Execs from Pure Energy Minerals, Wealth Minerals, Orocobre and Argentina Lithium and Energy share their lithium forecast for 2018.
Electric vehicles (EVs) made headlines throughout 2017, with many saying the year was the “tipping point” of the EV revolution. As a result, interest in lithium, a key component of the lithium-ion batteries used to power these cars, continued to increase.
But what will happen to lithium next year? To find out, the Investing News Network reached out to a number of companies in the space to get their thoughts on what’s ahead for lithium in 2018.
Patrick Highsmith, CEO of Pure Energy Minerals (TSXV:PE); Tim McCutcheon, president of Wealth Minerals (TSXV:WML); Nikolaos Cacos, CEO of Argentina Lithium and Energy (TSXV:LIT); and Andrew Barber, investor relations manager at Orocobre (TSX:ORL), were all able to provide insight. Read on to learn their thoughts on the lithium forecast moving ahead.
Lithium trends 2017: Better performance than expected
Lithium had a strong 2017, with many investors turning to the battery metal on expectations of increasing demand from the EV sector.
This time last year, Orocobre’s Barber anticipated that 2017 would see lithium prices remain firm and actual supply continue to be tight. “We continued to achieve an average price in excess of $11,000 per tonne, and it is clear that there continues to be significant headwinds for new lithium production,” he said, adding that supply additions remain overstated.
Similarly, Pure Energy’s Highsmith expected prices to soften after 2016’s run up. “Clearly we were wrong, as both carbonate and hydroxide prices have moved up strongly on a year-to-date basis,” he said.
Meanwhile, Wealth Minerals’ McCutcheon explained that the market has been experiencing a major shift as the electric car revolution unfolds. “The paradigm shift is ongoing, and I don’t think anyone expected otherwise. And therefore the price of lithium reflects that,” he noted.
One of the key trends seen in 2017 has been increasing EV sales forecasts, which have made “the end game much clearer,” Orocobre’s Barber said. With that in mind, he believes that for the broad lithium market the supply model has to change to meet enormous future demand.
“Access to technical skills and experience will mean that brownfields expansions are the lowest risk and fastest to market, while access to financing remains a key constraint for new projects,” he said, adding that for producing companies like Orocobre, “strategic relationships will remain key, from both the production and consumption perspectives.”
Pure Energy’s Highsmith also mentioned investment as a huge challenge in the market. “The list of players remains relatively small, and the velocity of capital is slow compared to more ‘mainstream’ commodities such as gold. We believe this relates in large part to investor education and outreach, which remains a key theme for many lithium players,” he commented.
Similarly, Wealth Minerals’ McCutcheon said the lithium space is quite small, which creates confusion and issues in terms of “just getting clarity on the market to the general investor public.”
For his part, Argentina Lithium’s Cacos said one of the biggest challenges this year has been that “competition for buying lithium projects has intensified, driving up acquisition prices.”
Lithium forecast 2018: Lithium prices to remain strong
Looking ahead to 2018, investors are wondering whether the electric car revolution will continue to have an impact on lithium, and more importantly, what to expect from the market going forward.
In terms of prices, Orocobre’s Barber said current lithium carbonate (LCE) pricing is running at around $12,000 to $14,000, while lithium hydroxide prices are $2,000 to $3,000 higher. He forecasts that this trend will “remain firm” going forward.
For the 2018 fiscal year, Orocobre is forecasting approximately 14,000 tonnes of LCE production at an average price of more than $10,000, subject to market and operating conditions. “Global market fundamentals for lithium remain intact for 2018, with strong demand growth, tight supply and attractive pricing,” Orocobre’s Barber said.
Argentina Lithium’s Cacos agreed, saying that with automotive and other industries moving toward electric power, demand is set to keep growing, and this will likely push prices higher. Wealth Minerals’ McCutcheon expects to see a continuing trend of permanently higher lithium prices in 2018.
Pure Energy’s Highsmith also expects a similar price environment next year — “strong, but with somewhat lower volatility than in 2016.” He also said, “the market for lithium … will continue to mature and build to unseen demand levels. Regardless of where we are in the price cycle, it is important to remember that the best developers will focus on low-cost projects that can weather the cycles.”
Pure Energy’s CEO also expects the market for lithium equities to mature, while more knowledge and more concrete advances will likely help investors identify quality companies and projects.
Similarly, Wealth Minerals’ McCutcheon said that as investors mature regarding their understanding of the lithium industry, “they certainly will start seeing more differentiation between different companies and what they are trying to do.”
For his part, Argentina Lithium’s Cacos suggested investors focus on lithium companies that have established exploration track records, good in-house lithium experts and expertise in working in the jurisdiction in which they operate.
Orocobre’s Barber added that for investors “there are no more compelling investment attributes than experience, strategic relationships and proven capabilities. The lithium market is no exception.”
Pure Energy’s Highsmith said investors should do their homework, and attend conferences where they can meet management personally or at least by video conference. “[Investors should] consider the differences between lithium and other mining investment opportunities. [In lithium,] different formulas for success may apply than in gold stocks, for instance,” he added.
Lithium forecast 2018: What’s ahead for companies
As the year comes to a close, the execs had a slew of achievements to highlight from 2017 and many more catalysts to look forward in the year ahead.
For Orocobre, 2017 has been a milestone year, as it emerged as the first new lithium brine producer in 20 years. The company reached production of just under 12,000 tonnes of lithium carbonate, representing over 5 percent of the global lithium market.
“We achieved this milestone after more than 10 years operating in Argentina, giving us deep experience, strong strategic relationships and vital community links in the Olaroz region,” Barber said. Looking ahead, Orocobre is working with its joint venture partner, Toyota Tsushu (TSE:8015), towards further expansion.
“We continue to investigate the expansion of our Olaroz facility and the construction of a lithium hydroxide facility in Japan,” added Barber, saying that a final decision will be made around the first half of 2018. Assuming stable performance from stage 1 at Olaroz, this expansion will see production double at Olaroz, coupled with a 10,000-tonne-per-annum lithium hydroxide plant in Japan.
In 2017, Argentina Lithium had set out to build a “sizeable, quality property portfolio in some of the best areas within the Lithium Triangle,” Cacos shared. The company acquired two major projects: Arizaro, a big stake in the largest salar in Argentina, and Incahuasi, which covers the entire salar in Catamarca.
“With drill programs underway, success in identification of economic lithium-bearing brines could lead to an exponential rise in the price of the shares and market valuation,” Argentina Lithium’s Cacos said.
This year, Pure Energy Minerals published a preliminary economic assessment for its Clayton Valley project. “There have not been many preliminary economic assessments for lithium brine projects, so it was an important achievement,” Highsmith said.
In 2018, Pure Energy intends to build a pilot plant at its Nevada-based project, where engineering, procurement and permitting are underway. “At the same time, we are very excited to drill the first holes on our new Terra Cotta lithium brine project in Argentina, which will happen in Q1 2018,” Highsmith added.
Lastly, in 2017, Wealth Minerals signed a letter of intent for the Seven Salars project in Chile. The property includes the Salar de La Isla, believed by many to be Chile’s second-largest lithium deposit. CEO McCutcheon expects the drill program at Atacama to be one of the highlights next year.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Wealth Minerals and Argentina Lithium and Energy are clients of the Investing News Network. This article is not paid-for content.