American Battery Materials (OTCMKTS:BLTH) Looks Well Positioned To Become America's Top Domestic Lithium Supplier

By now, you may have heard that we are facing a critical shortage of lithium.

Thanks to global economies steadily transitioning to clean energy solutions on the backdrop of the Paris climate agreement, demand for critical minerals, particularly lithium, is expected to far outpace supply over the next several decades. Global and domestic demand for lithium is only expected to ramp up as electric vehicles gradually replace internal combustion engine vehicles. 

In fact, Benchmark Mineral Intelligence estimates that annual demand for lithium will reach 2.4 million tons by 2030. That's four times higher than this year's production forecasts. Despite an abundance of rich domestic sources, the U.S. is almost entirely dependent on foreign sources of lithium. That is why the Biden administration has signaled its willingness to promote innovative technologies related to the exploration and direct extraction of lithium-related minerals and compounds by awarding direct grants to 20 companies in 12 states.

The only problem with lithium extraction is that it can be an ecologically and culturally destructive process, and opposition by affected local communities to any type of mining appears to be gathering momentum in the US. 

Luckily, one company by the name of American Battery Materials, Inc. BLTH appears well positioned to become a lithium powerhouse due to a jurisdictional and extraction process advantage that allows access to both the US critical mineral supply chain as well as other global markets.

ABM is focused on supplying domestically-sourced critical minerals, with a particular focus on lithium. The Company has 743 mineral rights across 14,260 acres of federal land with 8 wells and existing infrastructure in Utah. It is backed by an expert team with 100+ years of oil, gas, and mineral extraction and drilling experience.

Uplisting to the NASDAQ

In a major development, the company has reaffirmed its commitment to a $120 million merger agreement with Seaport Global Acquisition II Corp. SGII, a publicly listed SPAC, that will result in ABM becoming a wholly owned subsidiary of SGII. 

“Demand for lithium is far outpacing supply, with the U.S. producing less than 5% of the world’s lithium,” said Sebastian Lux, Co-Chief Executive Officer of ABM. “Combining with SGII and listing on Nasdaq will allow us to accelerate our lithium and critical minerals extraction projects in Utah and potentially beyond to capitalize on the attractive opportunity as the world increasingly shifts towards electrification.”

American Battery Materials, Inc. BLTH Chairman and Co-Chief Executive Officer, David Graber, further moved to address concerns investors might have had regarding NASDAQ’s recent delisting warning letter to SGII, explaining that this was not an unusual occurrence for a SPAC that has extended its acquisition timeline.

The merger, which was initially announced on June 2, will result in existing ABM shareholders owning approximately 70% of the pro forma equity of the combined company, with the deal expected to close in the fourth quarter of 2023. The combined entity will be known as “American Battery Materials Holdings, and shares will be listed on the NASDAQ. This merger has the potential to unlock significant shareholder value when you consider the following:

As of June 30, BLTH had roughly 3.6 billion shares (total including warrants). Since the merger is valued at $120 million, that would mean that the new combined entity would be worth $0.033 per share, implying a potential upside of almost 3x from the current share price.

High-quality lithium assets and direct lithium extraction advantages

For some background, ABM’s claims are located in Utah’s mineral-rich Paradox Basin, an area that straddles the southern portion of the Utah-Colorado border. Rich in multi-commodity brines that have the potential to host lithium, bromine, potash, and potassium, the region is one of two in the world that hosts lithium and bromine together. Unlike most of the lithium-rich regions in South America, the Paradox basin is also unique as it sits on a historic seabed as opposed to much smaller lake beds.

American Battery Materials, Inc.'s BLTH flagship project is the Lisbon Lithium Project, which is located in San Juan County, in southeastern Utah. It consists of 743 placer mining claims staked in one contiguous group on U.S. government lands administered by the U.S. Bureau of Land Management (BLM). Historical technical reports indicate a high probability that assets are mineral-rich with supersaturated lithium brines (40% minerals, 60% water), with reported lithium values ranging from 81 to 500 ppm. 

Not only does the region benefit from advantageous climate trends and access to existing energy and logistical infrastructure, but it also has a favorable regulatory backdrop that is ideal for using direct lithium extraction. DLE technology has a number of advantages over conventional lithium mining techniques, including the fact that it reduces land requirements by over 97% when compared to evaporation and hard rock projects. DLE also reduces waste production with no tailings, ponds, or open pits and returns 100% of the brine brought to the surface to similar depths in a closed-loop system. Essentially, ABM intends to deploy DLE to provide a more cost-effective, efficient, faster-to-production, and environmentally friendly method of extraction versus traditional hard-rock mining processes.

Takeaway

In spite of the Biden administration offering major incentives to domestic lithium producers, traditional lithium mining still faces major hurdles like impacts on the environment, regulatory issues, controversial mining practices, and territorial litigation. For investors looking to capitalize on the critical metals opportunity, American Battery Materials, Inc. BLTH should be closely watched as it represents an underleveraged company that is harnessing a new DLE technique that will lower both extraction costs and capital expenditures.

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