NetworkNewsWire Editorial Coverage: Almost everyone is aware of the tear that lithium stocks have been on over the last couple years. Driven by the projected exponential increase of electric vehicles and coupled with broad-based, ever-increasing demand for lithium-ion (L-ion) batteries, many recognized names in the lithium mining sector tripled in value to reach all-time highs by the end of last year. Shortly after the start of 2018, lithium shares tumbled by 14 percent and more on a negative forecast by Morgan Stanley analysts. That forecast has since been widely derided by a wide range of lithium industry experts, which give the negative scenario less than a one percent chance of happening. Reflecting the true scale of the unfolding energy transformation, respected independent commodity forecaster Roskill recently tripled its demand forecast for lithium through 2026. Roskill originally forecast lithium demand would increase to 328,000 tons of lithium carbonate equivalent by 2026 and now predicts lithium demand to explode to over 1,00,000 tons within the next eight years (http://nnw.fm/C5n4e). Lithium-related stocks and ETFs have proved to be the best way to play our collective electric future in vehicles, electronics and high-density storage — all dependent on lithium batteries. Broadly diversified across the entire production chain, the Global X Lithium & Battery Tech ETF (LIT) invests in the full lithium cycle from raw resource to battery production, reducing risk but limiting upside opportunity. Miners have been and should continue to be the best avenue to most directly and greatly profit from the burgeoning lithium demand and market imbalances. Even though lithium is trading near all-time highs, if demand increases 300 percent as many predict, miners in the renowned “lithium triangle,” such as Albemarle Corp. (ALB), Sociedad Quimica y Minera S.A. (SQM), and FMC Corp. (FMC) are likely to do well. However, given the location and value of its assets, a prospective junior miner, Lithium Chile Inc. (TSX.V: LITH) (OTCQB: LTMCF) (LTMCF Profile), may possibly outperform any other lithium player this year.
The Motherlode
Nearly 70 percent of the world’s lithium comes from brine water sources, and the rest comes from hard rock spodumene that is much costlier to mine. Salar brines (salt lake in Spanish) are the underground reservoirs that contain exceptionally high concentrations of dissolved lithium. Chile’s Salar de Atacama, the most renowned sector of the “lithium triangle,” holds the largest and highest-quality proven lithium reserves in the world. Mineral-rich brines, scarce rainfall and high altitude scorching desert sun make it an ideal environment for brine mining with the lowest lithium production costs anywhere on the planet.
Located in the heart of the lithium triangle, Lithium Chile Inc. (TSX.V: LITH) (OTCQB: LTMCF) is poised to explore and potentially develop what the company hopes will be the next big lithium discovery in Chile. Quietly and strategically, Lithium Chile has managed to amass over 148,000 hectares across 15 properties, surrounding the world’s foremost lithium reserves. Lithium Chile’s holdings represent the largest wholly owned lithium land package in all of Chile, outside of the government itself.
Current land prices hover around $1,000 per hectare as evidenced by recent competitor land purchases, but Lithium Chile was able to acquire large tracts of prime lithium-bearing properties for only $3 per hectare by staking the claims. If drilling proves successful, one would expect land prices to increase dramatically, based on what happened to successful projects in neighboring Argentina.
In 2014, commodity prices in precious and base metals were depressed, the country’s economy was weak, and lithium mining was hampered by antiquated government strictures. Concurrently, neighboring Argentina elected a pro-mining government and eased foreign capital restrictions on lithium exploration and mining. However, in March 2018, Chile elected a pro-mining, pro-business government that is easing restrictions and cutting red tape. In fact, within a day of taking power earlier this year, the government issued the first new lithium production and export license in decades. The result is a lithium exploration boom.
As exploration interest focused on Argentina, Lithium Chile turned to geologist Terry Walker’s 26 years of mining experience in country. With the full financial backing and support from the company, which has raised CDN$12.7 million to date, Walker used comprehensive, previously generated technical data to identify salars that were prospective for high-grade lithium, good magnesium to lithium chemistry and close to critical infrastructure. Now an equity shareholder, vice president of exploration, and chief geologist of Lithium Chile, Walker continues to advance his mission: proving out Lithium Chile’s prime properties.
A Lithium Bonanza
Lithium Chile has conducted sampling programs across its portfolio. The top six have returned high-grade lithium samples at and near surface, have good chemistry, great infrastructure — all for little more than $3 a hectare.
