4.5 billion over the next four years to
develop an amazing 12 new EVs and hybrids, according to the WSJ.
"Electric vehicles are one of the biggest market disruptors in
centuries -- which makes lithium the commodity that gives us the most reason
to be bullish," Oroplata Resources CEO Craig Alfred told Oilprice.com.
Let the Hoarding Begin
Metal hoarding and demand is driving up prices to $15,000 per ton or
higher on the spot market, vs. only $5,000 a couple years ago.
In 2014, lithium prices grew 20%. And in 2015 battery grade lithium spot
prices in China surged from $7,000 per ton in the middle of the year to a
market-shocking $20,000 per ton earlier this year.
Market consumption could triple from 160,000 metric tons to a staggering
470,000 metric tons by 2025. And even if the EV market share increased by
only 1%, it would raise lithium demand by 70,000 metric tons -- which is
about half of today's demand.
This has made the commodity -- described by Goldman Sachs as the "new
gasoline" a prime target for the break-out of junior miners who are
keen to get in on what has traditionally been an oligopoly. These juniors
will be just as disruptive to the market as EVs themselves.
In the race to secure new lithium supply acreage, the juniors are
relentless, and the newest junior on the scene is Oroplata Resources, Inc.,
which recently staked its own claim in Tesla's backyard, with the 100%-owned
Western Nevada Basin project.
Close to home -- and close to the North America EV center stage -- there's
nowhere else to be but Nevada, which has the only brine-sourced lithium in
the country and has strategically positioned itself to be the front line of
the American energy revolution.
The 'gigafactory' state is now the scene of the hottest activity since the
California gold rush, and the new entrants are scrambling to stake their
claims around the only producing lithium mine in America--Albermarle's Silver
Peak Mine.
According to Fortune
magazine, by some estimates the Silver Peak Mine alone "holds the
promise of even greater untapped riches of the valuable metal buried beyond
the mine."
The juniors are betting that Nevada's Clayton Valley Basin holds a lot
more lithium than we have ever imagined, and geology may just prove them
right.
"Never before has there been commodity supply that is this
fantastically tight," says Alfred of Oroplata Resources,
which has just
confirmed the presence of "highly anomalous lithium values"
from its Western Nevada Basin project, right in the heart of the state's
lithium ground zero. "Right now it's all about getting it out of the
ground first and becoming the next suppliers of a revolution that's already
unfolding at a phenomenal pace."
Musk would agree. When he cut the ribbon on the new gigafactory he noted
that he alone would use up most of the world's existing lithium supply.
"In order to produce a half million cars per year...we would
basically need to absorb the entire world's lithium-ion production," Musk
said.
And that's just one man, one brand of EV and one gigafactory. The race is
indeed on to be the first to get at new lithium supply -- and there is every
reason to be bullish on the new juniors who will disrupt the entire market.
