Three South American countries are responsible for the majority of the world’s lithium, whose demand is projected to double by 2025. With each country striving for the perfect winning formula between exploiting, sourcing, and exporting, the battle for supremacy in the lithium triangle is more dramatic than ever. But, recent developments in one region might finally have investors ready to cast in their votes for a new king. Companies such as Lithium Chile (TSX-V: LITH) (OTC: LTMCF), Nemaska Lithium Inc. (TSX: NMX) (OTC: NMKEF), Global X Lithium (NYSE: LIT), FMC Corp. (NYSE: FMC) and Millennial Lithium Corp. (TSX-V: ML) (OTC: MLNLF) are poised to take advantage of the most intense mining industry-race of 2018.
Location, Location, Location
When it comes to generating profits, it is imperative that junior mining firms know where they should go to get the most lithium for their money. In terms of sheer lithium output, it is a head-to-head battle between Argentina and Chile, and things are heating up.
Both Chile and Argentina are environmentally ideal for mining. They both contain an abundance of salars – or salt-flats – in which lithium can be found. Sensing the potential, firms are quickly purchasing huge masses of land in the two countries. Yet Chile is pushing ahead in terms of lithium production, and miners are noticing.
Lithium Chile (TSX-V:LITH) (OTCQB:LTMCF) is one little-known firm in particular which has yet to garner much attention despite the vast land package possession. In fact, it is second only to huge mining firms Sociedad Quimica y Minera de Chile and Albemarle in terms of land acquisition.
Yet Lithium Chile share prices remain low trading at under a dollar per share for most of 2018. Soon enough though, this could be set to change as the company now owns 140,100 hectares of property over thirteen salars. The property includes 56 square kilometers of the Atacama Salar, the highest grade salar in the world with the lowest cost of production.
There’s good reason to acquire all this land in Chile; According to Investing News, Chile produced 14,100 metric tonnes (MT) of lithium in 2017, second only to Australia which produced 18,700 MT. Considering Australia has more than ten times the landmass of Chile, this points to Chile’sexceptional lithium density. Argentina, meanwhile, produced 5,500 MT in the same year, which actually marked a decrease of 300 MT.
Argentina is out of the running. According to a Reuters report, industry officials predict that Argentina’s lithium carbonate production will triple by 2019, with the industry looking to employ over 1,500 people.
Of course, there are other factors than who can simply mine the most. The main one is which country is about which country makes it easiest for companies to do so.
Policies For Growth
Chile’s regulation is changing. The election of center-right Sebastian Pinera’s National Renewal Party last month will see mining regulations slashed to make way for greater investment in the industry. Days after Pinera took the seat, the Chilean government granted joint-venture mining firm MSB a lithium production and export license.
Lithium Chile (TSX-V: LITH) (OTCQB: LTMCF) noted the importance of the license grant at the time, stating that it “indicates a major change in Chilean policy with strong, potential benefits for Lithium Chile and other lithium exploration and development companies in Chile.” Indeed, by making it easier for firms to acquire land, the Chilean government is welcoming investors into the lithium market, who are sure to notice Lithium Chile’s low share price and large land ownership.
Chile’s recent liberal approach to mining has given junior firms the incentive to come forward, which is something that Argentina needs. This highlights the importance of firms such as Lithium Chile, which is bringing what it describes as a “top-tier” team to Chile to further its development there.
Meanwhile, in Argentina, the center-right government has seen President Mauricio Macri push for more lithium production since his election in 2015. In fact, according to the Financial Post, Macri has ambitions for Argentina to produce as much as 45% of the lithium market. Despite president Macri’s efforts, the biggest barrier to growth in Argentina “is a dearth of skilled workers.”
Juniors Over Majors
Currently, Chile is quite simply ahead of Argentina in terms of productivity, and the firms that operate there are seeing the benefits. In fact, SQM’s stocks have been in the green for a month, having risen around 10% from mid-March to mid-April.
However, the junior companies are quietly building potential. Current low stock prices coupled with high growth potential suggest that junior lithium miners aren’t to be underestimated. Investor focus is often on big-name mining firms such as SQM, meaning that junior firms with lots of lithium-rich lands are overlooked despite potentially undervalued stock.
Lithium Chile’s market cap is relatively small at around $90 million USDl, yet its stocks bumped up recently on the news that the company has identified multiple high-priority target areas at Chile’sSalar de Atacama and Salar Ollague properties. Drilling on both is due to commence this month.
In Argentina however, comparable junior firm Millennial Lithium Corp.is seeing a less stimulated stock performance in the short term, but the company has seen share prices rise a promising around 87% since April 2017 to April this year.
Clearly, Lithium Chile’s simple tactic of acquiring as much land as possible demonstrates Chile’scapacity to support junior firms due to its ever-productive salars, which may prove a match made in lithium heaven.
Other Active Firms In the Lithium Battle Include:
FMC Corp. (NYSE: FMC) has served the global agricultural, industrial and consumer markets since 1883. FMC is a market leader in using advanced technologies and customer-focused research and development. In 2017, FMC acquired a significant portion of DuPont’s Crop Protection business. FMC employs approximately 7,000 people throughout the world and operates its businesses in two segments: FMC Agricultural Solutions and FMC Lithium.
Nemaska Lithium Inc. (TSX: NMX) (OTCQX: NMKEF) is engaged in the exploration and development of hard-rock lithium properties. The company owns over two mining properties consisting of approximately 60 claims (Whabouchi and Sirmac) in the Eeyou Istchee/James Bayterritory in Quebec. The Whabouchi mine is one of the richest lithium spodumene deposits in the world, both in volume and grade.
Global X Lithium (NYSE: LIT) invests in the full lithium cycle, from mining and refining the metal, through to battery production. Founded in 2008, Global X Lithium is distinguished by smart core, income, alpha, risk management and access suites of ETFs, with more than 50 funds available across the U.S. and foreign exchanges.
Millennial Lithium Corp. (TSXV: ML) (OTCQX: MLNLF) – This junior Argentinian firm has two major projects in the country; its Pastos Grandes project, which covers 8,664 hectares, and its Cauchari project. The company claims that ‘no environmental obstacles exist to slow down the Company’s aggressive timeline.’ With director Graham Harris’ 30-plus years of finance industry experience and president Farhad Abasov’s 15-plus years of natural resource management, the firm is hardly lacking in experience. It recently began trading on the OTCQX market under the symbol MLNLF. Its Torontomarket price has sat around $2.50 for a week as of April 17th, bringing the firm’s market cap to around $208 million.
Overall, Chile Comes Out Stronger
On balance, Chile is the hotspot for lithium mining right now. Argentina’s Mauricio Macri has held his seat for longer that Chile’s Pinera has, and his ambitions are high. But Chile simply has the workers, the company interest, the output, and the single most productive salar in the world. This is evident from the growth of the firms which operate there.
Of course, Argentina is still third in the world in terms of lithium production, and this is hardly a bad thing. But Chile, in particular, has proven its lithium potential, and shares in junior mining firms such as Lithium Chile (TSX-V:LITH) (OTCQB:LTMCF) warrants some strong investors eyeballs.
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