Gold’s rally may be soaking up a majority of the headlines and limelight, but there is one commodity that has outperformed gold while remaining mostly under the radar. While gold is up nearly 20% year to date through June 2016 with one of its best performances in over three years, lithium prices outperformed in 2015 and are primed to continue its massive rally.
Lithium carbonate prices were around $6,000 per ton back in 2014, but have since risen to $13,000 per ton in 2016, and some prices even as high as $23,000 per ton has been paid by China this year, as demand ramps up. The enormous demand for lithium comes as Goldman Sachs Group (NYSE: GS) calls lithium the “new gasoline,” and the commodity is seen as the key to the electric car future. In fact, demand is so robust, that Statista estimates that the total demand worldwide for lithium will rise from 197,347 metric tons in 2015 to 359,435 metric tons in 2023. With new battery storage technology and ambitions such as electric cars, industry experts see the lithium rally only just beginning.
China, Tesla Driving Lithium Demand, Price Appreciation
It is no secret that China is a massive consumer of commodities and raw materials. In fact, China accounts for roughly 70% of the world’s demand for raw materials and even a higher percentage of current lithium demand, but this could be changing.
Tesla Motors Inc. (NASDAQ: TSLA) founder and chief executive office, Elon Musk, has one of the major drivers of price appreciation in lithium carbonate prices this year. Musk is known for pushing the envelope with optimistic projections, especially with Tesla, but the CEO is continuing to build the company’s massive battery gigafactory in Nevada that will be the key to expanding Tesla’s ability to deliver more cars. In fact, Musk believes that with the new gigafactory, Tesla will be able to produce 500,000 electric Tesla vehicles per year by the year 2020. “In order to produce a half million cars per year…we would basically need to absorb the entire world’s lithium-ion production,” detailed Elon Musk on the gigafactory progress.
While Tesla may be at the forefront of the emerging electric car industry today, auto industry experts suggest that Tesla’s competitive advantage could fade over the next several years, as more competitors get into the electric car market. As of this moment, there are rumblings of Apple Inc (NASDAQ: AAPL) working on their own version of an electric car, and Chinese start up Faraday Future is said to be working on developing an electric car. In short, the era of the electric vehicle will continue to drive demand and price appreciation for lithium. Goldman Sachs Group (NYSE: GS) estimates that for every 1% increase in electric car market share, lithium demand will increase by 70,000 tons per year and is forecasting the metal to triple by 2025 just due to electric car movement alone.
Bolivia Holds Largest Lithium Reserves, Australia Sees Largest Lithium Production
As miners frantically jump onto the lithium bandwagon, production of lithium has exploded. Australia is home to the largest production of lithium in the world, as of 2015 with around 13,000 metric tons of production. This compares to Australia’s lithium production of only 6,000 metric tons in 2009, showing the exploding demand for the commodity. Chile is the second largest producing nation of lithium with around 12,000 metric tons in lithium production. However, Australia do not have the largest lithium reserves in the world, despite their massive production.
Bolivia has the world’s largest reserve of lithium, which is estimated around 9,000 metric tons, according to the U.S. Geological Survey. Chile has the world’s second largest lithium reserves at 7,000 metric tons and the U.S. comes in third with just over 6,000 metric tons of the “new gasoline.” Miners are no doubt looking to install lithium mining operations in Bolivia, Chile and the U.S., as they represent major opportunity for miners.
Lithium Mining Companies Have Seen Explosive Year to Date Returns in 2016
Lithium X Energy Corp. (OTCQB: LIXXF) has been one of the most popular stocks this year to play the big rally in lithium prices. The Canadian company’s U.S.-listed shares have rallied nearly 355% year to date alone. Throughout early 2016, Lithium X Energy Corp. (OTCQB: LIXXF) was busy acquiring lithium mining properties in hotspots like the Clayton Valley Property in Nevada and lithium-rich land in Argentina. Lithium X Energy Corp. (OTCQB: LIXXF) has a market cap of nearly $69 million, as of June 2016. Furthermore, the company has unlimited authorized shares, 52.3 million shares outstanding, and a float of 42.5 million shares, as of March 2016.
Critical Elements Corp (OTCQX: CRECF) is another Canadian lithium miner that has numerous properties including: Rose Lithium-Tantalum, Amiral, Arques, Bourier, Caumont, Dumulon, Duval, Lemare, Nisk, Valiquette, and British Columbia Rare Earth properties. However, the company’s main property and flagship mine reside in the Rose Lithium-Tantalum property where they hold 340 claims across 174 kilometers. Critical Elements Corp (OTCQX: CRECF) has seen an explosive rally as well, with year to date gains of nearly 224.50%. As of June 2016, Critical Elements Corp (OTCQX: CRECF) had a market cap of $72.3 million and 126.3 million shares outstanding.
