As demand for lithium rises with the production of electric vehicles and the energy storage craze, supply concerns have new lithium miners ramping up assets to keep pace and banking on a major windfall at a time when other commodities disappoint.
There aren't very many bright spots on the commodities market today, and nothing is showing the growth power that lithium is.
Even without all massive battery gigafactory plans, lithium has gone from a steady, but relatively obscure commodity to the hottest thing on this market this year.
The pending energy revolution that is spurring lithium's rise doesn't even need global warming to move it along, as efficient energy storage promises to change our way of life from the energy grid to both air and ground travel.
Tesla’s new battery gigafactory will need 15,000 tons of lithium carbonate a year just to get started. Looking forward grid storage and the powerwall are set to drive lithium demand through the roof. Here, we're looking at a powerwall sector that could quadruple to $6 billion just by 2020.
Overall, lithium demand is expected to more than double from 2012 to 2017.
And prices are looking very attractive. Keep in mind, though, that lithium, has long enjoyed a steady demand, with one tough period following the global financial crisis.
Since 2011, market conditions have steadily improved and the price has continued the upward trend--but that was without the gigafactory announcements, and before it was clear that the grid, the powerwall and electric vehicles would rule the future day.
Lithium carbonate prices are key here, and for the first nine months of 2015 they averaged $5,700/ton.
The Land Grab of the Century
One of the most intense land grabs in modern history is taking place right now in the state of Nevada. First, Tesla (NASDAQ:TSLA) started scooping up all the land around Reno for its gigafactory, essentially rendering Reno more significant than Las Vegas for the first time ever.
Last spring, Tesla acquired some 2,000 acres outside Reno, after having purchased 1,000 acres the year before. All told, Tesla's tripled its holdings in the Nevada desert in the first half of 2015 alone.
Since then, investors have started moving in full force, and new lithium miners are in the midst of their own land grab in order to be able to meet the future spike in demand. Those who got in early, bought land at a discount, which has quickly turned into a premium.
Among them, we've been monitoring Dajin Resources Corp. (DJI.V), which has scooped up over 3,800 acres in Alkali Lake and over 3,000 acres in the form of the Teels Marsh project in Mineral County. Both are near Nevada's only producing lithium mine--Rockwood--and near new exploration projects.
Nevada Sunrise Gold Corp., Canadian-based Ashburton Ventures Inc., Vancouver-based Pure Energy Minerals and Canadian-based Matica Enterprises are four other early entrants.
Why Nevada Is So Important
Nevada is the only American state that produces lithium. This means that Nevada is ground zero for the coming lithium boom, particularly as gigafactory leaders such as Tesla will look for supply cheaper and closer to home.
Most of the world’s lithium comes from Australia, Argentina, Chile, Bolivia and China--but not for long.
Nevada offers lithium sourced from salt water, or brines, and this is the most cost-effective lithium on the market, which means it is exactly what Tesla and rival gigafactories are looking for. Nevada’s lithium will be a global game-changer.
The brine is the best place to be. Of the estimated mineral reserves containing lithium, some 87 percent is found in brine deposits, according to the United States Geological Survey (USGS).
Not only is Nevada the top mining state in the U.S., but it's also 3rd globally, accounting for 80 percent of total U.S. silver output. As such, "this unique lithium position has turned Nevada into a lithium hub, and companies are now racing to stake out potential targets," according to Brian Findlay, CEO and president of Dajin.
Dajin has positioned itself right in the middle of Nevada’s lithium sweet spot, and when lithium supplies begin to slack in the face of spiking demand. With exploration already well underway, this will be the second round of the lithium expansion in the longer-term game. But it's playing other geographical sides of this game, advancing another asset in Argentina, in the original "Lithium Triangle".
At the end of the day, the lithium rush is already in full swing in Nevada, and everyone's hustling to stake their land claims and position themselves at the top of the new supplier list. Land values are bound to explode this year, and we should see a spike in lithium prices before it all settles down a bit with the onset of the first gigafactories.
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