Extraordinary Future of Energy (Part 2 - Lithium)
Published in August 8, 2017
on
00:00:08 Let's talk about lithium. This really a time to be critical and optimistic but we want to ask the question so you have a better broader knowledge. Take a look at the slides here guys.
00:00:18 I was a gigafactory about six weeks ago. I spent the better part of the day there. Has anyone here been to gigafactory? I think I'm the only person in Canada that's been there. I could be wrong about that but maybe not.
00:00:29 There's a picture of what it looks like and this is a picture of what it's going to look like. We're going to have more batteries in the world, we all know that. That's no we're not going to waste our time on that. Questions for you guys and I think you can glean some information out to being a little bit critical. Can the existing lithium producers, the Big 4 or 4, can they produce enough lithium for all the demand that should be coming?
00:00:59 Jean-Francois Meilleur: The short answer is no. There's reason why. It can if you take Talison, Albemarle and Tianqi all together with Orocobre all be bringing 130,000 tons of lithium carbonate by 2025.
00:01:21 Gianni Kovacevic: You have to explain it to people. They might not know what a 130,000 tons is. Where are we going? Where is the growth going?
00:01:26 Jean-Francois Meilleur: If you take just the recent announcement over the co-manufacturer, the shift that has been done and if you have to understand, if you're a Volkswagen of this world and you're putting a new model, it means you need to put the design freeze which mean nothing will change four or five years before you launch the model. Right now what Volkswagen is announcing is to have minimum of 15 to 25 percent market penetration with electric vehicles by 2025. It means they're looking for lithium right now and the design is freeze and everything is ready to go. You have Delmer. You have BMW, Volkswagen in Europe that are all going this way, forward as well and China as well. Tesla is only a very small part of the story but you take 80 million cars worldwide 15 percent penetration is 20 million cars every cars will average about 15 kg's of lithium. You would divide that by a thousand that's 600,000 tons of lithium by 2025, okay? It's simple math.
00:02:41 Then you look over current production. It's about 200,000 to 230,000 tons of lithium carbonate equivalents. You add on a 140,000 tons from expansion that are planned. You're missing ten companies like critical elements to come into the market. I can barely see five of them. That's the market outlook.
00:03:11 If they reach the target of 25 percent, you're looking for a million ton. That's the picture.
00:03:19 Chris Parry: If we if we even just look in the shorter term, Albemarle has said that they were looking to increase their production to 35,000 tons a year, 2021. Get that that needs to essentially open two new mines a year, from here until then. If you take all the investment that's been made so far this year in the lithium business in bringing companies closer to production, you're looking at about half a billion dollars spent which would pay for one mine.
00:03:47 If you're looking at one company that's a large producer just to get to where they think they need to be, they're going to have to raise and spend a lot more money than is currently being spent anywhere in the industry.
00:03:58 Gianni Kovacevic: Let's ask the audience the question. Who here has driven in an electric car by show of hands? Very few people. Who here believes electric cars have a future and they're going to be an impact in the next five years? Are we there yet? Would you be a customer of the electric car? A lot of people believe in it now. It's coming. Where is it going to come from?
00:04:21 Chris Parry: It's a mystery. It's the mystery of the age. There's going to be a bunch of companies that we don't know about because they don't exist yet that are going to come flying in when the demand is high enough and the lithium prices got hard enough. There's going to be the big players who will have to spend a lot of money very quickly to bring stuff on. The real issue here isn't that there're limited supplies of lithium. There's plenty of lithium.
00:04:43 The issue is pulling it out of the ground and processing it properly. That's where you go from the major players have that knowledge and some of the smaller players don’t. As an investor, that's where I look at the real bottleneck right now is not how do you find lithium, it's how do you get that lithium out of the ground in a substantial enough way that you can actually make a difference a dent on the market.
00:05:07 Jean-Francois Meilleur: Most of the lithium will come out of Australia Spadonium producer and it's nothing against brine sources. It's just the cycle to put a brine source is much longer turn around then a spadonium deposit where you crush grind to a concentrate and ship it to China and Chinese is building capacity to a conversion. They can do it within two years.
00:05:34 The picture for the supply will come mostly from Quebec and Australia where Quebec we have some good spadonium deposits and Australian certainly has some. The key factor will be the Mica's and for some other specifications but they can be easily tackled, okay? Galaxy resource is it's proving that's slowly surely.
00:05:58 If you look to turn around that with the job galaxy has done compared to Orocobre. Orocobre has done a very good job but it's not as simple as it was presented in 2009-2010 where the brine were saying, we're brine, we’re cheaper and we can only open the valves and hard rock will never survive. The scenario is not there. It's not whatever which deposit is best. Every deposit has its own challenges and there's maybe 20 different spectrums to all you need to look after whatever it's Brian or Hard Rock
00:06:38 Gianni Kovacevic: Here's a question for the audience again. I just want to engage you by a show of hands who here is confused by the amount of lithium names that you potentially could invest in. Anyone? Okay, so if you guys can help them out here because you have a few different jurisdictions. What can you do to help them? Which companies have the best educational tools so they can better prepare themselves to for their own learning and reading and compare kick tires if you?
