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…
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…
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.
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 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)
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.
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).
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?
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.
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!