Lithium’s future is bright. If this wasn’t clear before, here’s your reminder that it’s a good time to be in the lithium space.

For starters, lithium companies made up more than 14% of Stockhead’s top 40 resource winners in June.

And just a year ago, desperate Australian spodumene producers were accepting sub-$US400/t prices for their products. Lithium spodumene now goes for as much as US$750/t.

Now Chinese lithium major Ganfeng is flagging prices could rise to 2018 levels of more than US$1,000/t.

A large part of this boost in lithium’s fortunes can be attributed to the increasing electrification of the world’s energy mix as well as the increasing uptake of electric vehicles.

Pan Asia Metals (ASX:PAM) managing director Paul Lock highlighted this point in his response to a query last year about why the company was focused on lithium when no one else was interested. He said China was already building multiple models of low cost EVs with huge uptake and that it would flow through to other markets.

Fast forward to the present and top leading brands like Audi and Volkswagen are now producing EVs.

“We’ve got huge consumer uptake. While we can’t use the Australian market as a barometer, if we look at a lot of the other markets, there are incentives to pick up EVs and people are purchasing,” he explained.

“In Norway, about 50% of the cars purchased are EVs and many other countries are approaching 15% and 20%.

“So we see the future for lithium consumption is bright.”

Supply constraints

On the other side of the equation, while supply is ramping up to meet demand, the general opinion is that oversupply is unlikely.

Fitch Solutions notes that existing lithium producers such as Chile and Australia will experience significant growth as companies ramp up operations ahead of the anticipated demand surge.

“This will help the production balance, but ultimately we expect the pace of new capacity to prove insufficient in meeting the pace of increasing demand, pushing the market into deficit,” the consultancy noted.

The greater emphasis on Environmental, Social, and Governance reporting is also expected to play a role with Fitch adding that the searching for ‘clean’ lithium will require additional time for research and development while requiring higher costs, which will limit oversupply risks.

Lock also expressed his belief that there will be a shortage of lithium concentrate, saying there were reports that some Chinese battery producers only had a month’s supply of lithium hydroxide and carbonate.

“On the supply side, there’s clearly a lot of lithium in the ground and we had previously calculated that in both brine and hard rock, there’s over 100 million tonnes of lithium carbonate equivalent which have a JORC resource category,” he said.

“So I think in three or four years, they (suppliers) will catch up naturally.”

However, Lock added that capital might be a concern for aspiring explorers as bankers would naturally be wary of projects that looked marginal.

“The banks are only in it for the interest rate, they don’t have equity and there’s no use picking up projects that are losing money,” he explained.

“Our view is that in any market when you’re sitting in the middle to the upper part of the cost curve, life starts to get hard when supply catches up to demand.

“At some point in this market, supply will catch up to demand and typically at the commodity end of any market where the barriers of entry probably are lower, supply will overtake demand and you get volatility.

“So our aim is to not only be at the bottom of the cost curve because we see more protection from the commodity price cycle but also to move downstream and produce lithium carbonate or hydroxide, which will further take volatility out while giving us a bigger market to work with.”

Small cap lithium plays

Here’s how ASX-listed lithium stocks are performing:

