Tesla Motors, Inc. (NYSE: TSLA) began mass production of lithium-ion batteries in the first week of January 2017, and by the end of the year it will have led to a doubling of global battery production capacity. By 2018, Tesla predicts it will churn out 35 gigawatts of batteries per year. It's a massive amount that surpasses more than what the rest of the world combined produces.
To put it more succinctly, Tesla's Nevada Gigafactory alone will lead to a doubling of global battery production capacity next year already-and with such limited supply availability it means a bull run for lithium. If lithium grows at its expected rate of 16 percent annually, it will be the fastest-growing commodity of the century--and junior lithium companies may turn out to be the fastest-growing companies of the century.
Lithium X Energy Corp. (LIX.V) (LIXXF) is a small-cap lithium company with a large resource (> 1 million tonnes LCE) and a dream team that has stormed the new supply scene in a way that would have been unthinkable just a couple of years ago.
Not only does the company have a world-class lithium resource in one of the sweetest lithium spots in the world, but it also has a world class technical and financial team with a strategic vision that has the potential to turn this into a billion-dollar company.
#1 Flawless Sector Fundamentals
Lithium stocks continue to rise, and analysts view 2017 as the strongest lithium rise yet because of Tesla's Model 3 demand. The demand is not even in question: Tesla's already got some 370,000 reservations and is looking to deliver 100,000 before the end of the year. It's more a question of supply meeting demand at this point.
Lux Research, a leading independent research and advisory firm, believes the electric vehicle market will grow to $10 billion within the next four years, while Navigant Research forecasts sales of electric vehicles to increase from 2.6 million in 2015 to over 6 million in 2024.
Last month saw the highest number of EV sales in the U.S - ever, with sales up 37 percent in 2016 from the previous year. The consensus is that the startup of Tesla's battery gigafactory will boost that sales growth further and faster.
In the meantime, Tesla (NASDAQ: TSLA) isn't alone - it's got competitors, and the battery gigafactory scene is heating up quickly. Those competitors need lithium, too.
Demand is set to soar. According to Deutsche Bank (NYSE: DB), demand for lithium will rise from 209,000 tonnes in 2016 to 534,000 tonnes in 2025. And it is definitively, a game for the small-caps now. While Albermarle Corporation (NYSE: ABL) has an estimated 22% of the lithium market share, FMC Corp. about 10%, SQM (NYSE: SQM) about 21% and Chinese lithium giant Sichuan Tianqi Lithium Industries about 10%, that is about to change. New supply is all about new miners, like Lithium X.
#2 Prime Lithium Land
When we talk about lithium, we aren't talking about very many prime locations. More than 70 percent of the world's known lithium reserves are in the 'lithium triangle' of Argentina, Bolivia and Chile. In the U.S., not only is Nevada ground zero for the American lithium boom, but it's also host to the only lithium mine in the United States-and Lithium X has prime projects in both places.
LIX has a market capitalization of US$110 million, but its lithium properties tell a story with a potentially much higher price tag. Other lithium companies operating in the 'lithium triangle' have market caps ranging from US$15 million to US$1 billion.
The company is developing its 8,156 hectare Sal de los Angeles project, situated in the prolific 'lithium Triangle' in Salta Province, Argentina. LIX owns the right to mine lithium on 32 claims here, nearby major miner FMC Corp's Fenix deposit at Salar de Hombre Muerto-one of the biggest lithium operations in the world. Here, Lithium X and its predecessors have already invested some US$20 million. And so far, resource estimates confirm the significance of the deposit.
More importantly, Lithium X is also the largest land holder in Nevada's Clayton Valley, the only producing lithium area in the entire United States. This is the heartland where all the new small-cap lithium miners are gathering, including Pure Energy Minerals (PE.V), Nevada Energy Metals (BFF.V), and Millennial Resources Corp. (ML.V).
Lithium X has over 15,000 acres in Clayton Valley, adjacent to Albermarle's Silver Peak mine (NYSE: ALB), the only American lithium producer right now, and about three hours from Tesla's gigafactory, where flipping the on switch has just created the start of a market frenzy.
#3 Best Operational Team in the World
Though lithium is the hottest commodity of our time, lithium companies-in their purest form-are actually rare. There are only a small number of lithium mining companies on the TSX.V compared to the enormous number of gold companies listed.
What this means from an investor's viewpoint is that talent is everything with this commodity, and real talent is hard to come by because few have the raw lithium industry executive experience necessary to develop this commodity in a sudden demand surge atmosphere.
It also means that there is a heated battle on to steal the best lithium executives because everyone knows this is where the winners and losers will be determined on this playing field.
It's also what makes Lithium X stand out. A brief look at the executive set-up here and it all becomes clear: We've got people, projects and capital, the three pillars of the mining business and the key to identifying the most promising early-stage mining opportunities.
- Eduardo Morales leads the operating team and has 36 years of experience, former CEO of Rockwood Litio Ltd. And former President of Rockwood Lithium Latin America, who developed Salar de Atacama from grass roots all the way up to a world leader in the production of battery grade lithium carbonate. Thanks to Morales leadership, Rockwood was sold to Albermarle Corporation in 2014 for US$6.2 billion.
- Paul Matysek, Lithium X's Executive Chairman, is a geochemist and geologist and also a corporate entrepreneur. He's built up and sold four companies in the past 10 years for over US$2.3 billion-and that includes lithium.
Brian Paes-Braga, Founder and CEO of Lithium X, is a visionary whose touch has so far turned pretty much everything to gold.
- It also helps immensely that equity financing and corporate structuring are the purview of Fiore Advisory, led by Frank Giustra, a Canadian business mogul who really needs no introduction and whose mining prowess is legendary. Giustra's reputation for financing high-level, successful natural resource deals means capital follows him around automatically. In fact, the industry calls it the "Giustra Premium". This is where we see the 'smart money' getting into lithium at the right time.
And there's no question about commitment, with roughly 20% insider ownership. They won't settle for anything short of another big success.
Indeed, from their perspective, success is imminent. The company is advancing full speed ahead, and looking to convert resources into reserves at a fast pace. In Argentina, construction on a 2,500-tonne pilot ponding facility should be permitted within the next 6 months, or sooner, in a JV agreement, and the contractor for this project is ready to mobilize. This will be a major step towards full-scale lithium production.
The LIX dream team has extensive experience and demonstrated success in Argentina, and just as importantly, the capacity to raise money. And in the emerging lithium boom, those who advance fastest in the race to production will be rewarded handsomely. LIX is working on its feasibility study, which is the last technical step to production--where investment turns into profit.
With Tesla already fired up and the hunger for lithium-ion batteries more voracious than ever before, the race to new lithium production is on, and it will be the best and brightest executive team that win when the dust on this energy revolution settles.
Elon Musk has already said Tesla "needs to absorb the entire world's lithium production" adding that he, "will seek American lithium sources first." With Tesla already inking early stage supply agreements in the Clayton Valley region already... the time to move on this opportunity is now.
We fully expect Lithium X (LIX.V) (LIXXF)-whose ambition is to become a billion-dollar company-to emerge on the top when that happens.
By James Burgess of Oilprice.com
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