Published on February, 26 2018. Updated on March 5th, 2018
Up until 2017, the lithium marketplace was an oligopoly, controlled by the big 4 companies. Even now, Albemarle (ALB), Sociedad Quimica y Minera de Chile (SQM) , FMC Corp (FMC), Tianqi and Ganfeng have produced 3/4 of the world’s lithium supply. Furthermore, over the last few years demand for lithium has rapidly increased, leaving an imbalance in the marketplace. As a result, prices for lithium skyrocketed from a historical average of around $5,000 – $6,000 (USD) per tonne to as high as ~$16,000 (USD) per tonne (recent January Hydroxide pricing). In China, prices have gone as high as ~$25,000 or even higher per tonne.
As a result of these historically high prices and consequently high margins for companies in the space, a flood of companies are attempting to enter into the marketplace.
In our previous analyses, we often like to think about junior miners by starting with those that are closest to production. This is for two key reasons. 1. The closer a company is to producing during the market imbalance, the greater the potential margins and cash flows, and 2. consequently, the greater the possible return from an investment perspective.
In this post, we provide our junior miner overview starting with those who are producing, looking at those who will be producing shortly and culminating with those just starting to explore new land assets.
Orocobre: The first lithium junior miner to enter the scene in many years (over 20 according to the company’s site). They’ve been closely watched and monitored since their arrival on the scene since they were the first new producer in many years. Many struggles have plagued the company such as weather and their brine concentration difficulties. Due to early difficulties, there were often rumors that this company would be the first junior miner to be acquired. For a company like ALB that is flush with cash and looking for new assets but hasn’t made a major move yet, it will be interesting to see if they attempt to acquire the company, takeover operations, and make the project more efficient and profitable.
Galaxy Resources: Galaxy is an Australian producer with one spodumene project currently online and two projects expected to come online in the next few years- one in Quebec and one in the lithium triangle The company’s Australian spodumene site, Mount Cattlin, is often talked about as having a less than ideal grade especially compared to their other sites like the James Bay Quebec site which looks to have a very strong grade.
Neometals: The company owns a 13.8% stake in the Mount Marion lithium site. which has surprised many by how much they’ve produced and shipped in 2017. Mount Marion is a joint project between Neometals, Mineral Resources and Ganfeng. (Note, we do not include either company in our list of juniors considering the stature, history and valuation of each company.) From our perspective, Neometals is also interesting in that they have a number of processes which seem to be potential competitive advantages in the future if proven successful on a commercial scale.
We’ve written about the 2018 producers in great length. We’ll include links in each section to our coverage of these producers
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.
Altura Mining: We have written about Altura extensively. Investors who jumped into the stock when we first wrote about them in September 2017 would have seen a >100% return in less than 4 months! They have a good project with a decent grade (~1.00%), and a strong management team to develop and run it. In their own words “they are a team of miners running a mining company focusing on mining.” In the mining space, management often have to tap their promoting side more than their scientific side. As Altura’s operators become greater promoters, expect the valuation to continue to rise. Finally, it should be noted that the company is often overshadowed by Pilbara Minerals since they are located in the same mining region of Australia (Pilgangoora). (We also covered Altura on Seeking Alpha and in our 2018 outlook.)
Tawana Resources: Had you only looked at Albemarle’s March 2017 presentation, which outlined upcoming junior miners, you would have completely missed Tawana Resources, who was nowhere to be seen. You’ll see that in our 2018 outlook, we said we believed that they were undervalued as a result. Tawana, like Pilbara and Altura, are expecting to start producing sometime in the first half of 2018. Their CEO has an extensive understanding of the mining industry as mentioned in our 2018 outlook.
AMG Lithium: AMG Lithium seems to be completely under the radar when thinking of of near term producers. The company expects to start producing spodumene in the back half of 2018. Like Tawana, their project already contains existing infrastructure which presumably is helping them lower capex costs and turn on the project so quickly. The overall grade of the deposit does not seem out of the ordinary (roughly ~1.00%), but their other mineral byproducts make the cost of their production competitive. The company has already started on phase II of their project, focusing on increasing their production rates. Construction for this process is projected to start by the end of 2018. Finally, AMG is an already profitable company and can use some of its current cash to help finance the project – helping ensure it is less reliant on outside funds.
2019 Producers: As of now there is only one main producer which has the potential to come online in 2019. It is Nemaska Lithium.
Nemaska: Nemaska has a 25% offtake agreement with FMC Corp, one of the original members of the lithium oligopoly. This immediately gives the company a boost in its reputation. Johnson Matthey (JMAT), their other offtake partner at another 25%, is no slouch either with a ~$6 billion valuation. The company is known to have strong grade (~1.5%) and its cost of production will be one of the lowest. However, one thing to watch out for still is their capex funding. The company needs ~$800m (CAD) to construct their mine and plant and has yet to finalize financing on that amount. Our interview with CEO Guy Bourassa can be found here.
