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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Will Big Oil Give Way To Big Lithium?

Lithium mining

A world running on batteries is a dream or a nightmare vision, depending on your literary preferences. Sci-fi enthusiasts would probably applaud such a vision becoming a reality. Stephen King fans would likely recall The Tommyknockers and shudder at the thought of post-human mutants whose lives run on batteries.

The reality that is actually taking shape right now is neither sci-fi, nor horror. It’s the reality of billons of electronic devices and millions of electric vehicles all fueled by lithium-ion batteries. In this reality, lithium will be king.

Leaving consumer electronics aside, by far the biggest driver behind this trend that prompted Goldman Sachs to call lithium the “new gasoline” will be electric vehicles. While Goldman Sachs’ assertion about lithium has been criticized – lithium is not a source of energy, unlike gasoline – in terms of importance Goldman Sachs is entirely right.

Lithium demand is unanimously expected to skyrocket in the coming years and Tesla Motors will be at the heart of this with its gigafactory, which, when it starts the first phase of full-scale production will need the entire lithium carbonate output of the world. No wonder then that since 2015, when Tesla started turning out EVs in the hundreds of thousands, the price of lithium jumped sharply and it hasn’t stopped rising since.

A nascent market inevitably attracts a lot of attention and the lithium market is no exception. Tesla’s gigafactory is in Nevada and that’s not a coincidence – Nevada holds the only large lithium deposit in the country. Mining juniors like Lithium X and Oroplata have been quick to buy land in the area and are already starting to exploit it. Those among them that floated on the stock exchange earlier have already registered stock price rises of 200-300%. Oroplata just floated early this month, soon after that announcing promising results from its prospective work in the Western Nevada Basin project.

Here are 10 reasons Oroplata is definitely worth keeping an eye on in the coming months and years.

1. A nascent EV market with a huge future.

The EV market is in its early stages of development, with super optimistic growth prospects. Sales of electric vehicles are growing steadily and all forecasts point in the same direction – this growth will only accelerate as nations around the world start introducing regulation that facilitates the switch from fossil fuel burners to EVs. Norway was the first to pledge a ban on cars with internal combustion engines but will not remain alone in that for long.

2. Strategic position.

The U.S. electric vehicle market has been growing more slowly than, say, China or Europe, but EV sales in Europe are slowing down, while in the U.S. they will be rising. Tesla Motors (NYSE: TSLA), by far the biggest player in this field, plans to roll out a million EVs from its Nevada gigafactory in 2020. Initially, plans were to have 500,000 EVs churned out annually by 2020, to help put trends in perspective. Oroplata’s lithium project is near the gigafactory and the company is perfectly placed to take advantage of the demand spike with its 10,000 acres containing 500 mining claims and the option of acquiring another 12,000 acres.

3. Focus on lithium brine.

Lithium is a metal but it is also highly soluble, which means that it sometimes leaks and collects in underground water as salt. In fact, 66% of the world’s lithium reserves are estimated to be in lithium brine. Oroplata’s Western Nevada Basin project involves precisely this type of mining, which has several important advantages compared with rock mining. It’s cheaper; it’s less capital-intensive; it yields lithium carbonate, which is ready for shipment; and it is also more environmentally friendly than rock mining. What’s more, says Oroplata CEO Craig Alford, “the U.S. has much better transportation, knowledgeable manpower and electrical grid infrastructure,” compared with some of the world’s biggest lithium deposits in South America.

4. Promising exploration results.

Oroplata recently reported results from a large-scale exploration in the Western Nevada Basin project, which yielded lithium concentrations in the range of 80-200 parts per million (ppm). Lithium reserves are considered economically viable above 200 ppm in Nevada’s Clayton Valley, which is the only place in the U.S. lithium brine is being mined right now. Maximum concentrations of the metal, however, reached 247 ppm in the Western Nevada Basin. The chief executive said “This is a massive anomaly, and we are all extremely excited by the direct confirmation of essentially economic values of Lithium reported at surface.”

5. Experienced management.

Craig Alford took the helm of Oroplata this month, soon after the announcement of the exploration results in the WNB. He has 30 years of experience in the mining industry, having managed an extensive number of projects across the world, from China to Australia, and from North and South America to Africa. Alford held senior positions in several leading miners such as Zijin, Teck Mining, and served as assistant to the World Bank and the China-Africa Development Fund on issues including investment risk, planning, and tax policy. On 8 July, Oroplata also officially brought on Paul Pelosi Jr. as senior advisor. Pelosi is the son of former U.S. Speaker of the House Nancy Pelosi, and he has extensive experience advising Fortune 500 companies in environmental sustainability and public policy. He also advises NASA Ames Research Center, and is a founding member of Cisco Systems Connected Urban Development.

6. An appealing stock.

Oroplata is currently trading at $1.70. When it floated on the over-the-counter market, the stock was priced below $1. The free float at the moment is 640,624 shares, while total stock outstanding is 40 million, giving the company a market cap of $64.8 million. The stock will certainly shoot up once production begins and when the Tesla gigafactory starts operations at the end of July.

7. Not a crowded room.

There are still few companies operating in the Nevada lithium deposits. Besides Clayton Valley, WNB is the only area than has proven lithium brine reserves that are economically viable. This puts Oroplata in the pole position among rivals, given its current land holdings and the option to bring the total to up to 22,000 acres.

8. Full control of the reserves.

Initially, after it acquired the WNB, Oroplata owed the vendors of the plot a net smelter royalty that stood at 2% of the gross value of any minerals produced at the site. Now the royalty has been canceled in exchange for some 600,000 shares in Oroplata. This gives the company complete control over the lithium and other minerals it extracts within the WNB project. It also makes it easier for the company to negotiate supply contracts with end-users, CEO Craig Alford said at the announcement of the deal.

9. A growing client base.

Tesla may be the biggest player in the U.S. EV field but it is by no means the only one. Smaller rivals, often funded by Chinese companies, are popping up on Tesla’s home turf. None of these is completely ready for mass production but they will be in the near future. These are all future clients of Oroplata and its rivals. Output marketing is pretty much guaranteed over the medium term.

10. Energy storage – the next big thing.

EVs are in the focus of the public eye but there is another technology that is gaining traction as well: energy storage. The lack of reliable energy storage systems (ESS) has been a major headache for those working to make renewable energy more popular and cheaper. Now there are cost-effective ESS, many of which rely on lithium-ion batteries. That’s a whole new market for lithium miners, and one potentially bigger than the market for EVs: we may not all be drivers but we all use electricity.

One final point that needs making is that purely exploration-focused juniors such as Oroplata are much better placed to reap the benefits of rising lithium demands. The big boys are all diversified corporations, which means they will be slower to ramp up their lithium production to the necessary levels. Oroplata and its peers, on the other hand, are small, flexible and betting it all on lithium in a world that is increasingly hungry for just this commodity.

By James Burgess of Oilprice.com

Legal Disclaimer/Disclosure: This piece is an advertorial and has been paid for. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this Report should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. We make no guarantee, representation or warranty and accept no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report




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