Our 2018 Outlook

As 2017 comes to a close, we outline some trends which we see occurring in 2018.  They are as follows:  

Consolidation is coming!  

In 2018, we will see at least one additional JV from a major leading producer and we will likely see at least one purchase of another Lithium company.  Consider the following:  

  • SQM, on their most recent investor day, explicitly stated that they are looking into a third project in addition to their JV’s with Lithium America’s and Kidman Resources.  
  • Albemarle (ALB) has said that they have a very “strong balance sheet” and are interested in opportunities within the Lithium marketplace.   
  • FMC Corp, who plan on spinning off their Lithium Business in 2018, will be one of the first 100% Lithium businesses traded on the NYSE.  Stocks which are usually spun off from their “parent” companies are often historically very active in the M&A space.  One could easily see a scenario where this company is purchased or becomes the purchaser.  Considering the size of the company, we think it’ll be more likely the latter – time will tell.  
  • Finally, there will be many junior miners who will have solid projects, with good future cash flow potential and will be excited to get their investors a significant exit.  Additionally, these junior miners will be excited to have the technical expertise which comes along with one of the larger and more experienced Lithium companies.  

Most Undervalued Lithium Juniors:

The award going into 2018 goes to Nemaska Lithium and Altura Minerals.  It’s a tie! Here’s our explanation on each name.  

Nemaska Lithium:

This 2019 upcoming Lithium Producer currently has a cloud hanging over its stock which is the pending financial raise of the company.  The company needs to raise ~$500 Million (USD) in order to fund its upcoming production operations.  Further to this point, many investors and commentators have been questioning if there is trouble in raising this capital or in general, what might be taking the company so long in securing capital. These concerns, while indeed concerns, will prove to be overrated once the company raises capital.  We see these concerns as a great entryway into the stock before they announce a financing, begin construction, secure the remaining 50% of their offtake deal and begin production within the next 24 months as one of the lowest cost producers.  In summary, there’s no better time than right now to start doing your research and considering an investment in Nemaska.  

Altura Minerals:  

We wrote about Altura Minerals back in September.  Much of our analysis which we wrote then still rings true.  In particular, potential upcoming catalysts include production beginning 1st half of 2018 and stage 2 expansion studies results.  

Most underrated CEO: Mark Calderwood, Tawana Resources

We spoke at length with Mark Calderwood several weeks ago and we were very impressed.  Like the company, Mark does not seem to be known outside of the Tawana Resource circles.  This is rather shocking considering that Mark literally co-wrote a book entitled “guidebook to the Pegmatites.”  Pegmatites, are igneous rocks that are often the sources for Lithium (Spodumene) and other minerals.    

Most Impressive New Junior Mining Project:  

This award goes to Pilbara Minerals.  As highlighted in our 2017 recap, this company was firing on all cylinders this past year.  They completed rounds of financings, off take agreements and most recently, a MOU with LG Chem.  They have one of the largest resources in the business and have some of the strongest partners, Ganfeng and Great Wall Motors as examples.  We’ve spoken with CEO Ken Brinsden several times and he is very impressive.  He has a deep understanding of the overall Lithium market.  Moreover, each time we’ve spoken with him, we come away feeling that he has a strong understanding of where the market is headed.  For 2018, this company will continue to stand out as one of the stronger new projects to hit the market.  

Financings for the 1st half of 2018 will be HOT

There are about 200-250 companies that are actively pursuing Lithium claims.  Almost all of them, aside from the Oligopoly and the most impressive of the Juniors, will need to raise capital in order to fund various studies, permitting, constructions, etc.  Seeing that supply and demand should remain tight in the first half of 2018, we expect that there will be a lot of financing activity taking place.  As always, we love to hear from readers and lithium company executives- if you represent, are invested in, or just follow a company that falls into this umbrella, let us know and we’ll add them to our watchlist of potential upcoming lithium capital raises!

The Lithium and Battery ETF (LIT) will be further rebalanced:  

Toward the end of 2017, the Lithium and Battery ETF (LIT) was rebalanced quite a bit, a move we predicted that would happen soon.  We believe that further changes to this ETF will happen in 2018.  Some potential names and trends to be on the lookout for –  what will happen when FMC spins off its Lithium business?  Tawana Resources, a producer in 2018, and Kidman Resources, the newest JV partner of Lithium giant SQM are not yet owned, will they be added?  China battery giant, Contemporary Amperex Technology Co Ltd (CATL), has stated their intention of an IPO, how will that affect LIT’s holdings of the company?  There will be much to follow with the only publicly traded Lithium ETF – we’ll keep you posted with the changes!  

 

1 thought on “Our 2018 Outlook”

  1. […] Pilbara Minerals: Pilbara has a really large resource (one of the largest in the world according to their presentations) at a strong grade of 1.25%.  They are fully financed, including their stage 2 project, and have strong offtake partners in Ganfeng Lithium and Great Wall Motor Company. The company is run by Ken Brinsden, who we think is truly capable of running a tier I project.  They are set to begin production sometime in the 1st half of 2018.  Our most recent interviews with CEO of Pilbara can be found here and here.  We also spoke about the CEO in our 2018 outlook.   […]

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