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July 25th, 2022 | 12:55 CEST

Rock Tech Lithium, Edison Lithium, Standard Lithium - Demand for lithium is increasing faster than supply

  • Lithium
  • Electromobility
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At an industry workshop on lithium price and supply risks hosted by the German Raw Materials Agency, it quickly became clear that lithium is facing a bottleneck. Demand in 2030 is expected to be between 316,000 and 558,000 metric tons of lithium. By comparison, only 82,000 tons were produced in 2020. The target of 15 million electric cars on Germany's roads is thus at risk. The Handelsblatt recently referred to calculations by the Federal Institute for Geosciences and Natural Resources, which clearly show that there will not be enough lithium. Therefore, we take a look at three companies from the lithium sector that will benefit from the high demand.

time to read: 4 minutes | Author: Armin Schulz
ISIN: ROCK TECH LITHIUM | CA77273P2017 , Edison Lithium Corp | CA28103Q1090 , STANDARD LITHIUM LTD | CA8536061010

Table of contents:

    Rock Tech Lithium - Everything is going according to plan

    Rock Tech Lithium's plans are aimed at helping European automakers optimize their supply chains. The Company plans to build the first converter for the production of high-grade lithium hydroxide in Germany. Plans for the Guben site are ready. In the future, lithium for around 500,000 electric vehicles will be produced there. By 2030, 4 more converters are planned, which could cover 30% of the European market share. Sustainability is not to be neglected either. Efforts are being made to achieve zero-waste production and to offer a closed material cycle for lithium and valuable by-products. The Company is also developing its own lithium mine in Ontario, Canada.

    In recent weeks, the Company has announced quite a few positive news items. The first was a letter of intent to cooperate with Transamine SA. Together they want to develop a supply chain for spodumene concentrate, which is needed for the converters. A strategic partnership is to be formed with ThyssenKrupp Materials Trading (Tkmt). Tkmt will supply spodumene concentrate and, at the same time, become a customer for lithium hydroxide. A framework agreement with a global auto manufacturer from Germany was announced on July 13. The off-take agreement runs for 5 years with an option to extend. It is a milestone for the Company.

    An off-take agreement makes it much easier to obtain financing for the converter. In addition, subsidies beckon for the cleantech company. If the start of production succeeds in 2024, it is only a matter of time before the other converters are built. In their latest report, the analysts at Montega issued a price target of CAD 10.50 and upgraded the stock to Buy. Currently, one pays only CAD 4.80 for a share certificate.

    Edison Lithium - Spin-out of cobalt assets

    Until May, the Canadian explorer Edison Lithium had two raw materials in its portfolio that are important for the implementation of the transformation of transport. There is a cobalt deposit in Canada with grades up to 4%, and there are two promising lithium brine deposits in Argentina with a total area of more than 148,000 hectares. On May 19, the Company announced the spin-out of the cobalt asset into a subsidiary. Edison Lithium shareholders will receive one share of the new company in exchange for each Edison share held. The new company is also expected to be listed on the stock exchange and raise an additional CAD 3 million through a private placement. This spin-out still has to be approved.

    Management's primary focus is on the Antofalla lithium project, which is 107,000 hectares and located in a known lithium basin. Just 20 km away is the production facility of Livent, a major lithium producer. Other lithium companies are also located in the area. The project has historical drill results. A total of 56 holes have been drilled, uncovering a resource of 83 million tons of potash at a grade of 6,400 mg/l and 2.22 million tons of lithium at a grade of 350 mg/l. The total discovery is equivalent to 11.8 million tons of lithium carbonate equivalent. It is here that economic success is likely to be achieved most rapidly.

    The Pipanaco project is 41,000 hectares in size, is located only 50 km from the city of Catamarca and is still in the early stages of exploration. The Company currently offers investors the opportunity to invest in both cobalt and lithium. That gives the Company two irons in the fire when the supply deficit in both areas becomes more apparent. The smaller stocks will also benefit when the lithium market comes back into focus. The market capitalization is currently CAD 9.8 million, and the share is quoted at CAD 0.085.

    Standard Lithium - On the upswing after Musk's statements

    The latest setback in lithium shares is due to the Goldman Sachs study, which assumes that there will be no supply deficit in lithium. However, the assumptions underlying this study assume an ideal scenario in production, as well as falling demand from battery producers. Nevertheless, the shares of the entire sector were dragged down. The most recent boost came from Elon Musk's statement that lithium refining into lithium hydroxide and carbonate is a license to print money. However, this is not about mining but processing. Still, the stock made bigger jumps in response until Friday, when it sold off from CAD 7.81 to CAD 6.47.

    The Canadian company owns two interesting projects in Arkansas. The main focus is on the development of the joint venture project with Lanxess. About 3.1 million tons of lithium carbonate equivalent have been reported there. On May 2, the Company announced the start of a preliminary feasibility study. By August at the latest, it plans to award contracts for the front-end engineering design and final feasibility studies of the lithium carbonate plant. If these studies are successful, Lanxess can take up to a 49% stake in the project company and acquire the lithium carbonate at a discount. A good deal for Lanxess, but it also provides Standard Lithium with more planning security.

    The Company is well positioned financially with the Koch Group's entry. The corporate bodies, such as CEO Robert Mintak, also continue to invest in the Company and have increased their voting shares by about 940,000 shares. Closing prices above CAD 8.32 are needed to break the downtrend in the stock. With the recent setback, the market capitalization is around CAD 1 billion. However, the capital value of the lithium projects is around USD 3 billion. So there is still room for improvement here.

    Lithium, the white gold, will remain volatile. Demand will continue to rise due to advancing electromobility. Rock Tech Lithium is well on its way to becoming a producer and covers the entire value chain, including recycling. Edison Lithium is still at the beginning but is present in the high-grade famous lithium triangle in South America. Standard Lithium is entering the hot phase. If the feasibility study is positive, things could move quickly.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author

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