In Austin, Texas, Elon Musk is building his Tesla Cybertruck plant…
And at the same time, Tesla is developing a new technology to supply its huge lithium requirements.
This is all part of a move by the EV giant to ensure it has control over its entire supply chain.
American lithium is expected to be in high demand for the next century, and Tesla wants to be ahead of the competition.
Few investors may know that the US has some of the world’s largest lithium reserves…
And with supply-chain issues and China’s emergence as a lithium power-house, lithium production is now flooding back to America and current types of lithium extraction may not be able to keep up with demand...
Lithium demand is estimated to increase by up to 40x over the next two decades, with automakers around the world committing to majority-EV production and renewable energy becoming the holy grail.
The majority of the world’s lithium is currently mined in Chile and Australia. And the majority of what is mined is then processed in China. China is controlling supply, which is a national security issue for the United States.
The situation has EV companies like Tesla scrambling to secure American lithium supply deals.
On November 1st, Tesla finally reached a three-year lithium supply contract with the world’s largest producer, Ganfeng Lithium Co.
But it’s still not enough to satiate Tesla’s needs, let alone everyone else’s.
The bulk of the world’s lithium supplies are extracted from liquid brine reservoirs located beneath salt flats, and a deficit is already being felt.
BMI's George Miller forecasts a lithium carbonate deficit of 25,000 tonnes this year. By next year, he expects that deficit to be much more serious.
For the Biden Administration, securing domestic sources of lithium is a matter of national security.
Biden’s blueprint for domestic lithium production, refining, and battery manufacturing is expected to drive a possible EV sales increase of up to 50% by 2030.
For EV makers and battery manufacturers, like Tesla, it’s all about new technologies that can ensure we have enough lithium and the best batteries for EVs.
Ford (NYSE:F) has pledged to go all-electric by 2040, and will invest over $30 billion in EV and battery production over the next five years. It’s also testing liquid cooling for a faster EV charger that could cut charging time from hours to minutes.
In Europe, they are moving even faster.
Even Mercedes will go all-electric by 2030.
In China, conventional gas-burning cars will be phased out by 2035.
Apple (NASDAQ:APPL) uses lithium in cell phones and laptops. And now, it’s coming out with a car. The Apple Car is expected to be released in four years.
In short: It looks like there’s an international “secret war” going on for access to lithium… and the technology needed to unlock it.
And that’s where Tesla’s new extraction technology comes in
Lithium generally comes either from subsurface brines or spodumene-bearing pegmatite deposits.
Lithium from brine is easier to extract because you pump the lithium-bearing brines out of the ground and then treat them to form lithium carbonate or lithium hydroxide.
The process doesn’t involve traditional mining.
But there are problems with this method.
The biggest problem is that we need more supply than brine deposits alone can offer.
The process is also incredibly time-consuming.
The new method patented by Tesla is expected to be environmentally friendly, using table salt - or sodium chloride - to extract lithium from the ore.
The one downside, however, is that it may be less efficient than some tech.
Extracting from the brine involves solar evaporation from salt flats, and that can take many years.
It’s also environmentally destructive and requires tons of water not available near the salt flats.
For example, Chile’s Atacama desert is being depleted of water thanks to lithium brine extraction. Now it’s barren and the locals are being deprived of water resources and grasslands vital to their survival. But what if there were a better tech?
This could be it!
And as if all of that wasn’t promising enough, Biden’s infrastructure deal could flood the ESG market with $1 trillion not to mention multiple billions more from investors hopping on this speeding train.
They are going all in because it's more than just car engines...
The energy storage industry is an even bigger market than EVs.
The potential of lithium grid storage is explosive. Just think of Tesla's PowerWall and Megapacks.
And this boom is just getting started.
Lithium is needed in everything from home batteries to cell phones and electric cars.
At the moment, it’s not so environmentally friendly…
But with new tech solutions, like Tesla’s or other innovators on the market, it could be.
The lithium market is one to watch in the coming years, not only because of its high demand, but also the new technology being introduced, and the companies producing it could change the world forever.