00:07:07 Jean-Francois Meilleur: I would easily say call critical elements or meet with the management team part of our management is staff and haba which was the CEO and president of Rockwood lithium which sold it for 6.2 billion for two Albemarle.
00:07:24 Stefan jointed us. We know Stefan for more than five years. We were in the midst of a transaction with Rockwood at that time and he understand that we have a very special deposit. He used to run the company that controlled 50 percent of the worldwide lithium. He bought Talison. He's a chemists. He knows all the details about Atacama, about Argentina. We've investigate ore than 20 different deposits and he chooses to come with Rose the one that we're developing right now.
00:08:00 If you're confused and when you want to know what brine is good if hard rocket wood is good he'll tell you, both are good it depends which one you're talking about and which one you're looking. It's not just what is good is every single one has pores and counts and you need to go through them. What I think there's five good deposits right now going forward.
00:08:24 Chris Parry: An example of how difficult that is really I guess to put a price tag on some of this is. I took to a company last week QMC, Quantum Minerals relatively new play got a property up. Got a Manitoba. It was a bunch of money was put into it in the 50s and the 30s when they thought that there was going to be a big lithium we tale of it never did.
00:08:47 Over the last seven years, it's basically been a highway market. This is where the town supposed to be that never became a town. They've also got 30,000 feet of drilling. There's a million or so tons of rock down there that they know about and it's all this. They can go in. They can have as much lithium as they want.
00:09:04 But they $45,000 getting this properly. Let's spent less then, John he's been on his car to get this lithium prior, its some purposes. They looks like it might be genuinely decent deal. It's only worth 45 gram because this is thulium every here. If you decide tomorrow that you want to sell your house and but a lithium. Can you get that out of the ground?
00:09:27 You've got a team here that actually has runs on the board that have taken lithium properties that have developed them that are produced. You had a lot of Vancouver players that have lithium deals that if you really ask them the frequently questions, how exactly you're going to get this out of the ground? How are you going to process it? What does it worth? They answer those questions. Your step one is to say just the simple stuff. Tell me about your deal and if it's not telling you about shares outstanding in market cap, then go somewhere else.
00:09:55 Ask them how they're going to get this stuff out of the ground that me as a big differentiator.
00:09:59 Gianni Kovacevic: I have a question for you. You can answer it two ways. For bigger batteries because power systems for back batteries. If you talk about a B'nai diem redox battery, can lithium be substituted out of some batteries in the future in your opinion?
00:10:15 Jean-Francois Meilleur: The answer is yes and in. Okay. If you in its chemistry and elements, properties. If you need to store energy in a box so a car is a box. Cellphone is a box. A more tablet is a box you cannot replace lithium.
00:10:38 Monica Pearson: If you're not constrained by size as other alternatives. Lithium can be a competing element or it can be replaced by something else. It depends what the applications. Critical element is not a battery expert.
00:10:58 If you want lots of details where there's lots of books and literature on that. As long as you're constrained in a box and you need to put energy and density into it, lithium got to be part of the equation and everyone here in this room doesn't want to go back to those big Mobile's with a hand as a suitcase almost. Everything is getting smaller, more performance, and as well, eye static. If you have to put in a city, a charging let's say a battery system for energy and storage. You want maybe the smallest possible so, lithium can be very widely.
00:11:47 Gianni Kovacevic: We only got 50 percent a quarter here. Chris, you want to give a suggestion of a little lithium stock. Web, almost you're going to recommended elements. That's your company, do have another favorite?
00:11:56 Chris Parry: You know what? I was going to say actually further to your previous question, there're other elements in the lithium-ion battery that are more easily replaced than lithium. The cobalt's been a big craze more recently. There's demand for it but it's also doing what graphite did a couple of years ago where everyone's got a cobalt play all of a sudden. A company like nano one materials, I went out to Burnaby they have a plant out there a pilot plant where they're putting together a process that could remove cobalt from the equation. It could change the chemistry of a lithium-ion battery and not have any deficit and in fact maybe even make it more efficient.
00:12:31 As far as the lithium place go, I think anyone producing. Anyone who is close to production, anyone who's in a play like in Chile, wealth minerals is interesting. I like with the fact that Lico Energy Metals as a small market cap that has a plot that's right in the middle of SQMs property. If you're looking for a potential take out, that makes sense to me.
00:12:53 There's a couple of local place. Obviously, critical is a good deal. For me, whatever the lithium price is doing right now has no play on the value of a lithium company that's exploring. The lithium price in five years is going to be what really draws the value from those explorers.
00:13:09 Gianni Kovacevic: Very good. Thank you gentlemen. Everyone always asks, I drove Tesla across America 13,000 kilometers. I didn't invest in the lithium space too late. They say what lithium stock did I invest in. Buyer beware, but I also agree that wealth minerals, my opinion is my lithium stock.
00:13:28 I love the management. I love the property. I love the group the way they finance. For what it's worth, do your own due diligence but that's my lithium stock.
00:13:37 Thank you. Thank you. We're going to talk now –
Comments