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Junior explorers under the spotlight as lithium market poised for makeover

Producers have seen share prices pressured in recent months as there have been fears of lithium going into surplus

Electric vehicles charging
Electric vehicles are set to be all the rage, sparking interest in battery metals

The face of the lithium market could be shifting but one thing is not in doubt: The white metal will certainly be needed in the burgeoning electric vehicle and energy storage sectors, which is putting several small-cap explorers in the frame Thursday.

Producers have seen share prices pressured in recent months as there have been fears of lithium going into surplus, causing lithium prices to fall.

READ: The lithium market is evolving rapidly, but what is lithium, what is it used for and how much is it really worth?

Chinese group Tianqi, currently capitalized at US$30 billion, has seen its stock decline by almost 50% over the past year, while Chilean producer SQM (NYSE:SQM) has dropped over 18% in the year to date. The Albemarle Corp (NYSE:ALB)  stock price has fallen around 11.5%.

But that fear of over-supply appears contradicted by the notion that lithium is going to be hugely in demand for use in the batteries of the future. For example, global lithium demand is forecast to surge 20% this year alone (2019), according to SQM.

Meanwhile, the auto industry has committed to spending US$300 billion on EV (electric vehicle) development and production by 2025, while nine countries and multiple states and cities are planning bans on gas and diesel vehicles from the same year.

JP Morgan has said that the growth in electric vehicles (EVs) and hybrid electric vehicles (HEVs) is climbing and that by 2025, both will account for an estimated 30% of all vehicles sold.

Proactive's Alastair Ford wrote in a recent article: "Data on how much supply will actually be sucked in by the new electric vehicle market is sketchy, but there seems a widespread acknowledgement inside the lithium industry that it will struggle to keep pace as demand continues to grow exponentially."

Ford added that analysis by the Massachusetts Institute of Technology argues that the five metals that will be most affected by new technology are tin, lithium, cobalt, silver and nickel, while batteries make up a considerable component of that, as can be seen in some projections from European car makers.

In addition to all this,  the issue of how to price the commodity (if that's what it is) is currently under scrutiny. London Metal Exchange’s plan to launch a new contract for the white metal and has chosen Fast markets to provide a reference price. Whether it will be successful or not remains to be seen, as the lithium market is a complex one.

Albemarle, for example, has refused to participate as it believes lithium to be a specialty chemical rather than a basic commodity and should be priced on a contract-by-contract basis. Adding to the mix is also the question of different battery types and what kind of lithium product will be needed for them, now and in the future.

in the spotlight

It all puts a number of juniors working in the space in the spotlight.

BlueBird Battery Metals (CVE:BATT) (OTCMKTS:BBBMF) has assets in Western Australia and in April acquired the Southern lithium project, which consists of nine granted exploration licences, three  exploration licence applications and a granted prospecting licence with a total land area of 664 sq km. The area has demonstrated potential for significant lithium oxide discoveries including mines at Greenbushes, Mt Caitlin, Mt Marion, Earl Grey, Bald Hill, Mt Kathleen and Buldania.

Shares today fired up over 31% in Toronto to $0.19.

Neo Lithium Corp (CVE:NLC), up 1.56% on the day to $0.65, is advancing the  3Q project in the southern end of the “Lithium Triangle” in the Puna Plateau in Argentina. It has now commissioned a pilot plant and plans to produce technical grade lithium carbonate by August this year and battery grade a month later.

Meanwhile, Millennial Lithium Corp (CVE:ML), down 2.53% to $1.54, is also in the 'Triangle', and  advancing its flagship Pastos Grandes brine project. A preliminary economic assessment (PEA) has shown potentially robust numbers based on a 25,000 tonne per year operation over 25 years.

Enertopia Corporation (CSE:TOP) (OTCMKTS:ENRT) is hoping to extract lithium from its Clayton Valley project in Nevada -- a hotspot address for the metal. Shares are today up almost 10% in New  York at  US$0.021. In Toronto they are unchanged at $0.025.  The company has just extended testing of material after the latest batch of positive findings.

Elsewhere, One World Lithium Inc (CSE:OWLI) (OTCMKTS:OWRDF), down $% at $0.24 in Toronto, has just completed a drill program at the Salar del Diablo lithium brine project in Mexico. The property could be one of the world’s largest lithium brine properties to be drilled this year.

Contact the author at giles@proactiveinevstors.com 

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Market: TSX-V
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