{"id":3901,"date":"2018-04-05T13:01:14","date_gmt":"2018-04-05T17:01:14","guid":{"rendered":"http:\/\/business.financialpost.com\/?p=1569229"},"modified":"2018-04-05T13:01:14","modified_gmt":"2018-04-05T17:01:14","slug":"chasing-lithium-around-the-world-is-the-red-hot-metal-about-to-leave-miners-in-the-cold","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2018\/04\/05\/chasing-lithium-around-the-world-is-the-red-hot-metal-about-to-leave-miners-in-the-cold\/","title":{"rendered":"Chasing lithium around the world: Is the red-hot metal about to leave miners in the cold?"},"content":{"rendered":"<p><span style=\"font-weight:400;\">It&#8217;s 11:55 p.m. and Steven Howard has just returned to his hotel room in Beijing after a draining day of meetings to promote his lithium exploration company. The next morning, he would fly to Seoul to do it again, and then on to Tokyo.<\/span><\/p>\n<p>&#8220;I\u2019ve got wings and wheels strapped to my rear end,&#8221; he says about his travel schedule which included stops in Hong Kong, Shenzen, Huizhou and Tianjin.<\/p>\n<p><span style=\"font-weight:400;\">Howard, whose background is in oil and gas, leads one of the dozens of Canadian-listed mining companies looking to capitalize on the roaring demand for lithium being created by the world\u2019s budding electric vehicle industry, before the bubble bursts.<br \/>\n<\/span><\/p>\n<ul class=\"related_links\">\n<li><a href=\"http:\/\/business.financialpost.com\/business-trends\/major-international-lithium-and-battery-manufacturer-teams-up-with-junior-explorer-to-solve-supply-shortages\">Major international lithium and battery manufacturer teams up with junior explorer to solve supply shortages<\/a><\/li>\n<li><a href=\"http:\/\/business.financialpost.com\/transportation\/autos\/musk-sleeps-at-the-factory-while-world-waits-for-model-3-numbers\">&#039;Car biz is hell&#039;: Elon Musk back to sleeping on the factory floor as Model 3 delays pile up<\/a><\/li>\n<\/ul>\n<p><span style=\"font-weight:400;\">But his company faces an odd dilemma: lithium prices have never been this high, estimated at more than US$13,000 per ton, yet there are growing fears that the supply and demand forecasts are out of whack, and that prices will crash. Unlike the other materials that are key to electric vehicle batteries, such as copper and nickel, the market for lithium is relatively opaque \u2014 with no futures\u2019 market and no benchmark price as most lithium is sold in private transactions.<br \/>\n<\/span><\/p>\n<p><span style=\"font-weight:400;\">As a result, lithium explorers are feeling more pressure than ever, and are having a harder time raising cash on the stock exchanges, in what should be a bull market for the metal producers. That\u2019s sending them into Asia, where a more advanced electric vehicle industry is creating real demand for lithium, and opportunities to lock in sales agreements, even for mines that remain years away from being built.<\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cIt\u2019s just such a different world over there,\u201d said Howard, chief executive of Lithium Energi Exploration Inc., who returned from Asia just before Easter. \u201cI was astounded by the number of electric vehicles \u2026 they\u2019re way ahead of us, leaps and bounds ahead of the rest of the world.\u201d<\/span><\/p>\n<div id=\"attachment_1411082\" style=\"width: 950px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg\"><img decoding=\"async\" data-attachment-id=\"1411082\" data-permalink=\"http:\/\/business.financialpost.com\/commodities\/energy\/lithium-may-be-the-new-oil-but-theres-a-double-whammy-looming-for-the-new-energy-source\/attachment\/mvd1623709\/\" data-orig-file=\"http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg\" data-orig-size=\"940,705\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;AFP\\\/Getty Images&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;TO GO WITH AFP STORY BY GERARDO BUSTILLOS A worker of the pilot plant for the industrialization of evaporitic resources builds a barrier with stones and rocks at a brine pool in the world&#039;s largest salt flat of Uyuni, 550 Km southwest of La Paz, Bolivia on July 14, 2011. Uyuni, with and area of 10,582 square km is one of the richest deposits of lithium of the world.  