FN Media Group Presents OilPrice.com News Commentary
LONDON: The twentieth century was the age of oil. Could the twenty-first be the age of lithium? It’s definitely starting to look that way. The lithium market is one of the fastest-growing commodity markets in the world. Included in today’s commentary: Rio Tinto PLC (NYSE: RIO), Arotech Corp. (NASDAQ: ARTX), Jacobs Engineering Group Inc. (NYSE: JEC), Alphabet Inc. (NASDAQ: GOOG), Advanced Micro Devices Inc (NASDAQ: AMD).
The market for batteries is set to grow to $120 billion over the next two years, fueled by the massive new demand for electric vehicles (EV) and battery-powered tech.
The boom in renewable energy sources, which need lithium-batteries to compete at cost with fossil-fuels, should only add fuel to the fire.
Since 2002, the price per ton has skyrocketed, from $2000 to more than $14,000. Now, lithium miners can take advantage of spot prices as high as $20,000. Meanwhile, costs have fallen and economies of scale have reduced cost per ton.
Companies and customers want lithium in larger and larger quantities. That’s put a lot of pressure on lithium miners, pressing them to open up new fields and increase production.
It’s also left the field open to new, dynamic companies hoping to get in on the action.
But while the big lithium players have some of the market cornered, the prospects for growth are bringing in a fresh crop of companies.
Here are a few choice stocks to consider for investors hoping to take advantage of the lithium boom.
Rio Tinto PLC (NYSE: RIO)
The international mining giant Rio Tinto PLC has embraced the technological revolution in mining and is investing heavily in new mining methods that will allow it to mine deeper, longer and at a lower cost than any other large mining firm.
A new mine opened by RT in Superior, Arizona has seen boring of nearly 7,000 feet. The deepest shaft reaches a depth of 1.3 miles, where temperatures rise to 175 degrees F.
The shaft is so deep and temperatures so high, some mining specialists have joked RT hopes to mine “in hell.”
Such a project would have been unimaginable ten years ago, but improved technology has made it possible. RT is using automated, robot miners to plumb the depths of earth to degrees that are impossible with human miners.
The company is now planning a $2.2 billion “intelligent” iron ore min that will incorporate new robotics technology, along with driverless trains and trucks. The site of the mine is in Western Australia, where RT extracts more than 300 million tons annually, making it the second-largest ore miner.
The company already operates 73 self-driving trucks in its Australian mines, and will likely rapidly expand that fleet in the coming years, as it embraces robotic tech.
The company is touting the benefits from robot mining, which include better safety, more efficient exploitation of resources and reduced environmental impact.
International Battery Metals (IBAT; RHHNF )
While most lithium stocks are in production/upstream activities, International Battery Metals (IBAT) is a tech stock with a brand new method for extracting the precious material.
Lithium carbonate is usually produced from brine sources and spodumene mines. Spodumene is a hard mineral that is mined from open pit mines such as Greenbushes in Australia. After mining the ore is beneficiated and undergoes thermal and heavy chemical extraction to produce lithium carbonate.
Lithium production from brine is different. Albemarle, SQM and Orocobre use solar evaporation is to extract lithium from the brine that has been pumped from Chilean and Argentinian Salars. This process utilizes many thousands of acres of solar evaporation ponds to precipitate non-lithium salts, and it can take months for the brine solutions to fully evaporate and produce a highly concentrated lithium solution. FMC is unique in that it is the only commercial company that utilizes Selective Absorption to recover lithium. This is the process that Burba and his partner invented and sold to FMC in 1994.
But IBAT has signed an LOI to acquire technology from Selective Absorption Lithium (SAL) which has developed improved technology that can process the brine in a matter of hours.
According to CEO John Burba, “Our tech has such a high specificity for lithium that it can directly take the lithium out.”
The method isolates lithium ions in the brine salt solution, removing lithium chloride and leaving the other salts behind, untouched.
It’s faster and much more environmentally friendly: no toxic ponds of brine left over and no salt piles dotting the lithium fields.
If proven on a commercial scale, it’s the equivalent of fracking for lithium: an improved method that could radically speed-up production times.
Right now, it can take 4 years for a lithium brine mine to come on-line, and other 3-4 years before the full capacity is reached. IBAT’s technology could turn a mine productive and fully profitable in a fraction of the time: as little as 24-hours would be needed to get the lithium out.
IBAT’s new technology would cut down on production costs. The patent pending technology will allow the company to utilize a very flexible model that can be broadly applied in a variety of oil field brine chemistries.
If everything works according to plan, IBAT could operate on a cost-per-ton equivalent to the biggest miners: Albermarle, Sociedad Quimica y Miner de Chile, and FMC.
The company could become profitable as soon as the tech is fully deployed.
Led by lithium pioneer John Burba, considered a genius in inventive lithium-extraction technology, IBAT entered the lithium field only last year. Already, it has evaluated numerous North American brines and is moving forward with in depth evaluation of several potential resources.
IBAT is an exciting company with some bold plans for the future. Its technology, if proved successful on a commercial scale could change lithium operations worldwide, paying off for any investor who believes that IBAT’s technology will win out.
