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Deficit Speculation Fuels Lithium Explorer Ambition

27 February 2024 14:53

After a rough few months for the Battery Metal, the lithium sector received a shot in the arm last week as speculation arose that Chinese battery manufacturer CATL may have shut down its Jianxiawo mine.

The news brought some much-needed relief to the sector, as initial excitement around its criticality in the battle against climate change has led to a surplus of the battery metal.

Speculation was fueled by a statement from the financial research group BarrenJoey that “CATL is reluctant to continue production below 95,000RMB/t (~US$13,000/t) for lithium carbonate,” and that as Jinaxiawo would provide 3% of global battery lithium supply, its closure could move the market from surplus to deficit within the year.

This speculation led to an immediate blowback on the market with Australian lithium giant Liontown Resources’s share price reaching a monthly high of $1.26 the day speculation of a CATL shutdown began, amongst a rise in interest for other top-end lithium shares.

Eyes on the Prize

It is said a rising tide lifts all ships, and as such news of lithium potentially returning to deficit as early as this year must also boost the confidence of a number of smaller players looking to crack into evergrowing Lithium’s interest as much as it excites the giants.

One such explorer looking is Pursuit Minerals which has just kicked off drilling at its flagship Rio Grande Sur lithium brine project located within Argentina’s lithium triangle.

The explorer is hoping that drill results will grow the project’s already considerable Maiden JORC Code 2012-Compliant Inferred Mineral Resource Estimate (MRE) of 251.3kt LCE @351mg Li per litre which it returned in October of last year.

Also looking to take advantage of North America’s growing lithium pedigree is Iris Metals, which has recently raised A$7.5 million to accelerate the exploration of its lithium land in South Dakota.

Funds raised will be put towards delivering a maiden mineral resource estimate for its flagship Beecher project, which recently returned compelling drill assays grading up to 2.07% Li₂O.

The recent difficulty in the market hasn’t stopped investors from seeing the forest for the trees and doubling down on lithium bets, with explorers large and small still working to expand their lithium holdings to satiate the EV industry’s growing hunger.

Most recently ASX-listed Valor Resources continues to bet big on Canadian lithium having expanded its North American portfolio with the acquisition of the Jesaulenko Lithium Project in Ontario which boasts a considerable 10.6Mt @ 0.88% Li2O indicated resource.

Jesaulenko is one of the three Canadian lithium projects Valor is acquiring to bolster its North American portfolio, with the Australian explorer having also acquired the Frazer Lake project which has returned rock chip samples grading up to 7.25% Li2O.

Valor is not the the only explorer to set up shop in Canada however as the country appears to be turning into a critical metal capital, with several players small and large staking claims to dig into its lithium potential.

Another new player in Canada is Metals Tech Limited, who set up shop in Canada recently with the acquisition of the Sauvolles lithium project in Quebec’s highly prospective James Bay lithium district.

The project covers a massive 300 square kilometres of the emerging district and already hosts 11 high-priority targets which the explorer is planning to hit with an extensive Field program consisting of outcrop identification, field mapping, rock chip sampling and general mapping of the prospective geology.

Patience is a Virtue

Lithium owes much of its continued time in the spotlight to the rapidly growing electric vehicle market which is anticipated to drive lithium consumption to an estimated 3.8 million tons by 2035, according to Statistica.

This is further backed up by forecasts of the growth of the EV market in general, with Fastmarkets estimating that EV demand in 2024 with increase by 36% and forecasting “robust growth” in the sector throughout the decade.

So while the metal is going through a shaky period, the continued growth of EVs and the Green energy sector provides a promising reward for those explorers with the mettle to whether the storm of short-term uncertainty is plaguing this critical metal.

For more on where the lithium market could go in the coming months, make sure to listen to this week’s episode of The Market Bull podcast, where host Ben Kosterich sits down with Global Lithium CEO Ron Mitchell to talk about where the market is now and where it is heading.

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