We’re facing an imminent crisis in global lithium markets. Demand is growing exponentially, and lithium consumers are facing a 100,000-ton shortfall by 2025.
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Traditional lithium brine projects take too long to put into production. At up to 48 months, they won’t be able to close the supply gap on their own.
They’ve recruited the world’s top lithium pegmatite expert and invested in next generation 3D modelling for what could be the largest drill campaign of its kind for lithium today.
With results expected in a matter of months and a fully funded ongoing drill program – Power Metals is the biggest, under the radar lithium story to watch for 2018 and beyond.
- Runaway Lithium Prices.
- The New Opportunity In “Hard Rock” Lithium.
- Exciting Exploration Play.
- Their Secret Weapon: The Queen Of Lithium Pegmatite.
- Incredible Ontario Tax Advantages.
We’re Nearing A Major Crisis Point In Lithium
Lithium is in the midst of an unprecedented boom. Since 2015, the price per ton has soared from $6,500 to over $20,000, and demand shows no signs of stopping.
In fact – with explosive demand growth for smartphones, EV’s and home storage batteries – we might soon hit the physical limits of our lithium supply chain.
Companies like Power Metals stand to attract major investor attention.
According to reports – the crisis is about to get a lot worse.
Analysts at UBS Securities expect us to hit a critical milestone in 2018 – as electric cars finally hit cost parity with the internal combustion engine.
That event should trigger a wave of EV adoption across the globe.
Electric car batteries require a staggering amount of lithium to produce.
The Tesla (NASDAQ:TSLA) 70kWh Model S battery pack contains 63Kg of lithium, equivalent to the amount of lithium in 10,000 cellphones.
Oil major Total predicts we’ll see 20 million electric vehicle sales by 2030. That’s the lithium equivalent of building 200 billion iPhones.
That would require up to 1,200,000 tons of lithium, or 6x current global production.
Morningstar predicts a 100,000-ton annual shortfall in supply by 2025.
By 2030, today’s lithium prices might look incredibly cheap.
Power Metals Opportunity In “Hard Rock” Lithium
Global lithium supply is concentrated in relatively few locations. Lithium brine deposits in Argentina and Chile represent nearly 60 percent of global production.
These deposits are time consuming to put into production.
It can take 12-24 months to set up a facility. Then it takes another 12-24 months for the evaporative extraction process to produce usable lithium.
It may literally be impossible to scale up production in time.
Many Pegmatites are known to have much higher lithium concentrations than brines.
Unlike brine, high-grade lithium pegmatite can be processed into a higher quality battery-grade lithium hydroxide, where consumers like Tesla (NASDAQ:TSLA) are lining up to buy it. The low-grade lithium produced from brine operators produces a lower grade lithium carbonate which is far less valuable.
All of this makes the hard rock method much more attractive to battery manufacturers.
And, while hard rock lithium projects were once viewed as prohibitively expensive – they’ve become very lucrative at $20,000 per ton lithium sales prices.
Credit Suisse analyst John McNulty estimates “Lithium from minerals or ores costs about $4,200-4,500/tonne (€2,800-3,000/tonne) to produce.”
That could potentially deliver $15,800 per ton in gross profit.
Exciting Lithium Exploration Play
It’s not in the Atacama Desert, or deep in Central Asia.
This lithium bonanza is located near the Gigafactory in a politically stable Canada.
Power Metals currently controls three properties in Ontario, each of which has vast exploration upside. The most important of the three is Case Lake.
Case Lake is located near established gold mining camps in the Abitibi Greenstone Belt. All season access roads surround it on all sides.
It consists of a total of 38 mining claims with 7136 hectares of land. Multiple pegmatite outcrops were historically identified on the property.
In 2017, Power Metals started with a drill program for 5,000 meters. On their 8th hole they high grade lithium and tantalum. See PWM’s November 2, 2017 news release for grade numbers.
To put that into context – a 1 percent grade is considered high for hard rock deposits.
Lithium grades on some cores ran as high as 3 times that.
Beginning in January 2018, Power Metals drilled 3,000 meters on a dyke that very high grade lithium at surface. The Company is eagerly awaiting these lab results. See the company’s news releases of January 22 and 24, 2018.
Over 15,000 meters of drilling is budgeted and funded for 2018. And, the team at Power Metals has a secret weapon for their upcoming drill campaign.
The Queen Of High Grade Hard Rock Lithium
Her expertise is so highly regarded, she’s known as the Queen of Lithium Pegmatites.
She worked for the Ontario Geological Survey during the tantalum boom in the early 2000’s. During this time, she visited about 90 percent of the pegmatites in the province.
Dr. Selway has worked on properties including Case Lake, Georgia Lake, Seymour Lake, Crescent Lake and Separation Rapids pegmatite fields.
She’s the co-author of twenty-three NI43-101 reports.
Now she’s leading Power Metals new exploration campaign.
There are several reasons to get excited about the upcoming program. First, PWM uses a 3D model to target every single drill hole they punch.
Geologist in the field update their office with their quick log every day. The 3D model is then updated every second day – giving PWM better targeting.
They set the coordinates of 2-3 proposed holes at a time, rather than blindly setting up locations for 30 holes at the beginning of the program.
This means their geologists – lead by Dr. Selway – can react intelligently and change the exploration plan based on the previous day’s drill core.
- Extraordinary Tax Benefits In The Ontario Jurisdiction
Sociedad Química y Minera de Chile (NYSE:SQM) and Albemarle (NYSE:ALB) were recently forced to sign new royalty agreements with the Chilean government.
SQM was paying 6.667 percent and now must pay a base of 20 percent. The payments are on a sliding scale and top out at 40 percent if the price hits $25,000/tonne.
They’re also required to sell a portion of their product at a below market price to local Chilean entities to promote value-added industries in Chile.
Albemarle signed a similar deal in 2017.
This dramatically changes the economics of Chilean lithium brine production.
By contrast the Ontario mining royalty is a flat 10 percent – with no royalty on the first $10 million
CDN of sales per year for the first three years of the life of a new mine.
With taxes low and lithium prices rising – the economics of Ontario pegmatite have never been more attractive than they are today.
The world is starving for lithium. Global consumption will nearly double by 2025, soaring to 422,000 metric tons – worth $8.4 billion at today’s prices.
We simply won’t achieve that production with brines alone. That’s why pegmatite deposits like those being developed by PWM are so critical.
They have the properties. They have Dr. Julie Selway. They have a smart exploration system. More importantly, they’re moving right now.
Each of those drill programs represents a major potential catalyst for the stock.
BY. Ian Jenkins
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