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CODE COMPANY 1 WEEK RETURN % 1 MONTH RETURN % 6 MONTH RETURN % 1 YEAR RETURN % PRICE MARKET CAP
INF Infinity Lithium 0.125 81 -34 19 43 $ 48,318,546.72
SYA Sayona Mining Ltd 0.097 56 613 18 732 $ 499,908,451.38
PSC Prospect Res Ltd 0.25 47 47 11 187 $ 93,506,463.75
LTR Liontown Resources 0.84 44 85 4 700 $ 1,564,434,583.66
LKE Lake Resources 0.3675 41 371 7 842 $ 396,778,997.63
GLN Galan Lithium Ltd 0.975 36 141 7 529 $ 244,649,086.00
AVZ AVZ Minerals Ltd 0.195 26 -3 22 275 $ 549,131,383.25
LPI Lithium Pwr Int Ltd 0.21 17 -22 8 24 $ 63,226,283.19
MIN Mineral Resources. 56.62 16 40 6 151 $ 10,714,541,698.14
INR Ioneer Ltd 0.375 15 19 14 188 $ 713,977,779.38
ASN Anson Resources Ltd 0.071 13 103 8 209 $ 65,280,807.87
PLS Pilbara Min Ltd 1.48 12 35 2 421 $ 4,435,442,704.80
VUL Vulcan Energy 8.16 7 102 4 1411 $ 902,700,637.90
EMH European Metals Hldg 1.55 6 19 0 464 $ 205,818,534.53
TON Triton Min Ltd 0.037 6 -29 16 -34 $ 38,571,914.28
ESS Essential Metals Ltd 0.11 5 20 12 0 $ 22,089,903.00
FFX Firefinch Ltd 0.395 3 72 1 204 $ 363,821,439.60
LIT Lithium Australia NL 0.1175 2 57 7 155 $ 104,256,793.84
PLL Piedmont Lithium Inc 0.91 2 94 -13 911 $ 537,272,918.00
MLS Metals Australia 0.002 0 0 0 33 $ 8,454,376.09
AJM Altura Mining Ltd 0.07 0 0 0 11 $ 209,037,029.25
ORE Orocobre Limited 6.57 -1 31 2 152 $ 2,324,401,123.50
GXY Galaxy Resources 3.76 -2 31 2 349 $ 1,956,941,460.36
EUR European Lithium Ltd 0.058 -3 7 5 35 $ 54,168,265.03
AGY Argosy Minerals Ltd 0.11 -4 -8 10 96 $ 137,529,887.44
GL1 Globallith 0.26 -5 4 $ 23,578,612.44
TKL Traka Resources 0.016 -6 -30 -6 61 $ 8,103,441.09
QPM Queensland Pacific 0.145 -6 254 -9 936 $ 174,267,898.38
TNG TNG Limited 0.063 -7 -31 3 -24 $ 79,967,810.56
RLC Reedy Lagoon Corp. 0.016 -11 -6 7 60 $ 7,520,418.66
CXO Core Lithium 0.23 -13 2 -2 342 $ 275,917,554.69
JRL Jindalee Resources 2.41 -14 211 -4 610 $ 130,839,716.70
LPD Lepidico Ltd 0.012 -14 -33 0 71 $ 73,824,989.35
AML Aeon Metals Ltd. 0.072 -20 -47 -4 -10 $ 48,785,020.34
ADV Ardiden Ltd 0.008 -20 -62 0 -50 $ 18,269,510.84

Pan Asia itself is accelerating work to define a JORC resource at its Reung Kiet lithium project in Thailand after drilling intersected extensive pegmatite dyke-vein swarms up to 100m wide that contain lithium mineralisation associated with lepidolite.

Notable assays were 11.3m grading 0.74% lithium oxide from 19.2m, 10.7m at 0.98% lithium oxide and 4.2m at 1.3% lithium oxide.

The results are promising as lepidolites are the only style of lithium mineralisation with an extensive suite of by-products that reduce the overall cost of lithium chemical manufacturing, so much so that they are often at the bottom of the cost curve.

There are plenty of other lithium plays also looking to carve out a piece of this lucrative market.

Aldoro Resources (ASX:ARN) recently expanded the size of its Windimurra lithium portfolio in Western Australia’s Mt Magnet region with the acquisition of the adjacent Wyemandoo Project and the Niobe tantalum-lithium project.

Windimurra is rich in lithium, cesium and tantalum-type pegmatites with rock chips returning grades of up to 2.6% lithium oxide, tantalum oxide grades of up to 5,610 parts per million and 16.5% tungsten oxide.

AVZ Minerals (ASX:AVZ) has received firm commitments for a $40m placement from sophisticated, professional and institutional investors to increase its interest in the Manono lithium and tin project from 60% to 75%.

Proceeds will also be used to negotiate project financing with an enhanced balance sheet and enhance the company’s limited early capital works program before a final investment decision.

Manono has a 401Mt resource grading 1.65% lithium oxide that contains a ore reserve of 93Mt at 1.58% lithium oxide that will deliver a mine life of more than 20 years with a post-tax net present value and internal rate of return of US$1.028bn and 33% respectively.

Over in Mali, Firefinch (ASX:FFX) received a massive boost in June after reaching a binding agreement with Ganfeng to establish an equal joint venture to develop and operate its world-class Goulamina lithium project.

Ganfeng will invest US$130m in three tranches for its 50% share of the project, with the final US$91m to be made upon a Final Investment Decision (FID).