Australian lithium mining company, Galaxy Resources Limited (OTC Pink: GALXF) engages in the exploration and production of lithium carbonate across the company’s Australian operations, Canadian operations, and Argentinian operations. Galaxy Resource Limited (OTC Pink: GALXF) has seen shares climb 335% year to date, as Galaxy Resources Limited (OTC Pink: GALXF) remains a top player in Australia lithium production and the company’s strong relationship with Chinese clients. In fact, Galaxy Resources Limited (OTC Pink: GALXF) entered into a $36 million agreement in March 2016 that involves the sale of 60,000 tons to two Chinese lithium converters. The contract will also see delivery of an additional 120,000 tons in 2017 to the Chinese clients with a price that is to be decided on lithium market price at the time.
Lithium Corporation (OTCQB: LTUM) is a New York-based miner that focuses on the acquisition and development of lithium and flake graphite properties in British Columbia and Nevada. Lithium Corporation (OTCQB: LTUM) current has two lithium properties in Nevada that spread across 3,200 acres: Fish Lake property and San Emidio property. Lithium Corporation (OTCQB: LTUM) has seen shares climb nearly 214% year to date, as the company continues to focus on its lithium fields. As of June 2016, Lithium Corporation (OTCQB: LTUM) had a market cap of $7.13 million. Furthermore, the mining company has 3 billion shares authorized and 77.61 million shares outstanding, as of April 2016.
However, there is a little known lithium exploration and drilling company that has yet to benefit from the lithium rally: SourcingLink.net, Inc. (OTC Pink: SNET).
SourcingLink.net, Inc. (OTC Pink: SNET): Emerging Lithium Explorer & Developer
San Diego, CA-based SourcingLink.net, Inc. (OTC Pink: SNET) is an emerging lithium/rare earth company exploring the Lac Fire and Eldor properties in Quebec, Canada. In addition to lithium, the Lac Fire property is known to host tantalum mineralization and the Eldor property contains a variety of rare earth metals and element mineralization. The company is exploring eight claims in the Lac Fire property and also 34 claims (3,951 acres) on the Eldor property.
As of June 2016, SourcingLink.net, Inc. (OTC Pink: SNET) had a market value of $5.2 million. In addition, the lithium explorer and developer had 900 million authorized shares, 41.61 million shares outstanding, and a float of 5.92 million, as of April 2016.
SNET: Initial Visit and Sample Collecting on Claims Scheduled For July 2016
SourcingLink.net, Inc. (OTC Pink: SNET) is preparing to send an exploration team including a professional geologist to the new Lac Fire property in order to do an initial visit and property examination. This visit entails verifying historical samples with lithium and tantalum values, location of historical drill holes, and collecting new samples with the aid of a diamond saw. SourcingLink.net, Inc. (OTC Pink: SNET) has said this initial program will take place in July 2016 and is fully funded.
Once the exploration team has completed the above work and analyses have been received from the lab, the company will then mobilize Phase 1 of drilling. This will allow the company’s exploration team to assess the subsurface potential of the surface mineralization. Three phases of drilling are planned. This drilling will allow the exploration team to assess the potential of the Lac Fire property to host a viable lithium/tantalum deposit.
The Lac Fire claims that Sourcinglink.net, Inc. (OTC Pink: SNET) are exploring are contiguous and on strike with Critical Elements Corp’s (OTCQX: CRECF) flagship Rose Lithium-Tantalum property. With the Lac Fire property in such close proximity to a proven and substantial resource on the Rose Lithium-Tantalum property, the company believes that the property they are exploring may host a similar lithium resource. The property has not seen a lot of past exploration, but the exploration that was done has proven the existence of highly anomalous lithium/tantalum mineralization on the property.
SourcingLink.net, Inc. (OTC Pink: SNET) is confident that the initial visit and three phases of drilling will be completed expeditiously and allow the company to define a lithium resource that could be developed.
In short, SourcingLink.net, Inc. (OTC Pink: SNET) is still in the early stages of exploration of the Lac Fire property. However, past exploration work and the proximity of the property to the Critical Elements Corp (OTCQX\: CRECF)’s flagship Rose Lithium property, gives the company favorable expectations for the results of the program. This program will increase the knowledge of the extent of the lithium/tantalum mineralization.