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Lithium – Is Clayton Valley Worth the Effort?

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Chemetall_Foote_Lithium_Operation

Everyone likes a good story. With Tesla Motors (TSLA) emerging onto the scene, hell-bent on electrifying the entire world, yeah, you could say that the EV buzz is definitely sparking in the air. Elon Musk has come out and publicly stated that he wants to produce 500,000 EVs/year as soon as 2018…

From RawStory:

Screen Shot 2016-05-06 at 11.12.28 AM

Oh man, that’s a lot of new vehicles…

But even if Tesla falls well short of their stated goal (I’ll give them a 0.001% chance of hitting such an incredibly lofty target), anywhere near such an increase in demand is going to eventually consume a whole lot of lithium-ion batteries… which can only mean that demand for lithium is going to skyrocket, shortly (if it hasn’t already).

Most recently, even Deutsche Bank has come out and stated that:

Global battery consumption is set to increase 5x over the next 10 years, placing pressure on the battery supply chain & lithium market. We expect global lithium demand will increase from 181kt Lithium Carbonate Equivalent (LCE) in 2015 to 535kt LCE by 2025.

And just where is the world going to get that much lithium in such a relatively short amount of time?

Well, there are many places on this earth that are rich in economically extractable (and refinable) lithium…

By Country

In short, if you want lithium via brine extraction, look no further than to South America, particularly Chile and Argentina, where 48% of the world’s supply currently comes from. Bolivia makes up the third leg of the “lithium triangle”, but up to now, that particular jurisdiction is seen as a bit more challenging, and its lithium isn’t yet near as economical as its neighbors.

From COHA:

Uyuni’s higher rainfall and cooler climate means that its evaporation rate is not even half that of Atacama’s. Achieving the necessary concentrations is further complicated because the lithium in the Uyuni brine is not very concentrated, and the deposits are spread across a vast area. Uyuni also has a high ratio of magnesium to lithium within the brine, which means the magnesium must be removed through an expensive chemical process. This is something Chile has handled with relative ease, but Uyuni’s deposits have three times the magnesium concentrations of Atacama’s, making investment in Bolivia’s deposits much less economical.

 

Nevertheless, it’s no secret to anybody that if you want lithium, well, you should probably head south of the border towards Latin America where it’s most plentiful… Outside of brine, lithium can also be found in hard rock spodumene, which is the most important ore for locating lithium metal. And where do you go to find an abundance of spodumene? From the chart above, we can see that Australia produces 33% of the world’s lithium supply, and although there are salt flats that develop in Southern Australia, the country is most known for its hard rock ore.

Once you add China into the mix, you’ve accounted for over 90% of the world’s lithium production, spread out across 4 countries. From that pie chart above, you can see that the US only accounts for a minuscule 3% of production, with all of it coming from Albemarle’s Silver Peak mine in Nevada.

Yet, because of the Tesla hype, you’ve got dozens and dozens of new lithium companies bursting onto the scene, looking to get in on a piece of the action.

From Lithium-X:

Autogrid-...-awesomeDemy_baseMap Map

From the Clayton Valley map above, we have:

  • Lithium X (LIX.V)
  • Pure Energy Minerals  (PE.V)
  • Ashburton Ventures (ABR.V)
  • Nevada Sunrise Gold (NEV.V)
  • Etc.

Everyone is out trying to stake a claim, hoping to become the next Silver Peak mine, and major supplier to Tesla’s Gigafactory. Again, this all makes for an awesome, feel-good, fairytale type of story. Think of all the synergies! Lithium brine straight from Clayton Valley direct to Reno. Go Nevada!

But when I look at that pie chart above, again, I can’t help but think…

Is everyone ultimately (and desperately) just searching for a needle in the haystack?

I mean, are we trying to believe that somehow, someway, there’s more than a sh!t-ton of economical, extractable lithium, that’s been overlooked for all this time? You know, it’s kind of always been sitting there in our own backyard, but for whatever reason we just never noticed or cared for it until now… Or, do people (and investors) really believe that Clayton Valley is going to massively boom soon and start seriously challenging Argentina, Chile, and Australia for supremacy in the world’s lithium supply chain?

Or are we more or less, just wasting our time here, falling in love with the whole romance of it all… without really being realistic with our goals?

I mean, even I wanted a feel-good Clayton Valley story too, so I bought up some shares of Pure Energy Minerals (PE.V) as my spec play in Nevada…

Yeah, that didn’t work out so well…

It looks like drilling to the south (at least), might not be so prospective after all…

In particular, please reference CV4, CV5, CV6 below.

map

Announced by Pure Energy Minerals:

“The results from wells CV-4, 5, and 6 included no significant lithium values…”

With those results, earlier today, the markets were swift to punish the following companies (whether just or unjust).

