Automakers led by Tesla are seeking a sustainable source of lithium for making lithium-ion batteries for their cars. Globally, the lithium industry has had tremendous growth over the past decade or so, and experts believe the demand would grow by 600,000 to 800,000 tonnes over the next decade.
Canaccord Genuity believes more capital is needed for identifying new sources of lithium to meet the demand, and the segment can expect a capital influx of $10 billion and $12 billion in the next decade. This would drive growth for the companies, who are into this business.
In Chile, the direct benefit of such lithium-related investment would go to the companies such as Lithium Chile Inc. (OTC:LTMCF), (TSX.V:LITH). Only recently, the newly elected government in Chile approved foreign investment worth $754 million. Further, Tesla – the electric car giant, is considering setting up its second Gigafactory in Chile.
Well prepared to meet growing demand
Talking of Lithium Chile, the company has a significant portfolio of properties. Lithium Chile has built a massive collection of properties in the “lithium triangle” of Chile, Bolivia and Argentina. More than 75% of the world’s lithium comes from these three regions, and Chile is the second biggest producer (next only to Australia) of the main ingredient that goes into the production of lithium-ion batteries used in the electric vehicles.
Lithium Chile has also tasted success on the foreign investment front. The mining company recently announced entering into a joint venture and a $1 million equity investment from Prosper One – a Hong Kong-based holding company, for Lithium Chile’s high-potential Norte project. Partnership with Prosper One gives Lithium Chile an international exposure and funds to boost the development of the Norte project.
Last week, the company announced the commencement of a four-hole drill program at its Ollague project in Chile. The minimum depth of the holes would be 250 meters or deeper as per the drilling conditions and brine content. Further, the drill rug will run 24-hours per day. The drilling will focus on the high-priority conductive targets found during the recent transient electromagnetic survey (TEM).
Once the drilling program is completed, Lithium Chile would go ahead with its plan of completing similar program on each of the other four advanced projects in succession through the third-quarter 2018.
Besides holding major properties, Lithium Chile also has cost advantage over other miners with average acquisition cost of $3 per hectare. Further, the company holds 100% of its properties, meaning no additional royalty payments or minimum work commitments.
Lithium Chile has several factors going in its favor including an attractive property portfolio and low-cost advantage. Further, the company has geographic advantage as well with Chile being a huge reservoir of lithium. Also, the quality of lithium in Chile is comparatively better than that of Argentina with lower magnesium content, giving the company an edge.
In the coming years, demand for lithium is expected to accelerate, directly benefiting lithium miners such as Lithium Chile. We expect the stock to continue moving up, and reward the investors, who maintain their trust in the company.
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