At the start of this month, Elon Musk, once again hit the headlines with his comments regarding lithium. This time it was in response to data that showed there had been a 1,654% rise in the lithium price in the last ten years.
Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.
There is no shortage of the element itself, as lithium is almost everywhere on Earth, but pace of extraction/refinement is slow.
— Elon Musk (@elonmusk) April 8, 2022
Lithium mineralisation occurs in a number of forms: brines; clays; and pegmatites, are the three most common deposit types and there are at least 130 deposits being mined, developed or explored at present. So Elon is right, in part - there is a lot of lithium out there, but many of these deposits will never be developed and mined for a whole raft of reasons including, environmental sensitivities, political issues, project economics, processing issues, other technical constraints, the availability of funding, and so on.
The rapid rise in lithium prices over the past ten years and its perceived positive supply-demand fundamentals has resulted in a boom in listed lithium explorers, developers and miners, but as we saw between 2018 and 2020, “too many cooks can spoil the broth”.
Between 2018 and 2020, the price of lithium carbonate fell from circa US$21,000 per tonne in January 2018 to just c. US$8,000 per tonne by the end of 2020 with refiners receiving more raw material than they needed, leaving many miners with product they couldn’t sell, causing several producers to go bust, development projects to stall and explorers to move on to projects in other commodities.
This 2018-2020 collapse in lithium carbonate price, was on the back of a corresponding rise in prices from US$8,000 per tonne in January 2016 to US$21,000 per tonne in January 2018. Prices rose dramatically, so investors and entrepreneurs flocked to the lithium space, as a result, production rose and the increased supply led prices to fall. It’s a standard commodity cycle and there shouldn’t be any surprise that as demand has again built up, lithium prices have risen. These high prices will drive more lithium mines and refineries into production, until supply catches up with demand and prices start to fall, the cycle will continue. So, is Elon right? Is the pace of mine and refinery development slow?
I don’t think it is; a mine in a more traditional metal will go from exploration to production over a period of around five to twelve years.
First, you have to find the mineralisation, then you have to determine the size and scale of the mineralisation that’s there, then you have to work out how you can extract the mineralisation and process it into metal, then you need to calculate if it’s going to be economic to extract the ore, then you have to convince investors that they can make money by helping you to build a mine, and then you have to actually build the mine, which typically takes 12-18 months itself. On top of this, all the time while going through this development process you are dealing with moving goalposts, as the metal price rises and falls.
Anyone who builds a successful mine in five years deserves a medal! The development pace of many lithium projects is well within what can be considered a normal development timeframe for a mine, not “slow”, and many projects are advancing at an even faster than normal rate.
Tesla has a lot of capital and a lot of clever people, while it may not have the knowledge base for mining yet, it has already started by hiring its first geologist and there can be no doubt that a company like Tesla could attract the best and brightest but building a mine or a refinery is a high-risk business that people spend their whole lives training for and building up to; it's not something you jump into lightly. If it goes wrong, it could destroy Tesla’s whole supply chain for raw materials, which would have a knock-on effect on its core business.
It would be a much lower-risk strategy to have some strategic stockpiles built up while prices are low, combined with a diversified portfolio of offtake agreements secured at favourable prices.
Tesla has already signed term sheets for lithium offtakes with:
- Ganfeng Lithium Co Ltd for an undisclosed amount of battery-grade lithium from 2022 for three years
- Piedmont Lithium Limited for up to 160,000t of spodumene concentrate per annum from 2022-23 for five years
- Core Lithium Ltd (ASX:CXO) for up to 110,000t of spodumene concentrate per annum from 2023 for four years
- Liontown Resources (ASX:LTR) for up to 150,000t of spodumene concentrate per annum from 2024 for five years
The large proportion of these agreements for spodumene concentrate would suggest that Tesla is seriously looking at refining concentrate itself, but mining lithium may be a step too far. In addition to these companies with existing term sheets, there are many other companies with exciting projects that offer opportunities to potential offtakers such as Tesla, including:
Atlantic Lithium Limited (AIM:ALL)
Atlantic Lithium Limited recently increased its Indicated and Inferred JORC 2012 compliant mineral resource estimate for its Ewoyaa Spodumene Project, located in Ghana, by 42% to 30.1Mt at a grade of 1.26% Li2O. The company expects further resource upgrades as the mineralisation remains open at depth and along strike, with additional untested pegmatites within the immediate deposit area.