2020 and Onwards: Lithium Junior Miners of Note:
Lithium Americas (LAC): This miner has become one of the strongest in the lithium junior sphere by way of its really strong connections among other factors. First, they have a Joint Venture (JV) in place with SQM, one of the preeminent miners in the lithium marketplace. Furthermore, Ganfeng Lithium was an early investor in the project, who has become of the most respectable companies in the lithium space. Lithium Americas is fully financed and construction is underway. Our analysis on the company can be found here.
Bacanora: According to the company, they have one of the “world’s largest lithium deposits.” The company has two main lithium projects: their flagship Sonora Lithium project, and the Zinnwald Lithium project in Germany. Sonora is expected to come online sometime in 2020. They have a relatively strong grade and a competitive expected LCE operating cost per tonne of $3,910. Hanwa, a leading Japan based trading company which was valued at 212 Billion yen (or ~$1.9B USD) at the time of this writing owns ~9% of the company and is a major offtake partner for their stage 1 project. In December 2017, NextView capital, a leading Chinese institutional fund, acquired a 19% interest in the company as well as an offtake agreement. Both of these deals are bullish signs for the company.
Lithium X: Speaking of NextView capital, Lithium X was acquired by NextView on December 18, 2017 for $206 Million Dollars (USD). We would have otherwise covered Lithium X in this post but instead, we will move onto the next publicly traded producer.
LSC Lithium: LSC owns 6 projects throughout the lithium triangle region, which is well known and further explained in our Lithium Supply I analysis. Stephen Dattels (co-founder and Chairman of the board) and his partner Mike Beck are involved with this project. Mike Beck was recently making headlines in the lithium space claiming that lithium pricing per tonne would go as high as $100,000 USD (up from ~$14,000 current pricing). Throughout 2017, the company was conducting acquisitions and financings. Most interestingly and recently as of August, the company stated they were reviewing “strategic alternatives” which often means a company is looking to sell itself. This would not be surprising considering the amount, and location of their assets.
Kidman Resources: The most important thing you need to know about Kidman is their recent joint venture agreement with SQM. Kidman’s resource has a strong grade at 1.44% Li2O. It’s also a large deposit which translates to a longer mine life and longer life of cash flows. The plan for production, once in operations, will be to mine Spodumene and convert it to Carbonate or Hydroxide. In addition to the Mount Holland Lithium project, there are also multiple gold sites the company can potentially mine from in the future. You can find further notes on Kidman in our most recent write up of the company here.
European Metals: The company’s main project, Cinovec, is located in Prague. It is the largest lithium resource in Europe and the 4th largest non brine resource in the world. Despite its massive size, the grade is one of the weakest worldwide. However, due to the vast amounts of Tin and Tungsten byproducts present in the mines, the cost of production for Carbonate is expected to be competitive at $3,483/t, especially in light of today’s lithium pricing. That being said, the company still needs project financing, offtake agreements and construction to take place before any lithium is sold into the marketplace. Furthermore, it should be noted that the Czech government is thinking about reviewing their deal with the company in an effort to develop their lithium resources with a local Czech company instead of the foreign European Metals. This is a major issue facing the company that should not be taken lightly by investors.
Savannah Resources: Savannah is a UK based company operating the Mina do Barroso lithium project in Portugal. Their most recent update as of this writing showed a 200% increase in inferred mineral resource estimate at 9.1Mt with a grade of 1.03% Li2O. Drilling is still ongoing at the site, and the company will continue to provide updates on the findings. However, their latest release shows a target deposit size of 17-21 Mt at 1-1.2% Li2O. It should be noted that these are just exploration targets, and only future exploration results will show the true size and grade of their deposit. Finally, given the issues plaguing the European Metals project, Savannah will be an interesting one to watch as the race to supply European based auto manufacturers heats up.
Millennial Lithium: There are three main sites which Millennial is working on developing. They are Pastos Grandes, Cauchari East and Pocitos North Cruz. The company’s flagship project is the Pastos Grandes project and is also the furthest along in development. The company hopes to start construction there by Q4 of 2019 which will go on through 2020. In November of 2017, the company received a major investment of $30 Million dollars (USD) from Million Surge Holdings Limited, a subsidiary of Golden Concord Group Limited, an energy service provider in China that specializes in clean energy and new energy. In total, the company raised close to $50 Million dollars (USD) in 2017. On paper, management seems strong, especially Farhad Abasov who has nurtured and sold multiple resource related companies.
