Over the past few months, oil and commodity markets have been taking out fresh highs after the shuttering of Ukrainian ports, sanctions against Russia, and disruption in Libyan oil production sent energy, crop, and metal buyers scrambling for replacement supplies. Russia is one of the world's biggest exporters of key raw materials, from crude oil and gas to wheat and aluminum, and the possible exclusion of supplies from the country due to sanctions has sent traders and importers into a frenzy. Base metals prices have been coming off recent highs (and in the case of aluminum, copper and tin, all-time highs) set earlier in the month that were spurred by fears over the potential for disruption to Russia’s metal exports following its invasion of Ukraine. Broad-based supply concerns remain, ranging from the potential for sanctions targeting exports, to actual output disruption and logistical dislocations (see ‘Implications of the Russia-Ukraine crisis for metals’ for details).
But the Ukraine crisis is only layering onto another more powerful trend: the global transition to low-carbon energy.
The energy transition is driving the next commodity supercycle, with immense prospects for technology manufacturers, energy traders, and investors. Clean energy technologies require more metals than their fossil fuel-based counterparts, with prices of green metals projected to reach historical peaks for an unprecedented, sustained period in a net-zero emissions scenario.
But few, if any, green metals have witnessed a price explosion as epic as that of lithium.
After more than quadrupling in value last year, lithium carbonate continues to soar in 2022 according to Benchmark Mineral Intelligence.
The rally in lithium hydroxide, used in high-nickel content cathode manufacture, is accelerating, up 120% so far this year, narrowing the discount to lithium carbonate, which historically is priced below hydroxide.
Benchmark says that Chinese inventory levels for hydroxide, carbonate, and spodumene feedstock remain very low, sustaining the high price environment. Many investors who got burned by the last lithium price bust of 2018 have probably been watching on the sidelines, not sure what to make of the current mega-rally.
To be fair, China's spot market, where small tonnages can have big price impacts, may be accentuating the scale of this mega-rally, but make no mistake about it: this is no false flag, with everything from mined spodumene to high-purity hydroxide, and every component of the lithium processing chain experiencing a wild price surge. The price explosion tells you that lithium supply is simply nowhere near enough to feed this demand surge.
With earnings season here with us again, the famous lithium trio of Sociedad Química y Minera de Chile S.A. (NYSE:SQM), FMC Corporation (NYSE:FMC) and Albermale (NYSE:ALB) will be heavily scrutinized. However, only SQM has really impressed with a 51.4% return so far this year, with FMC and ALB returning 9.9% and -12.7%, respectively, over the timeframe. The three companies are some of the largest in the business, with SQM boasting a $21.1B market cap, FMC is worth $16.7B while ALB is valued at $22.6B.
Luckily, scores of lithium juniors have been responding more readily to the lithium price boom. Here are some that have been outstanding so far this year.
#1. Lithium Energy Exploration Inc.
Market Cap: $14.7M
YTD Returns: 328.6% Headquartered in Toronto, Canada, Lithium Energi Exploration Inc. (OTCPK:LXENF)(TSXV:LEXI) engages in the acquisition, exploration, and development of lithium brine assets in Argentina. The company holds interests in the Laguna Caro project that includes eight mineral concessions covering approximately 17,759 hectares; the Antofalla North project that consists of thirteen mineral concessions covering approximately 41,496 hectares; and the Antofalla South project that includes eighteen mineral concessions covering 69,112 hectares in Argentina.
Incorporated in 1998, Lithium Energi was formerly known as Portola Resources Inc. and changed its name to Lithium Energi Exploration Inc. in March 2017.
Back in January, Lithium Energi Exploration announced that, under its JV Agreement with Global Oil Management Group, LLC ("GOMG"), implementation of exploration and development plans have been accelerating rapidly.
LEXI reported that it’s a 20% non-dilutable stakeholder in the JV and that development is slated to commence immediately, with the Sorcia Group owning the exclusive license to utilize the International Battery Metals Ltd’s (OTCPK:BATF) technology in Argentina and Chile. IBAT further stated that it has substantially completed the construction of its first lithium extraction unit and the system modules are currently being heat traced and insulated with final assembly and testing to take place in March in the U.S. prior to deployment to South America.
#2. Sayona Mining Limited
Market Cap: $1.6B
YTD Returns: 111.1%
Paddington, Australia-based Sayona Mining Limited (OTCQB:SYAXF), together with its subsidiaries, engages in mineral exploration and development in Australia and Canada. The company explores for lithium, graphite, and gold deposits. Its flagship project is the Authier Lithium Project located in Quebec, Canada. The company also holds a 60% interest in the Moblan lithium project located in Northern Québec.
Last year, Sayona Mining reported that the Superior Court of Quebec approved its joint bid with Piedmont Lithium (NASDAQ:PLL) for the acquisition of North American Lithium, which owns a previously producing lithium project near Sayona's core Authier project.
More than $400M had been spent on the project, which was operational and ramping toward nameplate production in 2018 but then was placed on care and maintenance due to weak lithium markets and a shaky capital structure.
Sayona and Piedmont say they are proceeding with technical studies that would prepare for the integration of Sayona's Authier and Tansim projects with the facilities at NAL.
#3. Frontier Lithium Inc.
Market Cap: $578.6M
YTD Returns: 76.1%
Val Caron, Canada-based Frontier Lithium Inc. (OTCQX:LITOF) engages in the acquisition, exploration, and development of mining properties in Canada. The company primarily holds a 100% interest in the PAK Lithium project, which covers 1,378 contiguous mining claim units totaling 26,774 hectares located in northwestern Ontario, Canada.
Frontier has forged a strategic partnership agreement with XPS Expert Process Solutions to develop a process to refine spodumene concentrate into lithium hydroxide. Further, Frontier Lithium owns 100% of the PAK Lithium Project, located in northwestern Ontario. This is a very high-grade spodumene resource with low iron and low impurities. The PEA post-tax NPV8% is estimated at US$974.6m based on producing 23,174tpa LiOH.
By Alex Kimani for Oilprice.com
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