Resource expansion and exploration drilling are already underway with this in mind and mining studies in support of the pre-feasibility study are well advanced. The 2021 scoping study based on a smaller resource estimate (21.3Mt) returned a post-tax NPV8 of US$789 million and an IRR of 194%based on an operation producing an average c. 300,000tpa of 6% Li2O spodumene concentrate over 11.4 years
LithiumBank Resources Corp (TSX-V:LBNK).
LithiumBank Resources Corp. recently listed on the TSX Venture Exchange and is focused on the direct extraction of brine lithium resources in Western Canada. The company plans to take advantage of Alberta's long history of fossil fuel production and established infrastructure, to create a local source of “green” lithium in North America.
LithiumBank's most advanced project is the Sturgeon Lake Project, which contains a substantial lithium brine mineral resource estimate, well suited to a direct extraction method of production. Having established a maiden total NI 43101 inferred mineral resource estimate of 5.97Mt lithium carbonate equivalent (LCE) at a grade of 67 milligrams per litre (mg/l), the company plans to undertake additional sampling on other formations to increase the size of the resource estimate with an upgrade targeted for mid-2022.
SIGMA Lithium Corporation
SIGMA Lithium Corporation recently updated its Phase 1 feasibility study for its wholly-owned Grota do Cirilo Spodumene Project, located in Brazil. This study returned a post-tax NPV8 of US$1.6 billion and an IRR of 424% producing an average c. 230,000 tpa (34,000 LCE) of 6% battery grade sustainable lithium over 8 years.
The Grota do Cirilo Project has a NI 43-101 compliant mineral resource estimate of 50.4 Mt of Measured and Indicated at a grade of 1.40% Li2O and 8.6 Mt of Inferred mineral resources at a grade of 1.43 % Li2O.
Sigma plans to produce an updated Phase 2 pre-feasibility study, that could see production increase to 450,000 tpa (67,000 LCE) in early Q2-2022.
AVZ Minerals Limited
AVZ Minerals Limited is developing the giant Manono Spodumene and Tin Project, located in the Democratic Republic of Congo. The company is currently awaiting the Minister of Mines pending decision on the award of the Mining Licence before commencing mine development, while the award has taken longer than expected, the company has stated that timing is expected to be imminent and we believe the award of the mining licence will be a significant de-risking event for the company.
The Roche Dure Deposit, located within the Manono Project currently has a total Measured, Indicated and Inferred JORC 2012 compliant mineral resource estimate of 400Mt at a grade of 1.65% Li2O, 715 ppm tin and 34 ppm tantalum.
A 2020 definitive feasibility study of the project returned a post-tax NPV10 of US$1.0 billion and an IRR of 33% producing an average c. 700,000 tpa of 6% lithium concentrate over a 20-year life of mine.
AVZ has recently completed an agreement with Suzhou CATH Energy Technologies for a US$240 million investment into the Manono Project. The company has also approved a A$6 million extension drill programme at Roche Dure, targeting a significant expansion to the already very large mineral resource estimate.
Lithium Power International Limited
Lithium Power International Limited started the year with a bang, announcing an updated definitive feasibility study (DFS) for the Stage 1 Maricunga Lithium Brine Project. The DFS returned a post-tax NPV8 of US$1.4 billion and an IRR of 39.6% producing an average of 15,200 tpa of lithium carbonate over a 20-year life of mine.
The Maricunga Project has a Measured and Indicated JORC 2012 compliant mineral resource estimate of 1.9Mt LCE at a grade of 953 mg/L.
