September 21st, 2022 | 13:41 CEST
Rock Tech Lithium, Edison Lithium, Albemarle, Allkem - Defying the recession
Fears of a global recession continue to grow, with prices for commodities such as copper, lumber, cotton and even grains correcting sharply. In contrast, the lithium price continues to hold at a high level after the explosive rise at the beginning of the year. The reason for this is the continued strong demand from the electric car industry. In China alone, sales of electric cars amounted to 3.2 million units last year, and 5 million vehicles are expected to be delivered this year. In contrast, the existing supply of lithium resources is scarce. In addition to existing producers, the primary beneficiaries of this shortage are the exploration companies, which have already been able to secure attractive properties.
time to read: 4 minutes
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Author:
Stefan Feulner
ISIN:
ROCK TECH LITHIUM | CA77273P2017 , Edison Lithium Corp | CA28103Q1090 , ALBEMARLE CORP. DL-_01 | US0126531013 , Allkem Ltd. | AU0000193666
Table of contents:
Author
Stefan Feulner
The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
He is passionate about analyzing a wide variety of business models and investigating new trends.
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High lithium demand, tight supply
The demand for lithium is expected to increase by around 130% between 2020 and 2025. Electric vehicles accounted for about 39% of demand in 2020. This share is expected to increase to well over 60% by 2025. According to the US Geological Survey, consumer electronics, energy storage batteries, and various industrial processes account for the remaining 40%. By 2030, the global demand for lithium carbonate is expected to reach 1.79 million tons. However, supply and production capacity are lagging. As a result, the price of battery-grade lithium carbonate has literally exploded, with an increase of over 400% in the last year and a half. According to experts, this will likely intensify significantly in the coming years.
The lithium market is currently highly concentrated, both geographically and in terms of corporate structures. For example, 85% of global lithium production comes from Chile, Argentina and Australia. The sharply rising prices on the world market are making previously uneconomic projects attractive and significantly increasing the expected project returns. While Australian lithium is extracted from spodumene ore, which comes from mining mines, lithium in South America is extracted from the brine of huge salt lakes. It is estimated that the salinas of Chile, Argentina and Bolivia hold up to 60% of global lithium reserves.
Edison Lithium - In the middle of the lithium mecca
Yet the "Lithium Triangle", which intersects three countries - northwestern Argentina, southern Bolivia and Chile - is known as the Mecca of lithium mining. In the midst of a concert of major producers, Edison Lithium is exploring two prospective brine claims. The total size is 148,000 hectares. The properties acquired last year from Resource Ventures are divided into the Salar de Antofalla project with 107,000 hectares, and Salar de Pipanaco with 41,000 hectares. Salar de Antofalla is located less than 20 km west of a lithium production operation of Livent Corporation, Argentina's largest lithium producer. In addition, the concession area is adjacent to the property of the major Albemarle. The other neighborhood also reads like a "Who's Who" of the mining industry with global companies such as Allkem, Lake Resources and Posco Chemical.
To date, results are available from 56 historical drill holes that have produced resources amounting to 83 million tons of potash with an ore grade of 6,400 mg/l and 2.22 million tons of lithium with a grade of 350 mg/l. Claims for the second property, Salar de Pipanaco, located less than 50 km from the city of Catamarca, are in an earlier stage of exploration.
Cobalt as a second pillar
Although lithium dominates the headlines, cobalt is actually the more difficult challenge for battery manufacturers. Even the latest technology is shifting in favor of using cobalt. If nickel-cobalt-manganese and nickel-cobalt-aluminum chemistry will dominate for all-electric vehicles, then cobalt will become even more important than before. Again, Edison Lithium has a presence here with its Ontario cobalt project in Canada. Earlier resource estimates here showed grades of 1.5% cobalt over 1.37m and selected grab samples of up to 4% cobalt and 93.3 g/t gold. In addition, deposits of nickel and copper were identified. In order to create greater value for shareholders to participate in the development of two separate specialized businesses, the spin-out of the Cobalt segment into a newly formed subsidiary has now been rubber-stamped. It could generate additional share price excitement due to the listing of the Cobalt segment.
Currently, the stock market value of Edison Lithium is CAD 7.58 million. At a price of CAD 0.07, the Canadians are trading at about 50% less than at the beginning of the year.
Rock Tech Lithium - Further downward
Despite promising news, the German-Canadian GreenTech company also continued its downward trend in recent weeks. Although a long-term cooperation with Mercedes-Benz was announced, the share price has lost about 44% since August and is still in free fall at CAD 2.85.
The sharp drop in the share price is probably due to the recent capital measure, which brought the Company around CAD 50 million for further expansion. According to the Company, most of the proceeds will be used for constructing the planned lithium hydroxide converter plant in Guben, Brandenburg, and for developing the Georgia Lake lithium mine in Canada. The Company will issue a total of 11,349,743 units for aggregate proceeds of approximately CAD 39.7 million at a price of CAD 3.50 per unit. Each unit will consist of one common share in the capital of Rock Tech and one-half of one common share purchase warrant. Each warrant will entitle the holder to purchase one common share for a period of 36 months from the date of issuance of the warrant at an exercise price of CAD 4.50.
In connection with the underwritten offering, the Company will additionally complete a non-brokered private placement of units for an aggregate amount of not less than CAD 9,037,500 pursuant to subscription agreements to be entered into directly between Rock Tech and the purchasers, all of whom shall be existing shareholders of Rock Tech.
Despite the price slide, analyst firm Montega is bullish on Rock Tech Lithium shares for the long term and sees a 12-month price target of CAD 10.00, representing a four-fold increase from current levels.
Despite recession fears, lithium remains at a high level due to high demand from the electric car industry. In this context, Edison Lithium owns two promising claims in Argentina. Despite the share price decline, analysts remain positive on Rock Tech Lithium.
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