Other companies to watch as lithium demand soars:
FuelCell Energy (NASDAQ:FCEL) is another alternative fuel stock that has taken Wall Street by storm. Fuel cells are a relatively new technology, which might explain why the company's shares seem to have little correlation with other stocks in its industry or even those outside of it. However, while momentum may fluctuate from time to time and investors should be prepared for fluctuations within 24 hours of 10%, this upstart will most likely continue on an upward trend due to steady advances in research and development as well as increased use cases worldwide such as China's investment into hydrogen transportation infrastructure.
Sitting at just $8.71 at the time of writing, FuelCell is a great opportunity to take advantage of a stock with a buy-in while gaining exposure to an exciting new market. Though fundamentally, the company is still struggling to gain its footing, don’t write it off just yet. As the greater trend of decarbonization takes over, companies like FuelCell, and other alternative energy stocks, are likely to benefit in a big way.
Energy companies shouldn’t be ignored, either. As one the world’s leading renewables producers, NextEra Energy (NYSE:NEE) is literally building the path towards sustainability. To make matters more exciting, the company was the number one capital investor in green energy infrastructure, and the fifth largest investor across all sectors.
NextEra Energy works with many different companies like Apple, Amazon, Nestle Waters North America among others to help them become more sustainable by investing in renewable energy sources as well as helping them reduce their carbon footprint through providing quality products and services that lower utility bills.
NextEra is the world’s leading producer of wind and solar energy, so it’s no surprise that it has received some love from the ‘millennial dollar.’ In fact, in 2018, the company was the number one capital investor in green energy infrastructure, and fifth largest capital investor across all sectors. No other company has been more active in reducing carbon emissions. And they’re just getting started. By 2025, the company aims to reduce their own emissions by 67 percent while doubling their electricity production from a 2005 benchmark. To put this into perspective, if all of America’s utilities were able to achieve NextEra Energy’s projected 2025 emissions rate, absolute CO2 emissions for the power sector would be approximately 75% lower than they were in 2005.
Even Big Oil is jumping on board, diversifying their portfolios and to hedge their bets in the rapidly changing new reality of energy. And no other oil major takes this more seriously than TotalEnergies (NYSE:TTE). maintains a ‘big picture’ outlook across all of its endeavors. It is not only aware of the needs that are not being met by a significant portion of the world’s growing population, it is also hyper-aware of the looming climate crisis if changes are not made. In its push to create a better world for all, it has committed to contributing to each of the United Nations’ Sustainable Development Goals.
Total checks every box in the ESG checklist. It is promoting diversity and safety, making massive changes in its day to day operations to ensure that its business is environmentally sound, and has even committed to going carbon neutral by 2050 or sooner. It’s no surprise that shareholders are loving its forward-thinking approach.
Sociedad Química y Minera de Chile (NYSE:SQM) has seen its stock price nearly double from $30 in mid-February 2020 to $57 at close on February 16, 2021. Sociedad Química y Minera, for example, signed in December a long-term supply deal with LG Energy Solution, which in turn supplies batteries to carmakers such as Tesla and GM. Under the deal, SQM will supply battery-grade lithium carbonate and lithium hydroxide to LG Energy Solution between 2021 and 2029.
The Chilean firm also announced a capital increase of up to US$1.1 billion, most of which will be used for lithium carbonate expansion in Chile, where SQM plans to more than double its production.
Sociedad Química y Minera sees the lithium industry growing at around 20 percent per year in the long term, supported by rising EV sales and emission reduction goals from China to the United States.
Charlotte, North Carolina-based Albemarle Corporation (NYSE:ALB) has also seen its share price nearly double, from $139 to $271 over the past year.
Analysts are growing increasingly bullish on lithium producers’ stocks, mostly because of the upside potential in lithium prices in the medium term, thanks to the constantly growing demand for EV and storage batteries.
The two biggest lithium producers, Albemarle and SQM, have recently announced expansion projects and long-term supply deals as they believe the EV revolution and the energy transition are just beginning.
Albemarle is also raising money via a public offering of common stock, with proceeds expected at US$1.3 billion, which will be mostly invested in construction and expansion of lithium operations in Silver Peak, Nevada, as well as in Australia, Chile, and opportunities in China.