The financing process for the development of the project is underway and the final investment decision for the project is expected this year, with construction to start immediately after.
Lake Resources NL (ASX:LKE, OTCQB:LLKKF)
Lake Resources NL has already signed a non-binding MoU to negotiate lithium offtakes from its Kachi Brine Project, located in Argentina, with Ford Motor Company (NYSE:F) and Japan-based trading company, Hanwa Co. Ltd., both for up to c. 25,000tpa lithium carbonate (+/- hydroxide), which would potentially cover all its production.
Katchi has an Inferred and Indicated JORC 2012 compliant mineral resource estimate of 4.4Mt LCE at a grade of 211 mg/L. A 2021, pre-feasibility study at the project returned a post-tax NPV8 of US$1.58 billion and an IRR of 35% producing an average c. 25,500 tpa lithium carbonate over 25 years
Lake is expecting to complete its definitive feasibility study for Katchi in mid-2022.
Cornish Lithium Ltd
Cornish Lithium Ltd has successfully commissioned its direct lithium extraction pilot plant at the Geothermal Waters Test Facility at United Downs. Initially, the pilot plant will test GeoLith SAS’s Li-Capt® direct lithium extraction (DLE) technology and process the deep geothermal water obtained from the United Downs site last year. After this, different DLE technologies will be tested at the pilot plant to determine which technology works best.
The initial tests are expected to confirm that lithium can be produced in Cornwall from geothermal waters, and the company also anticipates that the Pilot Plant will provide sufficient information to enable the design of a commercial lithium plant.
Nevada Lithium Resources
Nevada Lithium Resources owns a 50%-interest in the Bonnie Claire Lithium Project, located in Nevada. The Project has an Inferred NI 43-101 compliant mineral resource estimate of 3.4Bt at a grade of 0.103% Li. A 2021 preliminary economic assessment for the production of 27,400tpa of lithium carbonate returned a post-tax NPV8 of US$1.5 billion and an IRR of 23.8% over a mine life of 40 years.
A drill programme focused on improving the confidence category of the mineral resource (inferred to indicated to measured) is currently underway. This work will support an updated mineral resource estimate to be completed as part of the pre-feasibility study (PFS) and will also form the basis of the initial mineral reserve estimate for the Bonnie Claire Project upon completion of the PFS.
Cypress Development Corp (TSX-V:CYP, OTCQB:CYDVF).
Cypress Development Corp. is advancing the Clayton Valley Lithium Clay Project, located in Nevada.
Clayton Valley has a total Indicated and Inferred NI 43-101 compliant mineral resource estimate of 1.54Bt at a grade of 0.088% Li. A 2020 preliminary feasibility study for the production of lithium carbonate returned a post-tax NPV7 of US$1.03 billion and an IRR of 25.8% producing an average c. 27,400tpa lithium carbonate over 40 years.
The company is currently operating a pilot plant, which will form an important component of the upcoming feasibility study.
Cypress has also entered into a definitive Purchase and Sale Agreement to acquire Enertopia Corporation’s Clayton Valley Lithium Clay Project, which has a total Indicated and Inferred NI 43-101 compliant mineral resource estimate of 93.2Mt at a grade of 0.116% Li.
Jindalee Resources Limited
Jindalee Resources Limited recently announced its intention to spin out its Australian assets into a stand-alone vehicle listed on the ASX, allowing Jindalee to focus on advancing its McDermitt Lithium Clay Project in Oregon.
The McDermitt Project currently has an Inferred and Indicated JORC 2012 compliant mineral resource estimate of 1.4Bt at a grade of 0.13% Li2O, with the bulk of the resource estimate in the inferred category. The results from the 2021 drill campaign have recently been published, this programme was designed to increase confidence in areas of inferred mineral resource immediately adjacent to indicated mineral resource.
