The Lithium Age

Posted: 5th June 2016

By: Kevin Lu

Stone. Bronze. Iron.

The ‘Ages’ have been historically prefixed by the metal at the crux of mankind’s tools during that period. In this day and age, our tools are composed of a myriad of metals and materials, but soon to take the stage amongst these amalgamation of elements is, Lithium. Taking interest in this element, Goldman Sach’s in their December 2015 equity research report What if I told you... labelled Lithium the ‘new gasoline’, and yes, you ought to be curious too.

In 1817, Johann Arfwedson discovered the 3rd element of the periodic table working in a Swedish lab under the tutelage of chemist Jöns Berzelius, who named the alkali metal after the Greek word for stone ‘lithos’ because of its greyish metallic appearance. Little did they know that this soft white metal, easily sliceable with a breadknife, would become the new vessel of energy storage that will fuel generations of future technologies to come.

Since the inception of electronic devices, we have continuously attempted to streamline battery efficiency in accordance to increasing energy requirements , such as to not run out of battery amidst a heated streaming of your favourite new album. As transistors shrink, computer processing power increases (Moore’s Law), and the general price of electronics drops, more investments are directed at the optimisation of battery technology.

Enter lithium.

Holding the highest electric potential and lowest weight of any metal places lithium at the forefront of convertible-chemical energy storage technology. As such, lithium-ion batteries are highly sought after given their efficiency and very slow self-discharge rate when not in use. Though lithium-ion batteries have been in commercial circulation since Sony’s first release in 1991, scientists and corporations alike have found no substitution thus far, rather, they have opted to further enhance its efficiency.

From batteries in your iPhone, to your silver MacBook, to the hot new line of Tesla electric vehicles, lithium powers an increasing amount of the most important of technologies used in the daily lives of people around the world. Though this is the area where lithium demand is expected to surge the most, it only accounts for 29% of the total lithium consumption. Applications in pharmaceuticals, ceramics, grease, lubricants and heat-resistant glass, are also to be accounted for when considering the element’s aggregate demand, and these other sectors show no sign of slowing.

However, what really should excite you is the recent developments in electric vehicles (EVs) by Tesla Motors. Leading the world into an era of zero emission automobiles, Tesla has unveiled 3 commercially viable EVs to popular demand, and announced the operations of its giga-factory that is set to produce 500,000 EVs, including its lithium-ion battery component, over the next year. Tesla has already partnered with Barcona Minerals (TSXV: BCN) and Pure Energy (TSXV:PE) to meet its demand quotas for lithium, with the Nevada factory forecasted to require 25,000 metric tonnes of lithium by 2020. More so, this demand may further increase as Tesla’s expansion into the solar energy storage industry with its ‘Powerwall’ product complements the advent of EVs. This alone has stoked international interest to the degree that the price of 99% pure Lithium has more than doubledfrom $5900USD/tonne last October, to over $13000USD/tonnein the following two months.This price level is only set to grow as China looks to decrease carbon-emissions of petrol-fuelled vehicles. On the back of EVs alone, Goldman Sach’s predicts that the lithium market could triple by 2025 given their calculations that a1% rise in the EV market equates to surge in lithium demand of 70,000 tonnes a year.

Source: http://www.greenpowerco.com.au/tesla-gigafactory-net-zero-energy-factory/

Tectonic shifts in the way we produce energy are occurring as we move from fossil fuels to renewables. New York Physics Professor, Michio Kaku posits that a ‘Solar Revolution’ is on track as the world looks to cleaner solution to meet its energy demands. In support of Kaku’s views, the increasing cost of electricity derived from fossil fuels ($346/MWh) has crossed the decreasing alternative cost of electricity from solar power ($196/MWh). However, Kaku also notes that for such revolution to occur, storage facilities must be created to efficiently house the solar energy harnessed during the day for a long period of time afterwards. With Solar energy set to be more efficient than our current leading source of energy, the gravity of this impending change suggests strong growth in demand for lithium in the near future. That said, Lithium is not the only means of energy storage as dam’s can hold larger bulks of energy better, yet it is still by far the most versatile and cost-efficient storage method to date.

Global supply amounts to a production of around 40,000 metric tonnes a year, with an estimated total 39 million tonnes of untouched global reserves. The demand however, is set to rise steadily as shown by Statista below:

Source: http://www.statista.com/statistics/452025/projected-total-demand-for-lithium-globally/

Incidentally, Australia happens to be the largest producer of battery and technical grade lithium in the world with over 13,400 metric tonnes excavated last year. It is also home to the world’s single largest lithium reserve in the world, Greenbushes, however this site is owned and operated by Talison Lithium, a subsidiary jointly owned by China’s Tianqi Group and US based Albemarle (NYSE: ALB). The real budding gems in our outback are the junior miners emerging on the market, in particular Pilbara Minerals (ASX: PLS) and Galaxy Resources (ASX: GXY). Since June 1st 2015, Pilbara’s stock price has multiplied 13x from 5c to now 66c, harbouring the world’s leading lithium project: Pilgangoora in Western Australia. Galaxy resources also started near rock bottom a year ago with a share price of 3.9c, yet now in light of its recent merger with General Mining (ASX: GMM), has rocketed to a peak of 52c.

Mentor to Warren Buffet, Ben Graham posits that ‘the individual investor should act consistently as an investor and not as a speculator’. In short, he advocates investment decisions based on the facts, not on fiction. Lithium’s uncontested energy density is a fact. Carbon emissions causing pollution is a fact. Consequent demand for electric vehicles and solar power are facts. Lithium’s integral role in powering technology is a fact.