The biggest lithium producers are preparing for the growing EV demand, which is now coming not only from Tesla and Chinese start-ups, but also from established carmakers such as the highest-selling U.S. automaker GM and Jaguar.
Teck Resources (TSX:TECK) could be one of the best-diversified miners out there, with a broad portfolio of Copper, Zinc, Energy, Gold, Silver and Molybdenum assets. It’s even involved in the oil scene! With its free cash flow and a lower volatility outlook for base metals in combination with a growing push for copper and zinc to create batteries, Teck could emerge as one of the year’s most exciting miners.
Teck has had a great year, climbing from just $18 in January, to today’s price of $26.78. In addition to its positive trajectory, the company has seen a fair amount of insider buying, which tells shareholders that the management team is serious about continuing to add shareholder value. In addition to insider buying, Teck has been added to a number of hedge fund portfolios as well, suggesting that not only do insiders believe in the company, but also the smart money that’s really driving the markets.
Celestica (TSX:CLS) is a key company in the lithium boom due to is role as one of the top manufacturers of electronics in the Americas. Celestica’s wide range of products includes but is not limited to communications solutions, enterprise and cloud services, aerospace and defense products, renewable energy and enough health technology.
Thanks to its exposure to the renewable energy market, Celestica’s future is tied hand-in-hand with the green energy boom that’s sweeping the world at the moment. It helps build smart and efficient products that integrate the latest in power generation, conversion and management technology to deliver smarter, more efficient grid and off-grid applications for the world’s leading energy equipment manufacturers and developers.
Even old-school fossil fuel producers are getting in on this race. Suncor (TSX:SU) might be known mostly for its oil production. But it’s one of the few majors really pushing the boundaries. In fact, it has pioneered a number of high-tech solutions for finding, pumping, storing, and delivering its resources. When the rebound in crude prices finally materializes, giants like Suncor are sure to do well out of it. While many of the oil majors have given up on oil sands production – those who focus on technological advancements in the area have a great long-term outlook. And that upside is further amplified by the fact that it is currently looking particularly under-valued compared to its peers.
But that’s just one part of its business, however. Suncor is also a world leader in renewable energy innovations. Recently, the company invested $300 million in a wind farm located in Alberta. Additionally, as Canada moves away from oil, Suncor is well positioned to take advantage of another one of the country’s resource reserves; Lithium. The best part? It doesn’t even have to move very far. In fact, Alberta’s oil sands are a major hotspot for lithium production.
Lithium Americas Corp. (TSX:LAC) is one of North America’s most important and successful pure-play lithium companies. With two world-class lithium projects in Argentina and Nevada, Lithium Americas is well-positioned to ride the wave of growing lithium demand in the years to come. It’s already raised nearly a billion dollars in equity and debt, showing that investors have a ton of interest in the company’s ambitious plans, and it will likely continue its promising growth and expansion for years to come.
It’s not ignoring the growing demand from investors for responsible and sustainable mining, either. In fact, one of its primary goals is to create a positive impact on society and the environment through its projects. This includes cleaner mining tech, strong workplace safety practices, a range of opportunities for employees, and strong relationships with local governments to ensure that not only are its employees being taken care of, but locals as well.
Lithium Americas’ efforts have paid off in the market, as well. While many companies across multiple industries struggled last year, Lithium Americas’ stock soared. In February last year, the company’s stock price was sitting at just $5.26, while today it is at $21.12, representing a 300% return for investors who bought in just a year ago.
Turquoise Hill Resources Ltd. (TSX:TRQ) is a key player in Canada’s resource and mineral industry. It is a major producer of coal and zinc, two resources with distinctly different futures. While headlines are already touting the end of coal, zinc is a mineral that will play a key role in the future of energy for years and years to come.
In addition to its zinc operations, Turquoise Hill is also a significant producer of Uranium. Uranium is a key material in the production of nuclear energy, which many analysts are suggesting could be a major component in the global transition to cleaner energy. While the mineral has not seen significant price action in recent years, there are a number of new projects set to come online across the globe in the medium term, which could be a boon to Turquoise Hill, especially as alternative energies gain traction in the marketplace.
By. Charles Kennedy
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