Lithium Power International (LPI): Lithium Power International should be best known for having one of the world’s highest concentration pre-production lithium projects, the Maricunga Joint Venture (JV), which boasts a concentration of 1,160mg/l. It is a JV between LPI, Chilean Joint Venture Partner and Bearing Lithium Resources. The main project recently released its preliminary economic assessment (PEA) which showed among other things that they will potentially be one of the lowest cost brine producers. Next steps for the company will include completing a feasibility study, raising capital and constructing operations in order to begin production. In addition to its main Maricunga project, the company also has land that they can explore for lithium in key parts of the world including the Pilbara and Greenbushes Australia region, which we know well from Pilbara Minerals, Albemarle and Altura Mining.
Neo Lithium: Like LPI, Neo Lithium is another junior which has a strong grade and a potentially very low operating costs. Their maiden project, the 3Q project, is located in the lithium triangle, in Argentina. The current political administration in Argentina is working towards further improving the economy and aiding the lithium producers within the country. In the recent midterm elections, the incumbent government further expanded their political clout, a sign that this administration could win re-election come 2019, which would be good for miners. Management on paper is strong: The President and CEO was one of the co-founders of Lithium Americas. The Chairman was also involved with LAC from 2011-2015. Finally, the CFO has significant finance experience, including a role as VP at Scotia’s Investment Bank.
Critical Elements: The company is working on its flagship Rose tantalum-lithium spodumene project in Quebec, Canada and is hoping to hit production in Q3 of 2020. At the moment, the grade of the actual project does not appear to be that strong. Of interesting to note, the company has announced a new discovery, the lemare spodumene project, with a grade ranging between 1.6% and 2.6% Li2O. Furthermore, ex Rockwood Lithium (which was acquired by Albemarle) CFO Steffan Haber was recently appointed as President. Next steps for the company will include financing, permitting, construction and offtake agreements.
International Lithium Corporation (ILC): Any company that has a joint venture with Ganfeng Lithium (17% equity stake in ILC) is one to watch. After all, Ganfeng has partnered with other winners thus far such as Pilbara Minerals, Lithium Americas and the Mount Marion Lithium project (split between Neometals and Mineral Resources). ILC has many different lithium projects ranging from Canada to Ireland to Argentina. In particular, it looks like the initial grades for the projects in Canada and Ireland are impressive. Both projects are Spodumene based while the project in Argentina will be a brine based lithium project.
Sayona Mining: Sayona is focused on it’s main 100% owned lithium spodumene project located in Quebec called the Authier Lithium project which most recently begun its definitive feasibility stage. Currently, the grade seems just good enough to make it competitive in the marketplace but we wonder if this could change after the DFS is completed. Of note, most recently the company signed a MOU with Huan Changuan Lico Co LTD, a subsidiary of Minmetals groups which is a Fortune 500 company. It’ll be interesting to continue to watch Sayona as they develop their project. The next steps include financing, offtake agreement, construction and then ultimately production for this project. As of now, they are aiming for production to get started Q4 of 2019. We’ve included them in our 2020 producers since timelines often shift for upcoming Lithium producers. Of note, they also own an exploration project in the Pilbara region and another exploration site in Australia called the “Mount Edon site.”
Birimian: Birimian is working on its 100% owned solid-grade spodumene project that is based out of Mali, Africa. Immediately, the first and foremost concern for Birimian will be political and geographic risk. The next steps for the company will be to complete their DFS, secure offtake partners (if they choose to), permitting, financing, construction and then production.
Advantage Lithium: Advantage Lithium is a name which we would like to cover on this list of “whos next” due to it’s JV partnership with Orocobre. Orocobre was the first new miner on the lithium scene in many years and as such, any company forming a JV with them will be on our radar. The flagship project of Advantage is their Cauchari project which is owned 75% by Advantage and 25% by Orocobre. The property is literally right next to Lithium Americas Cauchari joint project with SQM. In addition to Cauchari, the company owns several projects in Argentina but all of which are less developed compared to Cauchari. The next steps for Cauchari will be a number of studies such as PFS and DFS as well as financings, offtake agreements, construction and then production. (Of note, the company recently sold off their stake to a Clayton Valley USA project to Pure Energy Minerals)
Pure Energy Minerals: Speaking of Pure Energy Minerals, this company we will highlight due its partnership with Tesla. The company has two main projects- Clayton Valley, Nevada and a secondary project in Argentina. They have a newer proposed technology which will help them extract lithium from lower concentration brines while keeping operating costs down and thus, increase overall margins for their Clayton Valley project. As of now, it seems the company is mainly aiming at producing lithium hydroxide. The next steps for the company include completing feasibility studies, financing, construction and then production beginning potentially in 2021. For more information on the company, see our interview with the CEO here.
Piedmont Lithium: Piedmont Lithium looks to be one of the first new U.S. based lithium projects to enter the market. Their asset is located in the North Carolina, which previously was the leading place for producing lithium worldwide. In their backyard, ALB and FMC have sites on hand. The company will be working on their scoping, permitting, feasibility study, financing and then production beginning towards the end of 2020. You can learn more about the company when reading through our interview with the CEO found here.