Stock Prices

Lithium X wasn’t hit too bad, since they have a lot of land in the north (which is maybe more prospective?) and brine projects in Argentina as well… So, LIX is more diversified… As for the other stocks… OUCH!!!

Look, I’m not hating on anyone here… I did own shares of PE.V (up until today), so obviously, I did genuinely want this fairytale story in Nevada to work out splendidly…

But at some point, maybe it’s time to wake up and smell reality? Yes, lithium is booming right now… and most of these stocks are screaming higher… Wouldn’t it totally suck if you missed out on all the big gains simply because you were looking in the wrong place at the right time? As an investor, why would I want to miss out on all the fun that’s happening now (which should only continue to amplify into the future for all the LEGIT lithium stories)?

In other words, why should I speculate in Clayton Valley, when I can so easily go elsewhere (like Argentina and Australia), where everyone knows definitively for a fact that there’s a ton of economical lithium to be found there?

 

  • If your prefer brine solutions, go to Argentina.
  • If you like spodumene, go to Western Australia.

 

I’m kind of learning myself, sometimes it’s just best to keep things as simple and straightforward as possible… especially investing/speculating.

Yeah, hitting a homerun in Clayton Valley would have been so awesome, but is it even necessary? Fact of the matter is, NONE of these up and coming Clayton Valley exploration plays are even going to be remotely ready to supply Tesla by 2018… Exploration to production in 2-3 years?

Get real.

Try 5+ years at a minimum, especially if you plan on getting an undeveloped new brine project up to nameplate capacity sans hiccups… So, like it or not, Tesla is going to need to get their lithium hydroxide from somebody else outside of Clayton Valley (well, maybe Albemarle’s Silver Peak mine will chip in a little bit? Silver Peak currently accounts for ~6,000 metric tons of lithium carbonate equivalent per year).

All I know is that anyone who was out purchasing shares of: Pilbara Minerals (PLS.AX), Altura Mining (AJM.AX), Galaxy Resources (GXY.AX), General Mining (GMM.AX), etc., anytime last year until now is grinning ear-to-ear, laughing all the way to the bank (or beach)…

Speaking of the land from Down Under, here’s how Australian lithium shares did this morning.

Australia Prices

 

The best part? It looks like these Australian stories are only getting better and better with time…

 

Man, I want in on some of that action too!

 

Clayton Valley… it’s been fun (no, not really), but I’m gonna take my dollars elsewhere.

 

But I wish you the best of luck!

{ 13 comments… add one }
  • PowerPNo Gravatar May 11, 2016, 1:34 am

    I’ve some shares on these new companies in Clayton Valley and I do think it’s too early to give up.
    Please consider that yesterday’s findings of Pure Energy Metals are partials (almost south CVs) and results have to be investigated further. Albemarle project clearly says that lithium is present in the valley, and other companies are explorating other areas in the nearby (please see Nevada Energy Metals that focus the explorations in the north).
    Of course I’m not saying that it will be a success but this high speculating trades require some time to pay off, so I’m still in.

    Furthermore consider that lithium is becoming more and more a strategic resource and probably US what to have some mines in its territory in order to have safe supply.

    • FI FighterNo Gravatar May 11, 2016, 6:13 am

      PowerP,

      Thanks for the comment. In no way am I denying that there’s lithium to be found in Clayton Valley, I’m just wondering how much is actually there and will it ultimately matter much?

      Like you said, Clayton Valley exploration is highly speculative, it’s going to take a lot of time, and it may (or may not) turn out to be a success…

      To me, that’s just too much uncertainty, when as investors, we can simply go elsewhere and locate some higher probability bets… In Australia, Galaxy Resources and General Mining have already re-started production at Mt. Cattlin, secured offtake agreements with the Chinese, and will be generating real revenues… Neometals and Mineral Resources have Mt. Marion in construction, as well as an offtake agreement, and Altura Mining and Pilbara Minerals each have completed a Feasibility Study (FS) for their projects and are well on their way to putting these mines into production sometime in 2017, 2018. Like the other Australian companies mentioned, Altura also has an offtake agreement with the Chinese.

      These Australian stories are lightyears ahead of the their North American exploration counterparts in Clayton Valley. The Australian names mentioned above will be the ones to fill the world’s supply gap, so I think these names will benefit shareholders the most as well.

      Right now, it looks like the markets are recognizing these facts, which also explains why the Australian names are running up so much. Why take unnecessary risks when you don’t have to? Spodumene is also way, way simpler to put into production than brine.

