Examining the Lithium Supply Gap: Manitoba to Play a Key Role

The world continues to grapple with exploding demand for lithium as both the electric grid and transportation electrify.

Top lithium producer Albermarle recently hosted an analyst day where the company increased projections for future demand for the third time in three years, now expecting demand to hit 3.7 million tonnes.

Demand is now expected to be double the 2020 estimate by the year 2030, driven mostly by electric vehicles and secondarily by grid level battery storage applications.

Demand for Lithium has Been Explosive

Source: Albermarle January 2023

Even if all 53 global lithium projects in the pipeline were to be developed, there will still be a supply gap of 500,000-800,000 tons, or 20% of demand in 7 years according to Albermarle and S&P Mining Intelligence.

This level of demand would require another $10.5 billion of capital on the top of the $27.3 billion required just to bring all 53 projects in development on-line.

If the world wants to electrify at the current pace we simply need more lithium projects. But where will those projects come from.

One place is Manitoba, Canada.

Manitoba Canada, The Lithium Hub You Never Heard Of

Little talked about among Canadian provinces, Manitoba Canada is quietly emerging as a western battery metals hub. Gateway to Asian and US centers of demand, with good access to infrastructure and a history of supportive politics and lithium concentrate exports, Manitoba is quickly becoming one of the largest sources of new lithium, outside of Chile.

North America EV Infrastructure Map

Source: Grid Metals Investor Deck June 2023

Manitoba lithium projects have been driven by a supportive government and long term agreements with First Nations already in place.

According to S&P Mining Intelligence, there are 409 active lithium projects in Canada, however only 17 of them are at the mining and feasability stage.

Manitoba already has a history of lithium discoveries and exportation of lithium concentrate. It also is home to one of only two lithium processing facilities in Canada, the Tanco Mine.

Global Lithium Project Map

Source: S&P Market Intelligence

Also important is the type of lithium bearing rocks found in Manitoba. Lithium in Manitoba is largely found in hard rock deposits made up of Spodumene.

Hard rock lithium has the cheapest upfront capital costs of any lithium source, giving Canada, and Manitoba in particular a leg up when it comes to securing project funding.

Capital Costs by Type of Lithium Deposit

Source: S&P Market Intelligence

Even though lithium from Brine has far lower operating costs than hard rock, it costs less to bring a hard rock project on-line and minimal outside capital is then required once the project is producing and generating free cashflow.

In the current market environment of tightening credit conditions and a focus on risk, funding a $300 million hard rock lithium project slated to come online in less than three years sounds much less risky than a $1 billion project four to six year out.

Manitoba Explorers in Focus: Grid Metals

Grid Metals (TSXV:GRDM) has been a particular focus for us here at Capital10x given its strong drill results and a processing agreement that could see the company in commercial production within 18 months.

Grid is fortunate enough to operate less than 5km away from one of only two spodumene concentrate producers in Canada and is close to the capital of Manitoba where major roads and export infrastructure are plentiful.

Grid Asset Map

Source: GRID Metals

Grid’s Donner Lake lithium project has seen significant drilling in 2022-2023 and the project’s main dyke is showing signs of a significant and consistant lithium resource.

Drill results from the Main and Northwest Dyke of Donner Lake are being used to build an Initial Resource Estimate NI 43-101 which will be released in the coming weeks.

Donner Lake Main Dyke Pierce Point Map

Source: GRID Metals
Grid will have turned its first drill result in February 2023 into a NI 43-101 initial resource estimate by the fall of 2023, a blistering pace of development.

With additional promising exploration (A + B in the picture below) planned in 2024, Grid is establishing a first to market major lithium resource in North America.

Source: Grid Metals

Mettalurgical Testing Proves Commercial Potential

Grid’s recent mettalurgical test results proved out key commercial attributes of its lithium resource.

  • Low iron content, which decreases expected processing costs
  • Concentrate tested at 6-7% lithium, high enough for mass commercial sales
  • Standard grinding and processing methods will work to process the ore
  • 95% of discovered lithium was carried in Spodumene, typically the highest purity lithium ore know to exist.

These findings confirm that Grid will be able to build a traditional lithium mining and milling operation, decreasing costs and the time from discovery to production.

Advancing Towards Production in 2025

Grid’s proximity to one of two operating spodumene processors in Canada gives it flexibility to send initial ore from Donner Lake to generate cashflow while the true resource of their lithium properties is discovered through additional exploration drilling over the next 12-15 months.

Grid has three major milestones remaining before toll milling can begin with Tanco

  1. Submit an AEP (Advanced Exploration Permit) to the government which will allow bulk sampling at the Tanco mine.
  2. Finish mettalurgical testing of samples from Donner Lake, currently being carried out by Tanco.
  3. Publish initial resource estimate for Donner Lake, proving out the resource potential

Current Focus Area a Fraction of Total Land Package at Donner Lake

  1. Source: GRID Metals

With the supply and demand balance for lithium remaining extremely tight at least through 2029, GRID metals is well positioned to sell lithium into a premium priced market while most other projects are still in the planning or construction stage.

Grid’s shorter time to production may enable it to command a premium multiple in 2025 and beyond while lithium prices remain close to $50,000/tonne, far above the average project cost of ~$18,000/tonne.

Capital 10X gets down to the real money business, actionable financial insights for traders and investors. We analyze company earnings, interview management teams and help teach the fundamentals of financial analysis and options trading. Our mission is to hunt for genuine 10 baggers.


Please enter your comment!
Please enter your name here