Jindalee expects to publish an updated mineral resource estimate for McDermitt during Q2 2022, based on the drilling completed to date. An additional drill programme is planned for the second half of the calendar year, with permitting already in place for 28 additional holes, which could further expand the resource base.
Anson Resources Limited
Anson Resources Limited is advancing the Paradox Lithium Brine Project in Utah. The Paradox Project has an Inferred and Indicated JORC 2012 compliant mineral resource estimate of 186Kt LCE at a grade of 322 mg/L.
A 2021, preliminary economic assessment for the production of sodium bromide and lithium carbonate at the project returned a post-tax NPV7 of US$468 million and an IRR of 31% producing an average c. 2,674 tpa lithium carbonate and 15,000 tpa of sodium bromide over 20 years.
Anson has just this month commenced a major resource expansion drilling campaign, which will support a definitive feasibility study at the Paradox Project.
European Lithium Limited
European Lithium Limited has just announced an interim NPV6 calculation on its 100% owned Wolfsberg Spodumene Project, located in Austria. Wolfsburg currently has a total Measured, Indicated and Inferred JORC 2012 compliant mineral resource estimate of 12.9Mt at a grade of 1.00% Li2O. The interim NPV6 is A$862 million (US$641 million) based on annual production of 10,500tpa of lithium hydroxide over a 20-year mine life.
A definitive feasibility study is expected to be published for the Wolfsburg Project in Q3 2022.
Arizona Lithium Limited
Arizona Lithium Limited has just completed a A$32.5 million placing to fast track the development of its Big Sandy Lithium Clay Project, located in Arizona.
Big Sandy has a total Indicated and Inferred JORC 2012 compliant mineral resource estimate of 32.5Mt at a grade of 0.185% Li. This resource estimate covers just 4% of the Big Sandy Project area; this area has a conceptual exploration target range of between 271.1Mt to 483.15Mt at 0.1% to 0.2% Li.
Arizona Lithium now plans to commence a fully-funded programme of resource expansion drilling, once BLM approval is received. The funds will also be used to fast track the metallurgical test work, including the preparation of a processing flowsheet and the design of a research facility to process material from the Big Sandy Lithium. This work will also feed into the scoping study which is currently underway.
Bradda Head Lithium Ltd
Bradda Head Lithium Ltd has interests in a variety of projects, the most advanced of which are in Central and Western Arizona.
The Basin Project has an Indicated and Inferred mineral resource estimate of 75.2Mt at an average grade of 0.076% Li, to date Bradda Head has only drilled area 2.4% (1.1km2) of its 47km2 of claims in this district and the significant upside potential is highlighted by an exploration target range of between 300 and 1,300Mt grading between 0.060% and 0.085% Li.
During Q2 2022 the company plans an extensive 30-hole drilling with an additional 14-hole sonic drill programme also approved. In the meantime, the company has commenced a 23-hole programme at its earlier-stage Eureka Lithium Clay Project, located in Nevada.
Enertopia Corporation
Enertopia Corporation is in the process of selling its Clayton Valley Lithium Clay Project to Cypress Development Corp. for US$1.1 million and 3,000,000 Cypress Development Corp. common shares.
These funds can then be redeployed to the company’s West Tonopah Lithium Clay Project, where a 1,500 to 2,000 foot, 15-to-20-hole, drill programme is planned. This programme is designed to confirm that the tenor and grade of mineralisation previously encountered to a greater depth and over a larger area.
Following this, the company plans to incorporate the results into its first NI 43-101 compliant mineral resource estimate for the project, expected later this year.
Ultra Lithium Inc. (TSX-V:ULI, OTCQB:ULTXF)
Ultra Lithium Inc. has just entered into a purchase, sale and joint venture agreement with Yahua International Investment and Development Co., Ltd. to sell a 60% interest in its Georgia Lake and Forgan Lake Spodumene Project for C$8 million and enter into a joint venture.