The Chinese lithium producer will also arrange up to US$64m in debt funding that will fund Goulamina into production.

Goulamina has a pre-tax NPV of $1.7bn and reasonably low all-in cost of about $313 a tonne of spodumene concentrate.

Global Lithium (ASX:GL1) has observed spodumene mineralisation from diamond drilling at its Marble Bar lithium project in the Pilbara and will start metallurgical test work soon.

Assay from the first reverse circulation program that was completed in June are also expected soon.

The infill and step-out drilling program was aimed at growing the existing inferred resource of 10.5Mt at 1% lithium oxide at Marble Bar while testing surrounding targets.

Galan Lithium (ASX:GLN) is hopeful of lowering capital expenditure for its flagship Hombre Muerto West after a review confirmed the robustness of the evaporation design that optimises the continuous terrain available to produce up to 25,000 tonne per annum of lithium carbonate equivalent.

Previous work had already estimated that the project in Argentina would be able to achieve low cash costs of about US$3,518/t of lithium carbonate equivalent.

Contract discussions are currently underway to start a revised drill program as soon as possible.

Jindalee Resources (ASX:JRL) expects to start drilling at its Clayton North project in Nevada this month to follow-up on surface sampling results.

It has also submitted drill permits for a program to upgrade and extend the existing resource of 10.1Mt of contained lithium carbonate equivalent at its McDermitt project in Oregon.

Kalamazoo’s (ASX:KZR) recent studies and field reconnaissance exercise have identified significant pegmatite-hosted lithium mineralisation at its DOM’s Hill project in Western Australia’s East Pilbara region.

This is notable as the region also hosts Pilbara Minerals’ Pilgangoora and Mineral Resources’ Wodgina pegmatite-hosted lithium mines.

The company has started first-pass soil sample analyses and further field exploration reconnaissance activities to fast-track the project to drill-ready status.

Lithium Energy (ASX:LEL) is currently waiting on environmental approvals to carry out geophysical surveys to define the basin basement morphology and thickness of the hydrogeological units at its promising Solaroz project in Argentina.

It will then carry out a preliminary exploration drilling campaign based on the results from previous work, to assess the distribution and geochemistry of the brine and to obtain data related to basic physical parameters of the different hydrogeological units.

Solaroz has a conceptual exploration target of between 1.5Mt to 8.7Mt of contained lithium carbonate equivalent (LCE) based on a range of concentrations of between 500 milligrams per litre (mg/L) and 700mg/L of lithium.

Also in Argentina is Lake Resources (ASX:LKE), which is carrying out a four-hole diamond drilling program at its Lake Kachi lithium brine project as part of its plans to expand future production.

The company aims to double proposed production to 50,000tpa lithium carbonate by converting existing inferred resources into higher certainty indicated and measured resources.

Kachi currently has an inferred resource of 3.4Mt of lithium carbonate equivalent and an indicated resource of 1Mt.

Over the border in Chile, Lithium Power International (ASX:LPI) has completed drilling at its Maricunga Stage One mining concessions with five exploration core holes returning average concentrations of 989mg/l lithium.

The company expects a significant resource expansion after the new drilling program tested the 200-400m mineralised zone.

Prospect Resources (ASX:PSC) closed off the last financial year in style with the start-up of production from its Arcadia pilot plant in Zimbabwe.

The plant is focused on producing high-quality petalite samples for potential customers though the company has outlined the potential to continue production if there is demand.

Arcadia sits just outside of Zimbabwe’s capital Harare and hosts an ore reserve of 37.4 million tonnes at 1.22% lithium oxide and 121 parts per million tantalum pentoxide for 457,000t of lithium oxide and 10 million pounds of tantalum pentoxide.

Meanwhile, testing has confirmed that spodumene from Sayona Mining’s (ASX:SYA) Authier project in Quebec can be processed into high purity 99.99% lithium hydroxide.

A portion of the lithium hydroxide sample has been dispatched to Novonix Battery Technology Solutions in Nova Scotia, Canada, to be processed along with other cathode‐precursor materials into batteries.

The company is raising up to $50m to support the acquisition of North American Lithium and advance its Abitibi lithium hub in Qeubec.

 

At Stockhead we tell it like it is. While Aldoro, AVZ, Galan, Lithium Energy, Lake, Pan Asia and Prospect are Stockhead advertisers, they did not sponsor this article.