AFP PHOTO\\\/AIZAR RALDES (Photo credit should read AIZAR RALDES\\\/AFP\\\/Getty Images)&quot;,&quot;created_timestamp&quot;:&quot;1310601600&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;Mvd1623709&quot;,&quot;orientation&quot;:&quot;1&quot;}\" data-image-title=\"Mvd1623709\" data-image-description=\"\" data-medium-file=\"http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg?w=300\" data-large-file=\"http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg?w=640\" class=\"size-full wp-image-1411082\" src=\"http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg?w=640\" alt=\"\" srcset=\"http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg?w=640 640w, http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg?w=150 150w, http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg?w=300 300w, http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg?w=768 768w, http:\/\/wpmedia.business.financialpost.com\/2017\/07\/lithium.jpg 940w\" sizes=\"(max-width: 640px) 100vw, 640px\"  ><\/a><\/p>\n<p class=\"wp-caption-text\">Lithium, like oil, is found in the earth&#8217;s crust<\/p>\n<\/div>\n<p><span style=\"font-weight:400;\">Based in Dallas, Tex., he\u2019s been using the TSX Venture Exchange to raise funds to convert a plot of land in Argentina into a brine pond, from which lithium can one day be extracted, and \u2014 if his recent trip pays off<strong> \u2014<\/strong>&nbsp;sold to a battery maker or auto company in Asia. <\/span><\/p>\n<p><span style=\"font-weight:400;\">The company has yet to drill any holes, which puts it several years away from production, assuming it finds lithium of sufficient grade and quantity in the first place. <\/span><\/p>\n<p><span style=\"font-weight:400;\">Analysts say average lithium prices, as reported by the largest producers and found in spot prices in China, have doubled in the past two years, leading to a proliferation of exploration companies. Between the TSX and the TSX Venture Exchange, at least 75 companies were mining or exploring for lithium, and that number doesn&#8217;t include the companies seeking to extract lithium from industrial wastewater or batteries.<\/span><\/p>\n<p><span style=\"font-weight:400;\">But even as a rush ensues, lithium prices remain hazy, in part because a few large players dominate the market and keep their prices private, said Chris Berry, who advises companies and is moderating a panel discussion in Shanghai later this month on the lack of transparency in the lithium market.<\/span><\/p>\n<p>&#8220;Because there\u2019s no futures market with respect to lithium &#8230; you\u2019re really left to talk anecdotally,&#8221; said Berry, founder of New York-based House Mountain Partners.<\/p>\n<p><span style=\"font-weight:400;\">A number of events have also conspired to throw cold water on lithium mining companies.<\/span><\/p>\n<p><span style=\"font-weight:400;\">Most recently, a Tesla Inc. driver in California died in a fiery crash that drew concerns about the flammability of electric vehicle batteries, which, coupled with the Palo Alto, CA.-based electric vehicle company\u2019s rising debt load, has raised questions about its business model.<\/span><\/p>\n<p><span style=\"font-weight:400;\">In late February, Morgan Stanley released a report that suggested the price of lithium could drop 45 per cent to around US$7,000 per ton by 2021. The report suggested that growth forecasts for electric vehicles, currently 1.6 per cent of global sales, may be overestimated, and that there could soon be an oversupply of lithium. <\/span><\/p>\n<p>It also noted the Chilean Economic Development Agency has increased the production quota for Sociedad Qu\u00edmica y Minera de Chile S.A \u2014 a large producer that is 32 per cent owned by Saskatoon-based Nutrien, the company created by the merger of Agrium Corp. and The Potash Corporation of Saskatchewan.&nbsp;Combined with a quota increase for another large producer, Albemarle Corp., an additional 200,000 tons of lithium could come online by 2025, according to Morgan Stanley analysts.