There’s plenty of speculation about demand surrounding the emergence of electric vehicles (EVs) as a mainstay on roads across the planet. A lot of the discussion is fueled by Tesla (NASDAQ: TSLA) chief executive Elon Musk yelling from the rooftop about his company’s planned dominance of the space. Musk and company have made hay about how Tesla will need every ounce of lithium produced today if it can meet its production goals. The fact is, though, that other companies aren’t going to lay down and let Tesla just have share in a market that right now only accounts for about 1% of the auto market.
This begs the question about what really will be in demand when EVs make up a larger portion of the market, say 9.2% by 2025 like UBS Group forecasts or 12% by 2025 as SQM says, or eventually 50% and maybe one day 100%? Understand that an EV’s rechargeable battery doesn’t just use lithium, there are many key minerals, including graphite, cobalt, nickel, manganese, dysprosium, neodymium and praseodymium.
When UBS took the opportunity to tear down a Chevy Bolt, the world’s first mass-market vehicle with an extended range, they revealed a great deal about the possible effect on demand for these commodities and, ultimately, future prices underpinned by demand.
The Visual Capitalist hit the nail on the head with graphics demonstrating the impact on commodities in a 100% EV world. Based upon the Bolt’s composition, this includes a stunning increase of 2,898% demand for lithium and 1,928% increase in demand for cobalt, not to mention 655% for rare earth elements and 524% for graphite. Understand that not all EVs are identical – for instance, Tesla vehicles use different style cathodes and an induction motor rather than a permanent-magnet synchronous motor – but you get the point about the spike in commodity consumption.
As UBS and Visual Capitalist note, some of the markets for these minerals are already large and they’ll get even bigger. The market for nickel, a key cathode ingredient whose market already rings in around $20 billion, will need to more than double. Most of the others, including lithium and cobalt, are quite small currently and will have to blossom into huge markets to keep up with demand.
While analysts are chiming in over the market forecasts, exploration companies are taking positions to capitalize on a market that simply can’t remain nearly totally controlled by a few companies, namely Sociedad Quimica y Minera S.A. (NYSE: SQM), Albermarle (NYSE: ALB) and FMC (NYSE: FMC).
LiCo Energy Metals – A Name to Get to Know
LiCo Energy Metals Inc. (TSX-V: LIC) (OTCQB: WCTXF) is an exploration-stage company taking a multi-prong approach to try and carve out market share in both lithium and cobalt production in the future. The Vancouver-based company has recently added two successful industry veterans to its team and two significant assets to its portfolio, both of which are located on highly prospective land for their respective metals.
Dwayne Melrose, new Director and Chair of LiCo’s Technical Advisory Board, brings more than three decades of experience in the mining industry, during which he spearheaded efforts at companies like True Gold Mining, where as President and CEO he led the company from exploration to a fully permitted and financed company in mine construction in just over 3 years. Greg Reimer originally came on as an advisor in June, but deepened his commitment by taking a board seat in August. Reimer previously was EVP of BC Hydro’s Transmission & Distribution business group, where he was responsible for about 2,300 employees, $580 million in annual capital investments in transmission and distribution infrastructure and $325 million in annual operating and maintenance expenditures.
The leadership and experience of the two men not only is invaluable to LiCo moving forward, but speaks to the quality of the existing team and assets to attract the attention of vets like Melrose and Reimer.
Earlier in the year, LiCo inked an agreement to acquire a majority interest in the Purickuta Lithium Project located in the Salar de Atacama in Chile. With this acquisition in the world renown “Lithium Triangle,” and area straddling Argentina, Chile and Bolivia, LiCo is rubbing shoulders with SQM and Albermarle/Rockwood in the most productive lithium brine region on the planet, currently producing more than 37% of the world’s lithium, all by SQM and ALB.
On the Cobalt Front…
Last month, LiCo agreed to acquire a cobalt mining claim from Glencore plc (LSE: GLEN)(OTC: GLCNF) in Bucke Township six kilometers outside Cobalt, Ontario. The 16.2-hectare property widens LiCo’s footprint in the area as it is located on the west boundary of LiCo’s expansive Teledyne Property. Teledyne hosts the southern extension of the past producing 15 Vein of the Agaunico Mine that produced 4.35 million pounds of cobalt and 980,000 ounces of silver during the early 20th century.
Glencore, one of the world’s biggest cobalt producers didn’t simply let the property go, structuring the deal with a back-in provision, production royalty and off-take agreements in their favor. In short, this means that LiCo will handle the blocking and tackling to get the project to the production stage and Glencore will be ready to buy the cobalt as its produced and reinvest in the property at its discretion.
If the project holds in the long vein of successful discoveries in Glencore’s history, as data suggest it potentially could, LiCo stands to profit handsomely from its efforts, underscored by a surge in cobalt demand.
Building on prior exploration efforts at Teledyne and Bucke, a new drill program was commenced by LiCo late in September. The company is adding new info to more than 6,400 meters of surface and underground drilling and other work indicating significant cobalt mineralization extending from the past-producing Agaunico Mine onto the property for a strike length of 152.4 meters.
Sea Change Opportunity
The look solely at the EV market clearly paints the picture of future demand for lithium, cobalt and a swath of other minerals that are woefully underexplored and under-produced currently. Certainly, the scenario of a 100% EV world is speculative in time frame, but there is no denying global efforts to phase out fossil-fueled cars, which can only expedite the EV evolution. Thing is, it can’t happen without material and upstart companies are a likely candidate to help fill a cavernous void in cobalt and lithium supply.
For the sake of brevity, the scenario also only considers the auto industry. If what Goldman Sachs says is true, the lithium market used for energy storage applications could be bigger than all other products combined in the future. This highlights other applications in addition to legacy uses where lithium again is integral to energy and our day-to-day future world. When looked at in this light, the potential shortfall of lithium is exacerbated and the importance or emerging explorers is even more amplified.