LOS ANGELES, November 29, 2018 /PRNewswire/ --
USA News Group - US automakers are feeling the pressure coming from China's largest lithium buyers, now that the Chinese effectively control over half of the world's lithium production. The brewing lithium scare has the electric vehicle (EV) sector scrambling to find their next sources of the integral white battery ingredient.
A push is being made by US miners to secure domestic lithium again, driven hopefully by orders from the battery and vehicle manufacturers who may be leery of dealing solely with China for arguably their most important ingredient. However the solution isn't likely going to come just domestically, as the US only produced about 2% of the world's lithium last year, from a single mine in Nevada. Due to higher grades, and a significant head start, the newest supplies are likely going to come from South of the equator-likely from the Lithium Triangle that spans Argentina, Bolivia, and Chile.
There are several players in the Lithium Triangle, with or without Chinese investment involved already, including Advantage Lithium Corp. AVLIF (TSX.V: AAL), FMC Corporation FMC, Galaxy Resources Limited GALXF, Sociedad Química y Minera de Chile S.A. SQM, and NRG Metals Inc. NRGMF (TSX.V: NGZ).
Interest in the region is currently. Recently South Korean steelmaker, POSCO, made a huge splash by purchasing the northern tenements of the Sal de Vida lithium brine project for $280 million from Galaxy Resources. Now a report coming from the Spanish language publication, América Economía suggests that POSCO will invest $450 million for the production of lithium on the property which is located in the Salar del Hombre Muerto.
Nearby to the South of POSCO's new acquisition is another high-grade lithium project, being developed by NRG Metals-with the help of Chinese partners Chemphys. NRG's Hombre Muerto North Lithium Project recently received very high-grade results and a favorable magnesium to lithium ratio on its latest drill results.
On the Chilean side of the Lithium Triangle, SQM recently finalized a deal with China's Tianqi Lithium to sell a 24% stake for over $4 billion. The stake was forced to be sold, after the January merger of its previous owner Potash Corp. with Agrium triggered a condition of the corporate union.
If US automakers still want to secure a lithium supply for their EV market, they must act fast. It's unlikely that the domestic US supply will be ready in time to matter. Therefore, it's necessary if they want to compete with Chinese buyers, they're going to need to go south.
WHY THE BAR IS SET HIGH
Demand in the region is set quite high, with POSCO's Sal de Vida purchase establishing a precedent. The later-stage project has the potential to generate total annual revenues of approximately $360 million, scaling up to 25,000 tonnes per year of lithium carbonate and 95,000 tonnes of potassium chloride.
Tianqi's purchase of a stake in SQM was even more significant, as it sent shockwaves throughout SQM's home country of Chile. Alarmed by the potential market dominance that Tianqi's stake would represent, state economic development agency Corfo asked the country's antitrust regulators to block the sale to not only Tianqi, but other Chinese companies also.
China is gobbling up all the lithium it can abroad, despite having huge reserves of its own. Instead, China is choosing to secure supplies from the world's largest producers, namely Australia, Argentina, and Chile.
Tianqi already owns 51% of Australia's Greenbushes lithium mine, giving it effective control over nearly half of the world's lithium production, according to Huang Liheng, an analyst at GF Securities. If the US buyers are still interested in securing their lithium without a middleman from China, then what are they waiting for? The Lithium Triangle awaits more US entries.
LITHIUM TRIANGLE SNAPSHOTS
Advantage Lithium Corp. AVLIF (TSX.V: AAL)
Backed by Phase II drilling results, Advantage recently released an updated resource estimate on its Cauchari Joint Venture Project with partners Orocobre. Located in Jujuy Province, Argentina, Cauchari's numbers were increased to a volume of approximately 1,200 million cubic metres of brine, at average grades of 450 mg/l lithium and 4,028 mg/l potassium for 3.0 Mt of LCE. The updated resource will be used as the basis for a Scoping Study/Preliminary Economic Assessment (PEA) scheduled for completion during this quarter.
FMC Corporation FMC
While lithium isn't the entirety of FMC's business model, its FMC Lithium subsidiary is still a significant part of the overall picture for the $11+ billion company. FMC is currently producing from its Fenix Mine in the province of Salta, within the prolific Hombre Muerto Salar, adjacent to NRG Metals' Hombre Muerto North Project, and near Galaxy Resources' Sal de Vida development stage project, which recently had the northern tenements sold to POSCO. FMC is planning to triple its lithium hydroxide production capacity by 2019.
Galaxy Resources Limited GALXF
For a whopping $280 million Galaxy recently sold the northern tenement package of its Sal de Vida project to POSCO. The package hosts a known resource of 1.58 Mt of Lithium Carbonate Equivalent (LCE), and total resources of 2.54 million tonnes. Galaxy intends to use the funds raised from the sale to develop Sal de Vida's remaining tenements in the Southern Basin. The southern tenements contain an estimated 4.09 Mt in the measured and indicated category, and 1.14 Mt of reserves. Prior to the sale, Galaxy appointed JP Morgan Australia to evaluate "strategic options" for Sal de Vida.
Sociedad Química y Minera de Chile S.A. SQM
SQM is coming freshly off the sale of a 24% stake in their company to China's Tianqi Lithium, for a cool $4.1 billion. The Chilean-based company continues to have plenty of activity in the Lithium Triangle, with its current production in Chile, and an ongoing joint venture with Lithium Americas in Argentina. Together, the JV is working towards building their own Cauchari-Olaroz project, which was announced back in March of 2016.
NRG Metals Inc. NRGMF (TSX.V: NGZ)
A second round of drilling on NRG's Hombre Muerto North Lithium Project delivered very positive results for the junior lithium developer. Brine samples collected from 100 meters to 300 meters showed high-grade values very similar to the previous assays for the samples from surface to a depth of 100 meters. Over the results, NRG's latest drilling returned an arithmetic average of 888 mg/l lithium, with the added bonus of a low magnesium to lithium ratio. With the project's close proximity to POSCO's recent $280 million acquisition from Galaxy Resources, and to FMC's producing Fenix Mine, NRG Metals has been quite optimistic the last couple months.
CHEMPHYS BOLSTERING NRG METALS IN ARGENTINA
NRG Metals Inc. NRGMF (TSX.V: NGZ) formed a strategic alliance with Chinese high-purity lithium manufacturers Chengdu Chemphys Chemical Industry Co., Ltd ("Chemphys"), long before Galaxy Resources made its massive deal with POSCO. Rather than a sale, NRG and Chemphys are working together to see the Hombre Muerto North Lithium project through each development stage, with Chemphys even having representation on the NRG Board of Directors.
The alliance has aggressively developed the property since initiating work together- Sampling on the project from earlier this year yielded very high lithium values. Several sites returned values over 1000 mg/l Li.
However, the company has more than just the alliance territories. On NRG's other Argentinean asset the Salar Escondido Lithium Project, the company boasted similarly high values.
Chemphys' interest in NRG proved that even earlier development stage projects were fair game for partnerships, and not just the major players. Chemphys, like POSCO, has long-term goals to see its lithium projects through to production. They entered the NRG partnership specifically to advance the exploration and development of the Hombre Muerto North Lithium Project ("HMN Project") all the way to its rightful conclusion.
Now with Phase II drilling delivering considerably positive high-grade results (an average of 888 mg/l lithium across 100 metres), there's more for the alliance to get excited about. Results like that tend to positively impact future capital and operating costs, should the economic viability and technical feasibility of the project be established.
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