Wealth Minerals: WML holds a lithium brine project portfolio of 100,000 hectares and is now transitioning from an asset acquirer to a developer. It has the largest lithium brine properties of any junior mining company. The company has four projects which are Atacama Salar, Laguna Verde, Trinity and Five Salars. The company still has a way to go until production. In the meantime, it should be interesting to see where the company moves from this point over the next few years.
North American Lithium (NAL): NAL is a company which is trying to restart a lithium based project which was almost in production in ~2014. Many millions were estimated to be needed to be reinvested into the project. It was proposed that the company would start off by producing spodumene and then later on begin producing carbonate. At this time, it seems the company’s plans are not progressing as expected. As of this date, the company’s site has not been updated for several months. This is not a sign which investors would want to see from an upcoming producer.
Sigma Resources: Like Tawana Resources, Sigma Resources is working on fast tracking a mine which had previously been a producing mine. As a result, the company is expecting to be able to reach commercial production by 2020. What’s most noteworthy about this company, is its grade and low capex. The grade of 1.56% is quite impressive and helps lead to a low production cost for the company. The low capex of ~$65 Million enables the company to move forward quicker than peers that have to build out infrastructure and without having to raise a significant amount of capital. The company is currently undergoing a capital raise via listing on the TSX Venture Exchange.
Frontier Lithium: Based in Ontario, this company has a very impressive, albeit small, deposit on their hands. With measured and indicated resources of almost 8Mt measuring a 1.73% Li2O (including 6.87Mt grading 1.96% in technical grade lithium zones), the downside of their asset is that it is not very large. Compared to nearby Nemaska Lithium, it’s about a third of the size, with a little over 300kt LCE in the ground. This means they will have a shorter mine life (and consequently duration of cash flows). That being said, the high quality resource is still something to keep an eye on, as they may enjoy great profit margins. The company expects to complete the PFS and DFS, and secure offtakes in 2018, with phase I concentrate shipping beginning in the winter of 2020 at the earliest.
Global Geoscience: With a chairman like James Callaway (former chairman of Orocobre), this project is definitely something we are keeping an eye on. The company is looking to bring the Rhyolite Ridge lithium-boron project located in Nevada online, which is one of the most advanced lithium development projects in the USA. Their mineral resource estimate defined close to 1.3Mt of lithium carbonate based on a 1,050 ppm Li and .5% B cut-off. It should be noted that their resource is a sedimentary formation that requires a different method to process than pegmatite or brine based lithium projects, which they have been proving out along the way. While they expect to complete the pre-feasibility study in 2018, the company is targeting cash operating costs of $3,500-$4,500 per tonne of lithium carbonate.
How many Lithium projects are there really out there?
We’ve sifted through all of them and found 200+ projects. Here’s a preview of our full list which we’ll be publishing shortly:
|ABE Resources Inc||Exploration +||Recently Acquired property from Nemaska. Changing name to Vision Lithium|
|Advantage Lithium Corp||Exploration +||Joint Venture with Orocobre|
|Alliance Mineral Assets Ltd||Production 2018||JV W/ Tawana Resources|
|Atlas Iron Ltd||Exploration||The company also has a DSO partnership W/ Pilbara Minerals|
|Auroch Minerals Ltd||Exploration||Project is located on Africa|
|Bearing Lithium Corp||PEA/DFS||JV with Lithium Power International|
|Cape Lambert Resources Ltd||Exploration||Investment in European Lithium|
|Capital Mining Ltd||Exploration||Very Low Capital at the moment|
|Cazaly Resources Ltd||Exploration||Had 50/50 split with Lithium Australia but LIT does not mention project anymore on its site|
|China Magnesium Corporation Ltd||Exploration||Fully Funded as of 01/31/18|
|Eramet SA||Future Producer?||Had you read the ALB 03/17 Future producers chart, you would have thought they’d be producing beginning in 2018.|
|Far Resources Ltd||Exploration||a Darling of social media (Ticker FAT)|
|Lepidico Ltd||Exploration||Partnerships with Galaxy, Avalon Advanced Materials and Grupo Mota.|
|Lithium Australia NL||Processing Specialist|
|MetalsTech Ltd||Exploration||Investment from Lithium Australia|
|New Age Metals Inc||Exploration||Option for Azincourt JV|
|Savannah Resources Plc||Exploration||Eurpean project / London Listed|
|Standard Lithium Ltd||Exploration||U.S. based brine projects|
|Tin International AG||Exploration||JV with Lithium Australia / Germany based|
|U.S. Lithium Corp||N/A||Recently launched a crypto currency. The company also has a Cobalt and Marijuana project|
|Venus Metals Corporation Ltd||Exploration||JV with Lithium Australia|