Arotech Corp. (NASDAQ: ARTX)
Arotech has had a twisty road on its way to becoming a lithium-based tech company.
Going public in 2001 under the name Electric Fuel Corp., the company couldn’t hack it as a battery manufacturer and tried instead to rebrand as a defense contractor.
It acquired a training and simulation company as well as a military battery supplier and changed its name to Arotech. Now, the company has two divisions, Training/Simulation and Power Systems.
While both divisions attract contracts and a proven record of profitability, T&S can’t match P&S for growth potential. In 2016, the company attracted some activist capital and underwent significant re-tooling.
Arotech now has a strong profile and some healthy prospects for growth, having seen its share price grow from $2.95 in March to the current price of $4.30. The company expects year-over-year earnings to exceed 200 percent for the current quarter and 28 percent for the year, according to Nasdaq.com.
Orocobre Limited
An Australian miner with a major operation underway in Argentina, Orocobre experienced some serious set-backs in the first half of 2017.
Last fiscal year the company missed its projections and posted a $22 million loss, chiefly due to cost overruns.
But since then, it’s turned its game around. In August 2017 the company posted a profit for the year of $19.4 million. While the figure was boosted by a $14.8 million asset sale, stocks responded favorably and Orocobre is now back on its feet. In FY 2017 the company sold more than 12 thousand tons of LCE for sales equaling $120 million.
After its struggles in 2016, the company is now one of the lowest-cost producers around, with gross operating margins of 62 percent and lithium production costs of just $3,700 per ton.
Shares in Orocobre in September gained momentum, rising from $3 to $4.30 and catching investors off-guard. The share price shot up past $6.50 for a time before falling back below $6.
With current production at 11,000 tons LCE and a nameplate capacity of 17,000 tons LCE, the company has strong prospects for growth, and if its August earnings report is anything to go by, has escaped the doldrums of last year.
Galaxy Resources
With three separate lithium projects in three different countries and a steadily rising production profile, Galaxy Resources is definitely a lithium stock to watch.
The company’s major project, Sal de Vida in Argentina, is one of the biggest concentrations of LCE ever discovered. Low concentrations of magnesium and sulphate means the cost of production are low.
At Mt. Cattlin in Australia, Galaxy’s mine is set to produce 160kt in 2017 of spodumene. With costs factored in the off-take for Mt. Cattlin is $905/t for 6 percent spodumene, making the mine a considerable source of funds for Galaxy’s operations elsewhere.
Sales took off in the second half of 2017 and have increased in 2018, according to company projections. Galaxy has risen from less than $1.80 to more than $3 in just the last six months.
If the company’s three mines meet expectations, major production at very low costs will make Galaxy a new player in the upstream lithium market.
Honorable Mentions:
Jacobs Engineering (NYSE: JEC) Amidst a national infrastructure re-construction campaign, there has to be companies prepared to do the actual constructing! Enter Jacobs Engineering, a major name in architecture, engineering and construction.The company is a behemoth, employing more than fifty thousand people in over two-hundred locations across the United States. It’s also a strong earner, bringing in $10.9 billion in revenues in 2016.
Alphabet (NASDAQ: GOOG): With a market cap of over $657 billion, this is the second-largest by market capitalization in the S&P 500. Oh, and self-driving cars … definitely a huge part of the innovation in energy and artificial intelligence. As an early entry into the self-driving car world, Alphabet’s innovations have paved the way for a transportation revolution. For these reasons, Alphabet is likely to become a top consumer of lithium products in the coming years.
Advanced Micro Devices Inc (NASDAQ: AMD) is Nvidia’s biggest competitor. The company has developed a cult following among gamers, leading to many a Reddit debate. AMD’s groundbreaking technology not only rivals that of Nvidia, some even argue that it outperforms it. As the two square off, one of the key areas to keep an eye on is in the GPU race. Widely purchased across the world as Bitcoin frenzy heats up, AMD is making a particularly hard push toward conquering that emerging demand.
By. Charles Kennedy
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
Forward-Looking Statements
This news release contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include that IBAT will complete its announced transaction with North American Lithium and acquire NAL’s technology and IP; the Lithium extraction process will be cost effective and can work much more quickly that other extraction technologies; that the process can be commercialized for large scale production; that the NAL team which knows the NAL technology will join IBAT; that the NAL technology can be licensed worldwide; that IBAT plans to set up a pilot extraction facility in early 2018, and then secure additional licenses for other high-grade lithium brines by this summer; that by 2020, IBAT anticipates becoming a supplier of various battery metals; that IBAT plans to secure 3 tin properties in 2018; and that it plans to acquire high value tin and tantilum properties. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that the Company and NAL may not agree on the final agreement terms, aspects or all of the process development may not be successful, the process may not be cost effective, the Company may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumption based on limited test work and by comparison to what are considered analogous deposits that with further test work may not be comparable; high value mineral properties may not be available for IBAT to acquire, or IBAT may not be able to afford them; competitors may offer better technology than NAL’s lithium extraction technology; the availability of labour, equipment and markets for the products produced;
IBAT may not be able to finance its business plans; and despite the current expected viability of the project, that the minerals cannot be economically extracted with the NAL technology, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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