May 11th, 2023 | 12:40 CEST
Drumbeat in the lithium sector! BYD, Standard Lithium and Grid Metals
A major merger is brewing in the lithium sector: Australia's Alkem has announced its intention to take over its US competitor Livent. This is further impetus for lithium shares to complete their sharp correction. The Bank of America, among others, sees light at the end of the tunnel. The price of lithium has stabilized, battery manufacturers have reduced their inventories, and the reopening of China is causing demand to rise. Against the background of the threatened nationalization - or at least partial nationalization - of lithium projects in Chile, investors should closely examine where the mining areas are located. This is where Standard Lithium, active in the US, and Grid Metals, active in Canada, come into play. Are carmakers like BYD, Volkswagen or Tesla grabbing hold of exciting projects in North America?
time to read: 4 minutes
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Author:
Fabian Lorenz
ISIN:
BYD CO. LTD H YC 1 | CNE100000296 , STANDARD LITHIUM LTD | CA8536061010 , GRID METALS CORP. | CA39814L1076
Table of contents:
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Author
Fabian Lorenz
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
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Grid Metals wants to process lithium as early as 2024
The shares of Grid Metals are still relatively unknown. But perhaps that makes it all the more interesting. Are the Canadians perhaps already getting ready for a partner or a takeover? At least one personnel development points to this. An experienced capital markets expert, Brandon Smith, has been appointed Chief Development Officer. Most recently, he was a senior equity analyst for one of Canada's leading independent investment banks, covering battery metals development.
"I am pleased to announce the appointment of Brandon as Chief Development Officer at Grid Metals," said Robin Dunbar, President and CEO of Grid Metals. "Brandon brings a wealth of experience that will benefit Grid Metals in what is shaping up to be a catalyst-rich year for the Company."
What catalyst-rich development are we talking about? Grid Metals operates exclusively in Canada and is focused on lithium. However, the Company also plans to mine nickel, copper and platinum group metals, which are also exciting. With the 4 projects Donner Lake, Falcon West, Makwa Mayville and a nickel mineral exploration license in the state of Manitoba, Grid Metals is well positioned in battery metals.
The Donner Lake lithium project is the most advanced. A drill program last year detected lithium (Li2O) grades of 1.5% to 1.7% in several drill holes. Grid Metals' goal is to go into production as early as 2024. Grid Metals intends to use the capacity of the adjacent Tanco Mine to mine and sell the lithium. A letter of intent to this effect is already in place. With a market capitalization of less than CAD 25 million and cash and cash equivalents (as of 03/31/2023) of around CAD 7 million, the Company appears to be anything but expensive.
Standard Lithium: Share with new momentum
Standard Lithium brings almost CAD 800 million on the stock exchange scales. The share price almost halved from CAD 8.40 in October 2022 to CAD 4.25 recently. In the last few days, however, the share price has increased by 10%. In addition to the stabilizing lithium price and concerns about the nationalization of projects in Chile, the stock also benefited from corporate news. Standard Lithium was able to prove a significant lithium brine resource at its project in the east of the US state of Texas. As part of the resource expansion work, lithium grades of 634 mg/L were discovered in one of the drill holes. According to the Company, this is the highest lithium grade of any lithium brine on the North American continent. As a result, Standard Lithium believes it is in a position to play a key role in supplying the US industry. Extraction from the brine is to be carried out using a technology developed in-house.
But the find is not the only positive news. A Joint Development Agreement (JDA) has been signed with Koch Technology Solutions (KTS) to develop optimal processing operations. KTS is part of Koch Industries, one of the largest corporations in the US. The agreement will further strengthen Standard Lithium's position to build the first commercial lithium project in the US in several decades, and to meet the growing demand for lithium.
Dr. Andy Robinson, President and Chief Operating Officer of Standard Lithium: "Today's announcement is about greater certainty, speed and choice. The performance guarantees for the KTS-Li-Pro technology license represent significant risk mitigation for Standard Lithium and its shareholders. The partnership will help accelerate the Company's first project to commercial reality, and the exclusivity will allow us to benefit from a second direct lithium extraction technology in addition to our own proprietary LiSTR technology that works with the brines of the Smackover Formation."
BYD, Tesla, Volkswagen & Co. in search of lithium
As lithium projects are commercialized within the next 1 to 2 years, companies like Grid Metals and Standard Lithium are also becoming attractive to the automotive industry. Manufacturers like Volkswagen and Tesla regularly confirm the importance of securing lithium for battery supply. And what could be safer than bringing lithium deposits in-house? Competitor BYD is showing how it is done.
In April, BYD entered into a strategic partnership with the state development agency CORFO in Chile. Together, they want to drive forward the production of lithium battery materials. Plans are already in place for BYD to set up production facilities in Chile to produce cathode material for lithium ferro-phosphate batteries. The announcement came shortly after Chile's president announced that the state would make greater use of lithium deposits in the future. According to the National Lithium Strategy, all private companies that wanted to mine lithium in Chile would have to cooperate with the state. The state's share in the projects would have to be at least 50.1%.
Tesla is also pursuing a consistent lithium strategy. The e-car pioneer is already building its own lithium refinery. The plant at the site near Corpus Christi in the US state of Texas is to be completed as early as next year and produce lithium hydroxide for one million e-cars as early as 2025. There are even plans for the plant to use lithium from recycled batteries and production waste in the future.
"Positive" momentum seems to be returning to the lithium sector. The price is stabilizing. The planned merger of the major players Livent and Alkem is attracting attention, and e-car manufacturers are extending the value chain. Grid Metals and Standard Lithium are interesting for several reasons: Exploration is on track, commercialization is foreseeable, and - not to be underestimated - the lithium deposits are located in North America.
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