LiCo Energy Metals (TSXV:LIC) is a Canadian company that conducts exploration for both cobalt and lithium. Finding these metals has become critical in the face of surging demand for electric vehicles, cell phones and many other modern devices.
In this interview, LiCo Energy Metals CEO Tim Fernback speaks about his company’s five ongoing projects in mining-friendly jurisdictions, including the recently acquired Glencore (LSE:GLEN) Bucke property.
The Bucke property is located in Eastern Ontario, on the western border of LiCo’s Teledyne project. “This purchase agreement allows LiCo to expand upon one of Glencore’s longstanding Canadian cobalt assets,” said Fernback. “If all goes as planned, we could be selling all our cobalt produced back to Glencore in the future. It is a property sale, but we have also found a significant future customer.”
In our interview with Fernback and one of LiCo Energy Metals’ directors, Greg Reimer, the gentlemen discuss the company’s position in the cobalt and lithium markets and explain their outlooks for both of the metals as demand continues to rise.
Below is a transcript of our interview with LiCo Energy Metals CEO Tim Fernback and Director Greg Reimer. It has been edited for clarity and brevity.
Investing News Network: What is the story behind the Bucke cobalt property in Ontario that was purchased from Glencore?
LiCo Energy Metals President and CEO Tim Fernback: The Bucke property has an interesting story. We have been active in the Eastern Ontario region with our Teledyne property for some time, and Glencore is one of our neighbors. We have always been interested in negotiating and working with them as they are the world’s largest producer of cobalt.
In April 2017, we saw the opportunity to negotiate with them for this property. They were interested in us as candidates due to our proximity and our focus on cobalt exploration. Under the proposed partnership, their terms included smelter return, net smelter revenue, an offtake agreement and a back-end option. We were happy to agree to those terms as they provided us with a long-term relationship with Glencore. We negotiated with them and struck a deal that was announced in early September 2017.
INN: What has it been like for a company of your size to work with such a large player like Glencore?
TF: Glencore has a really talented and diverse geological team that was a pleasure to work with during the acquisition. They are looking to us to continue to explore the property, and they understand that a small and nimble company like LiCo is able to devote funds for exploration and develop the property at a faster rate than they might be able to. Meanwhile, they are able to focus on their mining operations.
The partnership works well in that LiCo will explore the property and move it towards a $100-million in-situ resource level, then encourage Glencore to take up their back-end option, working with them on a joint-venture basis from then on.
INN: We know that Greg Reimer recently joined LiCo’s board, bringing on his extensive experience. Greg, what encouraged you to join LiCo’s leadership team?
LiCo Energy Metals Director Greg Reimer: Approximately nine months ago, I was introduced to a major shareholder of the company, and we discovered that our thoughts on the development of lithium batteries and electric vehicles across the globe were very much aligned. With my experience in the electricity industry and transmission distribution, I have useful insights on the future of storage for electricity grids from a customer, community and grid perspective. I saw a huge opportunity for LiCo — with its focus on lithium and cobalt — and wanted to be a part of it. I joined the advisory committee first, and recently joined the board.
INN: What will your role look like at LiCo?
GR: My role is to determine the opportunities relating to activities in the electric industry and the potential uptake for lithium and cobalt batteries. Electric vehicles are becoming widely accepted and have increased their presence on the road. What we still don’t understand is how quickly the industry will grow, and the levels of adaptation required.
The Edison Electric Institute — an industry association for electric utilities in the US — estimates that by 2025 there will be 7 million zero-emission vehicles on the road in the US. Currently, there are about 570,000. The majority of those new vehicles will be electric vehicles with lithium-cobalt batteries. My job is to highlight things like that and keep track of predictions for the industry.
INN: In your background on the utility side of things, did you see a lot of activity linked to grid storage?
GR: There are three opportunities for storage that the utilities industry is currently developing. Firstly, there’s local storage, which is the storage of electricity in your home or your business. If a person has solar panels on their roof, then electricity is only generated when the sun is out. Near-term developments for local storage would allow for electricity to be accessible for usage at any point of the day, or to be sold back into the grid if not used. Secondly, small neighborhood communities are also coming together to consolidate their excess electricity and store it for later usage or for sale back into the grid. Thirdly, there’s grid-level storage, which electric utilities companies are looking into at the moment by conducting feasibility and pilot tests.
Taking the recent drastic weather events in the US into account, these storage opportunities are becoming more important as regulators and utilities look to make the grid more resilient against extreme weather conditions.
INN: What catalysts are coming up for LiCo that investors should keep an eye out for?
TF: We recently launched drill and assaying programs on our two cobalt properties in Ontario. We are currently working on seven drill cores, and we will drill another 15 or so holes in the area, focusing on several key target areas. The drill program will continue into November, and we expect to release drill and assay results later this year.
In the near future we will also be providing updates regarding our lithium property in Chile. We are currently working with the local indigenous population to determine how best to explore and exploit the resource on our property. We hope to reach an agreement with the local community and be able to bring our drill rigs onto the property by the end of 2017, early 2018.
We are also actively looking for additional properties in both the lithium and cobalt space internationally, in the hopes of increasing our portfolio and our exploration potential.
INN: What is your outlook for lithium and cobalt prices?
TF: Lithium prices have been on the rise, month-over-month, since mid-2015. The price for lithium carbonate is ranging between US$12,000 to US$14,000 a tonne, with a supply-demand imbalance for both lithium and cobalt that is driving the price upwards. It is hard to say if this will continue in the long term. While there is ample supply of lithium in the world, it comes down to whether it is near extraction and whether that supply enters the market in time. We believe that the demand for lithium will be strong over the next few years, so we expect prices to firm up and remain strong.
We also see a demand and supply imbalance for cobalt. We have seen historic cobalt price spikes, where the price went up to US$50 a pound. While we don’t expect it to reach that point in the near term, the price has been rising over the last couple of years, particularly due to demand exceeding supply.
Both these resources are of interest to investors, and that has to do with the increased popularity of electric vehicles and lithium-ion batteries, which will drive the demand for both lithium and cobalt. To give you an idea: in a single Tesla Model S there are roughly 113 pounds of lithium and 51 pounds of cobalt. As the demand for these vehicles rises, as more manufacturers of electric vehicles emerge and as consumer adoption increases, there will be significantly more demand for these two resources.
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