When investors start looking for the next coup d’etat to bet on, lithium should be on the top of that list, and Pure Energy Minerals (TSXV:PE; OTC:HMGLF) should be frantically pinging investor radar. Not only is it sitting on top of the best future resources in North America, but it has also just signed an agreement to supply Tesla’s gigafactory—at a time when lithium prices have jumped 15%.
Not only is lithium already a wonder mineral that forms the backbone of much of our daily lives, but it is poised for a gigantic spike in demand thanks to the emerging battery energy war launched by Tesla’s gigafactory. At the same time, lithium supplies are thinning and the name of the game will be finding new producers, new lithium plays and lower costs.
Battery manufacturers across the board are moving to lithium because it has the highest electric output per unit weight. And nowhere will this demand soar more than with grid storage and the production of hybrid, plug-in hybrid and electric vehicles used by everyone from Toyota (NYSE:TYO), Honda (NYSE:HMC), Nissan (NYSE:NSANY), Renault (EPA:RNO), and Mitsubish (NYSE:MSBHY), to Ford (NYSE:F), Chevrolet and GM (NYSE:GM). And of course Tesla Motors (NASDAQ: TLSA).
Without lithium, there will be no battery gigafactories. In fact, one of these factories alone will need 15,000 tons of lithium carbonate a year just to get started—and the first is slated to come online as soon as next year.
The battery gigafactory scene will be one of the biggest battlefields of the century from North America to China to Brazil—and the outcome entirely depends on lithium supply.
Even more than hybrid cars, grid storage and the ‘powerwall’ will drive lithium demand through the roof, with General Electric talking about a $6 billion industry. In an interview with Reuters, the company said it expected this sector to quadruple to $6 billion by 2020 thanks to rising demand for industrial battery systems driven by increasing reliance on intermittent energy sources, such as wind and solar power, as well as the potential to add energy to the grid quickly when power needs spike.
This is what makes Pure Energy Minerals one of the purest revolutionary plays of the decade, and here are five key reasons this company should be on every savvy, strategic investor’s radar.
1. Pure Energy is sitting on the only potential future brine resource in North America.
Welcome to the state of Nevada, where Vancouver-based Pure Energy Minerals is working to advance its Clayton Valley Lithium Brine Deposit, recently completing successful drilling and seismic and releasing an inferred resource estimate of 816,000 metric tons of lithium carbonate equivalent (LCE) over 8,000 acres of its claim area. What does this mean, exactly? This is a significant amount of lithium even from a global perspective, and Pure Energy’s claim area is adjacent to the only lithium production facility in North America—Albemarle’s Silver Peak Lithium Mine. Even better, the lithium discovered here in two aquifers is easily extractable brine, making this deposit potentially one of the most important in the world due to its size and North American location. Furthermore, Pure Energy believes that this resource estimate is conservative and that they haven’t yet reached the base of the lithium-bearing zones.
2. Not all lithium is equal, and Pure Energy’s play is in the brine, which is the best and cheapest place to be.
Lithium is sold in different types for different prices, with lithium carbonate going for around $6,000 per ton and lithium hydroxide trading for about $8,000 per ton. Both are hot commodities, but it is lithium hydroxide that is much of the focus of new battery technologies, particularly from Tesla. But regardless of the type, it’s the lithium found in salty water--or brines--that is by far the most cost effective. This is the cheapest way to produce lithium because nature has already rendered the mineral into an easy-to-extract form. Costs are kept to a minimum because extraction requires simply drilling wells and pumping the liquid brine. There are only a few places in the world where lithium is present at high enough concentrations in these salty brines and the most famous is in the Atacama desert, in the “Lithium Triangle” of Bolivia, Argentina and Chile. The only other brine resources ae in China, and they are much smaller. Pure Energy is moving fast to position itself as the lowest cost lithium supplier in North America.
3. Lithium demand will skyrocket, and Pure Energy is poised to become a key supplier for this explosive future.
When new gigafactories come online, everyone will be looking for cost-effective lithium sources closer to home. It’s important to emphasize that one of the most significant aspects of this game from our perspective is future resource potential—and Pure Energy, as we have noted, has the only potential future brine resource in all of North America as far as we can tell. Not since the shale boom have we seen a market transformation of such significance. Lithium has long been used for a variety of mundane purposes, and while the variety is spectacular—with applications in everything from glass, ceramics and greases to a line-up of industrial process—it has flown under the radar for most investors. Supply has always largely managed to keep pace with steadily rising demand for lithium, and while the mineral is poised for growth with or without the ‘battery explosion’, These gigafactories will spark a phenomenal spike in demand that will be no less exciting than the shale boom. Tesla’s Elon Musk is eyeing a “complete transformation of the entire energy infrastructure of the world to completely sustainable zero carbon”, and what he’s talking about here is lithium-battery production on a mind-blowing scale. Tesla alone is planning to produce more lithium-ion batteries in this factory than in the entire global marketplace combined.
In terms of suppliers, here’s what investors need to know: The traditional lithium producers have performed well enough, but they are not at all prepared for the surge in demand that is about to be unleashed. There are real concerns about keeping pace with demand, particularly for specialty lithium hydroxide. And outside of North America, potential future lithium resources face a high level of risk—mostly of a geopolitical nature. To find the next new lithium resources IN NORTH AMERICA means we have a unique, low-risk opportunity.
And this isn’t just a North American opportunity; demand is global. It’s about the battery electrics market on a broad level. The entire market is growing and global demand is driving this growth.
4. This small company has big management and even bigger global tech partners.
Nothing is more important than management for small companies with big ambitions. We’re looking at a team of individuals with experience, including Dr. Andy Robinson, who serves as the company’s COO. This management team appears to be well positioned to find the right strategic partner—a goal that is also likely pinging investor radar right about now. And, significantly, they’ve done this before with public companies, successfully building and then selling a power plant.
5. No debt. This is really self-explanatory, other than to note that in today’s energy market it’s tough for investors to find a company that has no debt and at the same time is sitting on revolutionary assets that are about to explode.
Let’s recap: We are preparing for a huge spike in lithium demand—which is already on the steady rise—with new gigafactories coming on line and a general surge in battery applications on all fronts, and everyone’s pretty much sold out of battery-grade lithium carbonate and lithium hydroxide, according to Albemarle’s CEO, Luke C. Kissam, in a recent conference call.
This means there are new opportunities for non-traditional entrants to this market, and Pure Energy should be on the top of investor radar for this segment because it has no debt, experienced management and—most significantly—the only potential future brine lithium resource in North America, positioning it to become a key supplier.
By James Burgess of Oilprice.com
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