Elon Musk has doubled the workforce at Tesla’s gigafactory in order to accelerate the construction timetable, hoping to bring the battery factory online later this year. When fully operational, the gigafactory will nearly double the world’s entire lithium-ion battery production, making Tesla responsible for soaring lithium prices that are catapulting lithium miners to the forefront of the next big energy boom.
Musk wants the gigafactory online urgently in anticipation of the huge demand for the Model 3—the new electric vehicle that is breaking into the mainstream market which is affordable for the masses. As the assembly lines for the Model 3 get ready to power up next year, Tesla will need a volume of batteries that is mouth-watering for the lithium investor.
Musk also needs batteries for the energy storage systems he plans on rolling out—another big bet on a clean energy future. He is hoping to merge Tesla and SolarCity to create an EV and solar + energy storage powerhouse.
Lithium is the key element on which Musk’s dreams depend, and the phenomenal demand that these plans for Tesla and Solar City are creating for lithium is sending prices through the roof.
Skyrocketing lithium prices have been a boon to the share prices of an array of lithium explorers. One company, American Lithium (LI:TSXV) (OTCQB:LIACF), a Nevada lithium exploration company, exemplifies the bullish trend for lithium. American Lithium holds an entire basin to itself, and as such, has potential to become the largest lithium company in Nevada. The company has also just announced a 13-well drilling program that has just kicked off.
Here are 10 reasons why investors should watch American Lithium—a company that is backed by Robert Cross, who was also responsible for spearheading Pure Energy Minerals, who recently announced an official deal with Tesla.
1. Lithium prices are set to surge. Lithium prices have more than doubled in recent months, and tripled from 2015 price levels. Supply is tight, and there are few places in the world where lithium is produced. Nevada’s Clayton Valley is the only location in the United States where commercial lithium production is found. And more basins in Nevada outside of the Clayton Valley look promising. Demand could outpace supply in the next few years as the Tesla gigafactory is set to gobble up all available lithium production capacity in its sight.
2. Lithium demand goes far beyond Tesla. Other automakers, unwilling to let Tesla have the market to itself, have moved forward aggressively with electric vehicles as well. Chevy is coming out with the Chevy Bolt—its own mass-market affordable EV—later this year, which is on track to beat Tesla to the punch. GM, Ford, Daimler AG and others are rolling out EV models at a brisk pace as well. The global market for lithium will double to $22.6 billion this year from $11.7 billion in 2012, and that is just the beginning. Growth rates will accelerate even more as EV models hit the market. And in Nevada, the demand for lithium will come from more places than just Tesla—Faraday Future is also building a $1 billion EV factory, turning the state into a lithium and EV mecca. More companies will likely follow suit.
3. EV revolution just beginning. Lithium prices have surged and supplies are already tight, but the adoption of EVs is still in its infancy. Today EVs account for just 6 percent of lithium demand, but by 2025, that share will shoot up to 38 percent. Lithium is mostly used in consumer electronics today (cell phones and laptops), but that will soon change. In essence, an entirely new market for lithium is about to open up. As Pure Energy Minerals CEO Patrick Highsmith just told CNBC in an interview, the market is used to dealing with grams of lithium carbonate for portable electronics, but batteries for an electric vehicle will require kilograms of lithium carbonate. The market is set to explode.
4. American Lithium has big assets. Albermarle has the largest operating lithium mine in the U.S., located in the Clayton Valley. Other companies have flocked to the region to try their hand at lithium exploration. American Lithium is looking a few hours away in the Fish Lake Valley, which has analogous geological features to Albermarle’s Silver Peak lithium brine site. American Lithium has 13,000 acres of lithium claims in this valley, which is the largest contiguous land position in the region. The company’s exploration data indicates large concentrations of lithium brine at shallow depths on its acreage.
5. Actively expanding its presence. American Lithium sees the coming tidal wave of demand for lithium and is not sitting by and waiting for it to arrive. The company is acquiring acreage in order to grow its lithium assets. On July 5, American Lithium announced an agreement to purchase a 70 percent stake in a series of 77 placer claims over 1,540 acres from Nevada Energy Metals, acreage that sits at the northwestern side of the Clayton Valley. What is most exciting is that the acreage (Clayton Valley-1) is located 250 meters from Albermarle’s property.
6. Successful exploration already underway. American Lithium announced on July 19 that it had successfully completed six initial shallow auger drill holes as part of its Phase 2 exploratory drilling program in the Fish Lake Valley. It is now analyzing the results and will move forward with further drilling at 13 locations. The program will provide the mining firm with solid data on the extent of its resource base. “American Lithium’s team have been developing the Fish Lake Valley lithium brine target for over 8 years and are excited to begin this Phase of the program on its North Bowl Playa lithium brine project,” Michael Kobler, CEO of American Lithium, said in a statement. “The planned near surface drilling on the South Bowl Playa lithium brine project is the first program to explore the Company’s expanded target package in Fish Lake Valley, Nevada, where the Company controls over 18,550 contiguous acres.”
7. Supported by a solid management team. American Lithium has a sharp leadership team that has steered the company well thus far. CEO Michael Kobler has spent 35 years finding and producing natural resources and also developing infrastructure projects. He has a proven track record of success in exploration, permitting, and derisking resources.
8. Technical expertise. American Lithium added a top lithium battery expert, Dr. David H. Swan, to its Advisory Board in June. He brings more than 30 years of experience in energy storage systems, along with a special focus on the use of lithium battery technology for both vehicles and aerospace applications. He is internationally recognized, and has consulted with a long list of big automakers including BMW, Toyota, Honda, Chrysler, Daimler and GM.
9. Listed on the OTC market. In June, American Lithium successfully saw its shares listed on the over-the-counter market – the OTCQB Venture Market. The offering will allow the company to tap equity finance to expand and move forward with its exploration plans.
10. Derisking asset base. Other companies are moving into the Clayton Valley and beyond in order to mine lithium. As each miner conducts surveys and exploration and proves their resource base, the broader region becomes less risky. Albermarle already has its Silver Peak mine up and running, and other companies such as Pure Energy Minerals have demonstrated promising exploration results. The lithium rush is on, and a flurry of companies are proving that Nevada is the real deal. All of this helps American Lithium.
By James Burgess of Oilprice.com
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