At its 100% owned Laguna Verde Brine Lithium Project, located in Argentina drilling has commenced on the first drill hole, which was drilled down to a depth of 140 metres below surface to date. This programme is expected to total of 800 metres of drilling over 3 holes, with an additional diamond drill hole to be completed to define subsurface stratigraphy and to carry out in-situ density/permeability tests of various sedimentary units down to a depth of up 400 metres.
Once the drill hole is completed, the contractor will also arrange technical support for carrying out pump tests, brine sampling, and downhole geophysical surveys.
ACME Lithium Inc. (CSE:ACME, OTCQB:ACLHF)
ACME Lithium Inc. is currently completing an induced polarization survey at the Warm Springs Lithium Brine Project, located in Oregon, to refine targets ahead of a drill programme.
At the Clayton Valley Lithium Brine Project, ACME plans a multi-hole drill programme up to a depth of 500 metres to focus on the most prospective lithium brine targets. These targets were defined by recent geophysical work that detected low-resistivity values on multiple areas and zones, which are interpreted to correlate to lithium-brine occurrences in saline rich aquifers or brine saturated pebble gravel.
In addition to this, the company has acquired by staking 340 placer mining claims, known as the WS Lithium Clay Project, which encompasses about 6,727 acres in southeast Oregon. The WS Project is situated regionally in a cluster of calderas northwest of Lithium Americas’ Thacker Pass Lithium Clay Project and Jindalee Resources McDermitt Lithium Clay Project.
Lithium Energi Exploration (TSX-V:LEXI) Inc.
Lithium Energi Exploration Inc. has a joint venture with Global Oil Management Group, LLC that sees Global provide capital for the exploration and development for the lithium brine project, located in Argentina.
The JV Agreement requires Global to provide up to US$3 million to cover exploration costs on the JV Concessions and it is also required to produce a NI 43-101 resource estimate within three years of the execution of the JV Agreement. Global will be the majority owner of up to 80% of the JV company and LEXI will own a "non-dilutable minority interest" of no less than 20% of the JV company.
Exploration work is about to commence at the joint venture project, with 2,400 metres of drilling in six holes planned. The core samples will reveal porosity, permeability, and chemical analysis critical for development planning and mine valuation. Brine sample analysis will be conducted to yield a full spectroscopic analysis of brine chemistry and lithium concentrations.
If positive Lithium Energi, expected the work to result in an NI 43-101 resource estimate, which could be completed by Q4 2022.
Usha Resources Ltd
Usha Resources Ltd has recently entered into an exclusive option to acquire a 100% interest in 140 mineral claims prospective for lithium brines, that total 2,800 acres, located in Jackpot Lake, Clark County, Nevada.
The geologic model for the project is similar to that of Albemarle’s Silver Peak Nevada Lithium Mine which has operated continuously since 1966, and Iconic Mineral’s and Nevada Lithium Resources’ Bonnie Claire Project.
Usha is targeting a 5 km by 2 km anomaly within a closed basin that suggests the presence of a highly concentrated brine. The company intends to drill test both shallow and deep targets outlined by a CSAMT Survey, with the goal of completing a 43-101 resource estimate by Q4 2022.
ION Energy Ltd. (TSX-V:ION, OTCQB:IONGF)
ION Energy Ltd. completed a 222-auger hole programme for a total of 1,304.5 metres at the Baavhai Uul Lithium Brine Project in the fall of 2021, to date the company has only received 50% of assays. Initial drilling results are highly encouraging with a new discovery highlighted at the White Wolf Prospect with results including:
Drill hole AU-17 returned results up to 1,502ppm lithium in clays and evaporites with the hole averaging 700ppm lithium from 0.5m to 3.5m depth.
Drill hole AU-20 averaged 650ppm lithium from 4m to 6m depth with the last sample in the hole returning 860ppm lithium.
Results of additional drill holes will be delivered to the company over the coming months.
ION Energy is also expected to commence a programme of TEM geophysics; and hydrogeological sampling are expected this month, with maiden exploration at the Urgakh Naran Lithium Brine Project expected to commence in the coming weeks.