      I just can’t help but ponder if Clayton Valley is really worth all the effort for investors… In regards to North America, there’s ONLY one lithium stock that I would buy right now, and that company is not found in Clayton Valley. No, you’d have to go north to Quebec… I’m talking about Nemaska Lithium, which is also lightyears ahead of its Nevada exploration peers… And if they can pump out lithium hydroxide like they say (think) they can, they’ve got way better odds of supplying Tesla in the near-term (2018, 2019), me thinks.

      Take care!

  • Investment HuntingNo Gravatar May 11, 2016, 8:23 am

    I’m invested in two companies exploring the Clayton Valley, so I’m hopeful that they strike gold, well Lithium, but gold will work too 🙂

    • FI FighterNo Gravatar May 11, 2016, 8:27 am

      IH,

      LOL, who couldn’t use another Goldstrike in their portfolio, right? 😉

      Best of luck! I really do hope the explorers find something good in Clayton Valley, that would benefit the entire industry.

      Cheers!

  • FritzNo Gravatar May 11, 2016, 9:15 am

    Hi, just to add in another thought! so far nobody has really talked about Dajin. They are more diversified concerning location! On Lithium X, no mentioning about their (excessive) increase in share price. Are they still worth it an investment or wait for a pull back.
    Cheers

    • FI FighterNo Gravatar May 11, 2016, 9:20 am

      Fritz,

      I still don’t know much about Dajin, as I haven’t quite gotten around to researching that name yet, but from my Pure Energy Minerals experience, I’m going to simply pass on these early stage stories.

      Again, I don’t see the appeal at all with so much uncertainty… Why not just go with Galaxy Resources that will get you a producing spodumene mine, earning real revenue today, and a world class brine asset in Sal De Vida in Argentina that already has an economical DFS published? You get the best of both worlds… Sal De Vida alone, most of these exploration plays in Nevada will probably never even amount to anything close to that resource.

      As I mentioned above, outside of Nemaska Lithium, I am done with speculating on North American lithium plays… Australia is really where I think investors ought to focus their attention towards, but I know that’s not a popular suggestion…

      Cheers!

  • TomNo Gravatar May 11, 2016, 11:57 am

    FI,
    Are any of this lithium stock trade at OTC Market?
    I couldn’t purchase from AX ?
    Thanks

    • FI FighterNo Gravatar May 11, 2016, 7:32 pm

      Tom,

      Yes, many of the names that I listed above trade on OTC.

      Galaxy Resources (GALXF)
      Nemaska Lithium (NMKEF)
      Orocobre Limited (OROCF)
      Lithium Americas (LACDF)

      The above are just examples, not a recommendation in any sense.

      Best wishes!

  • chillywitNo Gravatar May 22, 2016, 12:02 pm

    Recall the decision to locate Tesla’s gigafactory in Nevada was because Gov. Sandoval (who grew up and lived in Reno until he was elected gov) gave Tesala a billion dollars in tax credits in exchange for hiring 6,000 local employees. Reno’s economy relies heavily on construction and isn’t well diversified, so the gov was determined to get Tesla to build the gigafactory here as the area was hit hard in the Great Recession. Tesla didn’t move to Nevada because there was a significant source of lithium here, though it would make for a nice Hollywood ending if a large discovery was found in Clayton Valley. Stick to the Nevada gold mining producers and explorers instead.

  • RJ RocketsNo Gravatar July 26, 2016, 10:24 am

    Do you wish you hung onto PV now? Go for a longer play – 2025 is a ways off yet!

  • FritzNo Gravatar July 28, 2016, 7:23 am

    I’m holding few Clayton valleys and Big Smokey valley, just for diversification and off course the hope that the one or other or all will find some good results. But I tend to agree, there has been soooo much hype and no delivery yet. So far in summary I have not lost anything, but hasn’t been a stunner either. Look at Dajin, been around for a long time and just can’t get their act together.

    What are your thoughts on cobalt?

    Best

  • HamishNo Gravatar August 14, 2016, 10:30 pm

    Interesting subject as I have just brought in Lithium X 70k my buy in price $1-70. The main reason I brought in is company management with an UNBEATIBLE track record, in other words, these guys KNOW what they are doing, just wish I had got in much earlier. Because the USA only produces 3% of the worlds Lithium any one finding a new lithium deposit in the Clayton valley will see their share price explode, never mind the time to production. A pure lithium play with a good new deposit in the USA can and will only go up in price, most of the lithium plays here in Australia have seen the max share price increases already ! Hence I went looking for potential growth.

  • Leonardo MastacheNo Gravatar February 3, 2017, 4:20 pm

    What happened to the Amerilithium land claims?

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