2017 in Review

As the year comes to a close, we are excited to present our major thoughts from the past year in the Lithium industry.  

Electric Vehicle (EV) Industry Tipping Point:  

For those readers just joining us in the Lithium boom, the EV industry is one which we closely follow since lithium demand is largely coming from lithium ion batteries which fuels electric vehicles.   2017 was the year that dramatically changed this industry. Several prominent countries worldwide announced mandatory EV adoption rates. Many car companies from the U.S. to China to Europe announced new EV cars or at times, introduced plans to electrify their entire fleet!  Examples are as follows:  

  • GM: at least 20 new EVs by 2023
  • Mercedes: will electrify entire lineup by 2022
  • VW: announced plans to invest $84b to bring 300 new EV models to the market by 2030
  • Dyson: announced that they will spend 2b pounds to develop an EV using solid state battery technology
  • Volvo: the more aggressive of the bunch announced that all of their new models will be EV by 2019

Supply/Demand Imbalance Reached New Heights:  

Supply could not keep up with the rapid increase in demand which led to historic lithium pricing.  Just a couple of years ago, lithium pricing was around $5-6k/t. Currently, lithium pricing is ~$13k-15k/t.  These prices might rise even further as the supply and demand balance remains tight. More on this to come in our upcoming 2018 post.  From an investment perspective, pricing among other factors created a perfect opportunity. Producers could reap higher revenues for their production without any additional costs, thus increasing profit margins.  It was an ideal investment situation which was clearly indicated by massive stock increases across the industry.  

Junior Miners Grew Up Quickly:  

  • Lithium America’s – They closed all of their financing rounds and started a share consolidation to list on the NYSE.  Once listed, they could be the first 100% purely lithium play trading on a major U.S. stock exchange. You can read our analysis on the company here.  Since we published our post, the stock is up over +40%.  
  • Pilbara Minerals – The company secured $100M (USD) in financing for their hard rock stage 1 production with an offtake with Ganfeng Lithium, which has quickly become a giant in the lithium space.  The company also started working on their stage 2 production, securing an offtake with Great Wall Motor Company.  Finally, the company recently signed a MOU with battery powerhouse LG Chem.  Our recent interview of the CEO can be found here.  
  • Altura Minerals – The company, like their neighbors Pilbara Minerals, secured major financing for their stage 1 production.  The capital raise was secured via Pala Investments who were one of the first investors to see the supply shortfall in the Cobalt market. The company also recently raised capital to help start with their stage 2 exploration.  Our analysis on Altrua minerals can be found here.  Since publishing, this stock is up over +100%.  
  • Galaxy Resources – Their production at Mount Cattlin and forthcoming production at Sal De Vida and James Bay sites make them one of the more powerful lithium junior miners. Most recently, the company signed a 5 year offtake agreement for Mount Cattlin and provided an update on the James Bay Resource – which is a significant one at 1.40% Li2O.   
  • Tawana Resources – this one that seems to have been treated like the ugly stepchild of the industry was one of the sleepers of the 2017 year.  Moreover, they didn’t even seem to exist at the beginning of the year – since all charts touting “upcoming producers” didn’t have them listed.  The company completed their financing, offtake agreements and are on track to be one of the first producers of 2018.  We thank all of our many readers who emailed us about them.  While we can’t respond to all of the people who email us, we really appreciate all the great suggestions – keep them coming!  

Historic Firsts:  

  • SQM made a JV partnership with Kidman Resources.  This marks the first time that a market leader has invested in an area outside of their core expertise.  SQM is the renown brine expert and has taken a leap into hard rock production with its JV with Kidman Resources.  Moreover, this marks the first time they are investing outside of South America.  The company has now made two outside JV’s, one with Kidman Resources and one with Lithium America’s.  The company has stated that they are looking for a third site to partner with- who could be next? Stay tuned, as we have some very interesting thoughts!

Demand Estimates Kept Moving On Up:  

  • In March of this past year, ALB (one of the market leaders) increased their demand projections from 20,000 tonnes LCE to 35,000 tonnes LCE per year.  A 75% increase in demand projections is no small matter.  
  • SQM, another major Lithium leader, had an initial demand projection of 8-10% per year growth in the industry.  In their 2nd quarter earnings call, the company revised their estimates predicting demand as high as 12-18%.  

Lithium and Battery (LIT) ETF Rebalanced:  

  • The Lithium ETF LIT was rebalanced which further incorporated many of the leading Lithium Junior miners and further increased their stake in the major global producers.  We monitor this ETF closely and plan to do a follow up post on them shortly.