<\/p>\n<p><a href=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png\"><img decoding=\"async\" data-attachment-id=\"1570360\" data-permalink=\"http:\/\/business.financialpost.com\/commodities\/mining\/chasing-lithium-around-the-world-is-the-red-hot-metal-about-to-leave-miners-in-the-cold\/attachment\/fp0403_lithium_world\/\" data-orig-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png\" data-orig-size=\"1001,561\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"FP0403_LITHIUM_WORLD\" data-image-description=\"\" data-medium-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png?w=300\" data-large-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png?w=640\" class=\"aligncenter size-full wp-image-1570360\" src=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png?w=640\" alt=\"\" srcset=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png?w=640 640w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png?w=150 150w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png?w=300 300w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png?w=768 768w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0403_lithium_world.png 1001w\" sizes=\"(max-width: 640px) 100vw, 640px\"  ><\/a><\/p>\n<p><span style=\"font-weight:400;\">For perspective, Rupert Merer, an analyst with National Bank Financial, pegs current lithium production at around 200,000 tons per year, and forecasts&nbsp;demand will quadruple to 800,000 tons per year by 2025.<\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cWhen you have that kind of growth, it\u2019s always going to be hard to nail that kind of demand and supply accurately,\u201d said Merer.<\/span><\/p>\n<p><span style=\"font-weight:400;\">Meanwhile, stocks of the biggest lithium producers are in the doldrums: Albermarle,<strong>&nbsp;<\/strong><\/span><span style=\"font-weight:400;\">Sociedad Qu\u00edmica y Minera de Chile and FMC Corporation are all trading down at least 20 per cent since January. Junior explorers have not been spared either:&nbsp;Howard&#8217;s company&#8217;s stock price has nearly halved, from 93 cents in November down to 46 cents on Tuesday.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight:400;\">If prices stay that low, Howard and others are convinced a wave of mergers will sweep the industry as buyers snap up cheap assets.<\/span><\/p>\n<p><span style=\"font-weight:400;\"><\/span><\/p>\n<p><span style=\"font-weight:400;\">That helped convince him to hop on a plane to China and spend a week meeting with executives from car companies and battery cathode makers, about one day purchasing lithium from his company.<\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cWe\u2019re coming closer to the end of the stampede, if you will,\u201d he said.<\/span><\/p>\n<p><span style=\"font-weight:400;\">In one ray of hope, last month, a consortium of Chinese investors paid a significant premium to purchase all shares of Vancouver-based Lithium X Energy Corp. \u2014 an exploration company with prospects in Argentina, but still years away from production \u2014 for an aggregate price tag of US$265 million.<\/span><\/p>\n<p><span style=\"font-weight:400;\">But there was skepticism before the deal closed, with Lithium X shares trading as low as $1.77 \u2014 a 32 per cent discount \u2014 three days before NextView New Energy Lion Hong Kong Ltd. paid&nbsp;$2.61 per share&nbsp;in early March to take the company private.&nbsp;&nbsp;<br \/>\n<\/span><\/p>\n<div id=\"attachment_1570363\" style=\"width: 1010px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png\"><img decoding=\"async\" data-attachment-id=\"1570363\" data-permalink=\"http:\/\/business.financialpost.com\/commodities\/mining\/chasing-lithium-around-the-world-is-the-red-hot-metal-about-to-leave-miners-in-the-cold\/attachment\/fp0405-gs-tesla-crash\/\" data-orig-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png\" data-orig-size=\"1000,750\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"fp0405-gs-tesla-crash\" data-image-description=\"\" data-medium-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png?w=300\" data-large-file=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png?w=640\" class=\"size-full wp-image-1570363\" src=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png?w=640\" alt=\"\" srcset=\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png?w=640 640w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png?w=150 150w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png?w=300 300w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png?w=768 768w, http:\/\/wpmedia.business.financialpost.com\/2018\/04\/fp0405-gs-tesla-crash.png 1000w\" sizes=\"(max-width: 640px) 100vw, 640px\"  ><\/a><\/p>\n<p class=\"wp-caption-text\">Emergency personnel work a the scene where a Tesla electric SUV crashed into a barrier on U.S. Highway 101 in Mountain View, Calif. late last month. A vehicle using the semi-autonomous system crashed into a concrete lane divider killing the driver.