Emerging Lithium Miners

What a year it has been. One standout story this year has been the transition from fossil fuels and ICE’s (internal combustion engines) to the new clean and green world of Electric Vehicles. The ‘go to’ commodity for this climate change buster is, of course, lithium. We only have to look at the recent results from South American lithium behemoth SQM to see the dramatic effect that rising prices have had on profitability. SQM made a big jump in 3Q earnings this year from US$1.7m in 2020 to US$106m. Revenues were up 46.1% on higher prices and more production.

2022 is set to continue that trend. It is clear that the current boom is different to the previous lithium boom in 2017, that went too hard, too fast and did not have the fundamental demand behind it. Demand is growing rapidly. Too rapidly for the mines to keep up with. Australia, Chile and China now produce 88% of global lithium. The US has only one lithium producing mine. And this from a country that gave us the Tesla.

There are 200 new battery megafactories in the pipeline by 2030 and 122 are already operational. China is pegged for 148 of them. If all 200 were to be producing batteries at full capacity, annual demand would be 3m tonnes. To put that in perspective, that is 37 times what was produced in 2020. We look at three lithium stocking fillers below.  

Emerging lithium miners

 

Ioneer (INR)

Currently developing a project in Nevada, one of the only places that lithium is found in the US. INR’s project is called Rhyolite Ridge and the company has recently signed a deal with Sibayne-Stillwater to fund 60% of the DFS estimated capital. The two are now working together to secure full debt funding. US Lithium is especially attractive given the President has decreed that lithium is a strategic white powder. Sibayne-Stillwater will also directly fund US $490m of the expected US$785m capex for a 50% stake in the project. Sibanye-Stillwater is a US $10bn international mining company, with existing US operations and a proven track record. There is bit of a fly in the project ointment, and it’s called Tiehm’s Buckwheat and it grows in only one spot. That’s right, on the Rhyolite Ridge in Nevada. It is causing some environmental delays; the company has stressed that it will not harm the Buckwheat. 2022 could be a big year for the project as financing should be agreed upon, with permitting to follow with first shipment of product in 2H24. The company has a very experienced board and management team in place and Rhyolite Ridge is expected to produce 20.6ktpa of lithium carbonate, converting in year four to 22.0ktpa of battery-grade lithium hydroxide. There are eight US megafactories in the pipeline to 2024, and three are already cranking out batteries. Estimates of demand of around 107ktpa of lithium chemicals by 2024. INR is not without its issues but, given the strategic nature of the project, the company will move heaven and earth (and Buckwheat) to satisfy the environmental concerns. - Speculative buy.  

Piedmont Lithium (PLL)

Next is Piedmont Lithium (PLL). Once again, this company has a North American focus in North Carolina. It has hard rock lithium in three locations. Also, a 37% interest in a Canadian project called North American Lithium (NAL) with a strong balance sheet. Just for good measure, it is also ESG friendly. Once again, like INR, it is going through the environmental hurdles. There are still plenty of boxes to be ticked. The project has 44.2Mt @1.08% Li2O with production expected to be around 30,000tpa of LiOH. Capex again will be relatively high at $839m but it should pay that back in under three years. This is not a binary outcome though, as it has the Canadian project and a project in Ghana.  

Sayona Mining (SYA)

Last but not least, Sayona Mining (SYA) could be a nice little stocking suffer. SYA and PLL have a common interest in the North American Lithium (NAL) project in Quebec. PLL effectively owns a 39.6% economic interest in Sayona Quebec. SYA is supported by its US partner Piedmont (PLL). Just to give SYA an Australian flavour it also has projects in WA, including a gold project and graphite in the Kimberley. SYA has a market cap around $1bn but clearly has potential. - Speculative buy.  

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