- Coipasa: 11,300 hectares
- Near surface samples from 310 to 1410 mg/L lithium
- Chemistry 3.9 Mg:Li
- Ollague: 2,200 hectares
- Near surface samples from 160 to 1140 mg/L lithium
- Chemistry 7.1 Mg:Li
- Helados: 30,100 hectares
- Near surface samples from 390 to 1280 mg/L lithium
- Chemistry 2.6 Mg:Li
- Atacama: 6,600 hectares
- Near surface samples from 210 to 1330 mg/L lithium
- Chemistry 2.6 Mg:Li
- Turi: 7,600 hectares
- Near surface samples from 290 to 740 mg/L lithium
- Chemistry 4.5 Mg:Li
- Talar: 3,500 hectares
- Near surface samples from 260 to 525 mg/L lithium
- Chemistry 7.8 Mg:Li
Field tests so far have shown some of the highest lithium sample grades reported throughout Chile. To provide some perspective: typical lithium concentration needed for production in the United States is between 190 to 200 mg of lithium per liter. Some of Lithium Chile’s properties have tested over 1000 mg per liter, and one sample returned 1410 mg per liter taken within three feet of the surface. Also, if the right brine chemistry doesn’t exist, lithium extraction can be difficult and expensive. The chemistry tests on the six top products have shown excellent results.
When Millennial Lithium first entered Argentina in 2016, it picked up its first project at $2,000 a hectare. Within six months of acquisition and after additional exploration, adjoining ground was selling for $3,000 a hectare. Once the project was proved to contain mineral resources that could be mined, adjoining ground was bought for close to $9,000 a hectare.
Land values in Chile have already risen to $1,000 per hectare. If Lithium Chile proves up the potential of its holdings, the values could see a significant spike. The company continues to receive inquiries with respect to joint ventures and optioning on one of more of its properties.
Lithium Chile’s wholly owned assets include 66 square kilometers directly on the Salar de Atacama, Chile’s largest mineral salt flat and home to about 30 percent of the world’s lithium production. The Salar de Atacama offers multiple competitive advantages in lithium production including good infrastructure, high concentrations of salar brines, low processing costs, superior evaporation rates and favorable year-round weather.
Following field test samples, the company initiated a TEM survey program on five of its properties, with encouraging results, including identifying multiple high-priority target areas on Lithium Chile’s Atacama, Ollague, Helados and Coipasa projects. Drilling permits have already been applied for, and it is anticipated that drilling will commence before the end of the second quarter 2018.
Tangled Triangle
Over half of all the world’s lithium resources are in the lithium triangle, which encompasses parts of Argentina, Bolivia and Chile. Of the three countries, market-friendly Chile has dominated world lithium markets for decades. Chile produced nearly 80,000 tons last year, almost twice as much as Argentina and Bolivia combined. Argentina is taking steps to increase activity while Bolivia has barely begun. In Argentina, FMC Corp. (FMC) mines lithium brine at Salar del Hombre Muerto. Primarily a pesticides maker, FMC is planning to sell off around 15 percent of its lithium business in an IPO later this year, giving the business a market value of more than $3 billion. After the IPO, the company plans to spin out its remaining 85 percent stake in the lithium business to existing shareholders.
Under leases signed in the 1980s, Chile’s SQM and Albemarle of the United States currently extract brine in Chile’s lithium-rich Salar de Atacama. Albemarle (ALB), a global leader in specialty chemicals, is among the largest lithium producers in the world with operations in Australia, the United States and Chile, deriving over 40 percent of its total revenue from lithium sales. Sociedad Quimica y Minera S.A. (SQM) is a large intriguing player in the global lithium quest. SQM has battled for years with CORFO, the Chilean economic development agency, and just ended a long-running dispute over royalties on the leased Salar de Atacama properties. SQM settled and will now be allowed to expand (http://nnw.fm/7TIg3) its annual lithium carbonate equivalent production to at least 216,000 tons by 2025. This comes after CORFO had blocked the sale of 32 percent of SQM to the Chinese, preventing China from controlling 70 percent of the world’s lithium supply. Albemarle (ALB) also came to terms with CORFO and received approval for an increase in the company’s lithium quota to as much as 145,000 metric tons. Even with these increased quotas for major producers, it’s still a far cry from the projected 1 million tons of lithium needed by 2026. Only new sources can make up the projected shortfall.
Lithium is essential in the new energy revolution that looks to be larger and more transformative than the transition from steam power to petroleum. To profit from this L-ion powered transformation, investors need to adjust their portfolios accordingly.
For more information on Lithium Chile, please visit Lithium Chile Inc. (TSX.V: LITH) (OTC: LTMCF).
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