Lithium & Energy Demand
Three weeks ago, China, the world’s largest auto-market said that it would set a deadline for automakers to end sales of fossil-fuel-powered vehicles.
In 2016, China alone accounted for 32% of global car sales selling 28M cars out of total 88.1M. Now imagine that every single one of those vehicles will soon be entirely electric.
Adding in UK’s 2.7M car sales and France’s 2M car sales in 2016, that means that the countries that together make up 37% of the global car market have pledged to become 100% electric.
In the next 25 years, global energy demand will increase by over 50% and as the world is looking for cleaner ways to store that energy, lithium will play one of the most important roles in that equation.
In 2002, the yearly lithium demand was around 60,000 tonnes and by 2025, demand is projected to be north of 400,000 tonnes/yr. With all the new technology that’s coming, we think that future demand numbers are severely underestimated.
There’s a huge gap between the cost of production and the price for lithium and today’s producers are enjoying tremendous margins. This happens from time to time and often in these circumstances, it’s new technology that helps to close that gap.
For lithium production, we think the Tenova Bateman Process (YouTube) very well could be that technology that revolutionizes lithium production in the coming years. This technology has already been proven to work in pilot plants, but has yet to be tested at a larger scale. Early test indications are that the TBT process may outperform conventional and other alternative technologies for lithium recovery. Standard Lithium is looking into the Bateman Process and as they are evaluating all their options, Bateman is one of them.
We are convinced that the fundamentals for lithium are great already as it is, but we see the potential of a much longer bull market than most are even talking about. Much of the reasoning behind that theory is explained by Tobias Tretter (link to interview).
Mr. Tretter is one of very few lithium experts who actually knows what he is talking about. Tobias runs the world’s only pure lithium fund and what he doesn’t know about lithium isn’t worth knowing. Why are we telling you this? Two things.
1) Tobias’ views has very much influenced us into investing in Standard Lithium. We simply don’t see much else in the space that we want to invest in to be honest.
2) We don’t want you to read any further before you make any decision about investing in the space. This interview is very educational and a must listen for all of you!
Standard Lithium (SLL.V) –
A Premier Lithium Producer In The Making
There’s an inflation in crappy lithium juniors and one has to be thorough in one’s due diligence before picking the best one. Yes sure, they are all talking about how soon they will be in production, but the truth is, very few will actually succeed. If Mr. Tretter is correct, 95% of these companies will all be gone in less than 5 years.
Standard Lithium is founded by some of the most serious people in the industry with a track record of building and running multi-billion dollar companies.
In May, we visited the Bristol Lake Project in California, a fully permitted mining operation with a production history going back 100 years. Current operators have run the mine in the last 50 years.
The current operation is mining for salt, not lithium. Standard has acquired all the mining rights to the lithium brines and since this is already in production, this is a fully permitted mining operation.
Recent results from a geophysical survey of the 25,000-acre Bristol Lake site suggest a high concentration of lithium-bearing brines are present throughout the company’s mineral lease agreement claims.
All necessary infrastructure is on site, which gives Standard Lithium immediate access to conduct exploration brine sampling, lithium extraction, evaporation and processing activities, all within a fast-track project development schedule.
Standard Lithium has one of the best management teams we have ever seen in a junior mining company, innovative and result-oriented with a strong focus on technical skills.
Tesla & Apple
Both these giants want to source their lithium from North America and this is another reason for why we have SLL as our only lithium investment. Argentina and the lithium triangle is an overcrowded place, making it very hard to determine what’s quality and what’s not.
Standard Lithium is focusing on USA, being closer to Tesla’s Gigafactory than most of its competition. We agree with the SLL founders that this is a great strategy, and this will fit right in with North American investors’ preference on where to invest. It will be easier to stand out in a small crowd than in an ocean of explorers down in South America.
“Large technology companies will play a major role in the North American future lithium production, mark our words.”
The graph above clearly shows one of the main investment thesis for Standard Lithium, the lack of U.S. Li production is significant. The companies with the strongest management teams, outlining a trustworthy path to production, will be in a great place to sign offtake agreements with companies like Tesla and Apple as well as Chinese and Japanese tech giants. We think Standard Lithium will be one of those few companies.
Conclusion & Price Expectations
Lithium is one of the strongest bull markets in the whole resource sector and it’s our view that it will still surprise to the upside. We have placed our bet with a very strong group of people and as readers know, people are often the most important factor when investing.
We usually have a 6-12 month investment horizon but with Standard Lithium we take a different approach. We see Standard Lithium as a long-term investment, perhaps even as long as 3-5 years. If Standard Lithium is not taken over, which is a huge probability, we could absolutely see the stock reach $10-12 in this time frame. Perhaps more even.
Gecko Research first recommended Standard Lithium around 80 cents back in March and our investment group GIG was able to participate in the 75c placement in June.