<\/p>\n<\/div>\n<p><span style=\"font-weight:400;\">\u201cLithium X was created at the beginning of a wave,\u201d said Brian Paes-Braga, former chief executive of the company, who added the plan was always to sell the company before more lithium projects came online and caused a price correction.<\/span><\/p>\n<p><span style=\"font-weight:400;\">Still, Paes-Braga said his company \u2014 backed by Vancouver billionaire Frank Giustra, and chaired by Paul Matsyek, a veteran of the mining industry \u2014&nbsp;exemplifies the differences between western and Asian investment strategies for the lithium market.<\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cI think there\u2019s two different agendas, one is economic value creation,\u201d said Paes-Braga, referring to his own company. \u201cThe other is a demand side agenda in China.\u201d<\/span><\/p>\n<p><span style=\"font-weight:400;\">In China, as part of an initiative to upgrade its industries, known as \u2018Made in China 2025\u2019, the country has set a strategic priority to lead the world in electric vehicle production and targets seven million new electric vehicles by 2025 compared to 330,000 in 2015, <\/span><a href=\"https:\/\/www.crugroup.com\/knowledge-and-insights\/spotlights\/made-in-china-2025\/\"><span style=\"font-weight:400;\">according to the research firm CRU Group<\/span><\/a><span style=\"font-weight:400;\">.<\/span><\/p>\n<p>That&#8217;s helping to drive consensus that the electric vehicle industry is set for big growth in the next five to seven years, but both the supply and the demand forecasts are predicated on multiple assumptions.<\/p>\n<p>&#8220;The point is there\u2019s a lot of growth and demand coming,&#8221;&nbsp;said MacMurray Whale, an analyst with Cormark Securities.<\/p>\n<p><span style=\"font-weight:400;\">Last week, TSX-listed Nemaska Lithium Inc. unveiled new details of its plans to raise as much as US$825 million to construct a lithium mine and electrochemical processing facilities in northern Quebec.<del> <\/del><\/span><\/p>\n<p><span style=\"font-weight:400;\">The goal is to begin building within a year, according to chief executive&nbsp;Guy Bourassa, who was on a trip to Tokyo and Seoul this week, meeting with potential investors.<\/span><\/p>\n<p><span style=\"font-weight:400;\">\u201cIt is more difficult to raise money\u201d on an exchange, said Bourassa. \u201cIt\u2019s not the flavour of the month anymore.\u201d<\/span><\/p>\n<p><span style=\"font-weight:400;\">But, he added,\u201cIn China and Korea and Japan, I can guarantee you that they\u2019re struggling to get their hands on a good supply.\u201d<\/span><\/p>\n<p><em>\u2022 Email: <a href=\"http:\/\/business.financialpost.com\/commodities\/mining\/gfriedman@postmedia.com%E2%80%9D\">gfriedman@postmedia.com<\/a> | Twitter: <a href=\"http:\/\/twitter.com\/GabeFriedz\" class=\"&quot;twitter-follow-button\u201d\">GabeFriedz<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Not that long ago lithium was the it-mineral but miners are finding it harder to raise capital now that fears of over-estimated electric-car uptake have crept onto the scene<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/3901"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=3901"}],"version-history":[{"count":1,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/3901\/revisions"}],"predecessor-version":[{"id":3902,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/3901\/revisions\/3902"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=3901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=3901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=3901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}