The Surging Global Demand for Lithium: Two Stocks to Have on Your Radar

In this edition of the Capital 10X Battery Metals series we examine the surging global demand for lithium, and two Canadian companies that are well positioned to capitalize: Grid Metals (TSXV:GRDM) & Stria Lithium (TSXV:SRA).

Strong Demand Tailwinds till the end of the Decade

In it’s 2023 strategic update, Albemarle – the 3rd largest lithium producer in the world, updated its global lithium demand (LCE, lithium carbonate equivalent) projections to 3.7 million tones by 2030. It was a 15% increase from its previous forecast due to the impact of the US “inflation reduction act” and strong EV demand.

This forecast represents 30% annual lithium demand growth till the end of the decade – the strongest growth runways among all metals.

Lithium Supply Will Struggle to Keep Pace with Demand

Albemarle stated that lower grade, higher cost projects will be required to fill that growing demand gap. Bringing on new capacity requires extensive time and resources, starting with early exploration and target testing (3-6 years) to engineering and economic studies (6-7 years) to construction and initial production (0.5 to 2 years). Recent hard rock mining projects have taken up to 10 years to start of production; integrated projects come in at around 14 years.

Benchmark Mineral Intelligence – one of the top consulting agencies for battery metals forecasts demand to be 2.4 million tonnes by 2030, notably lower than Albemarle’s forecast. However Benchmark’s base case lithium supply forecast for 2030 is 2.1 million tonnes – which is materially below Albemarle’s 3.7 million demand forecast.

This projected significant supply shortfall presents a very bullish backdrop for lithium prices over the long-term. Lithium prices have risen 200% in the last year alone.

Canada will Play a Key Role in the World’s Future Lithium Supply

Currently, almost all lithium mining occurs in Australia, Latin America, and China, accounting for a combined 98 percent of production in 2020. Additional lithium sources required to bridge the supply gap are predicted to come from early-stage conventional mineral and brines projects, as yet unknown resources, and unconventional brines such as geothermal or oilfield brines.

To meet surging lithium global demand, conventional lithium assets from the U.S., Mexico and Canada will be required to come into production.

Canada has the 7th largest lithium reserves in the world with 0.8 million metric tons. The country will play a key role in supply lithium to the world – with a national government highly supportive of critical metals development.

The Canadian government is hoping to capitalize on the opportunity this poses with a new critical minerals strategy — backed with $4 billion in funding in the recent federal budget — that aims to develop a full critical minerals industry value chain, from exploration and mining, to processing, manufacturing and recycling.

Clean Energy Canada estimates $5.7 billion to $24 billion in GDP could be created by 2030 annually by developing a battery supply chain, creating 18,500 to 81,000 direct jobs.

Ottawa is also anticipating that their Canadian critical minerals industry can benefit from the Inflation Reduction Act and other American policies which will inject billions into electric vehicles. This will potentially create opportunities for cross-border cooperation on the development of North American supply chains.

In our note today we are taking a look at two Canadian mining companies with what we believe are exceptional lithium prospects: Grid Metals and Stria Lithium.

Grid Metals: Unique Production Agreement and Major Potential

Grid Metals is a lithium, nickel and copper producer exploring in Southern Manitoba.

Grid Metals Property Map

Source: Grid Metals

What makes Grid so interesting to us is the company’s pre-production agreement with the only operating lithium processing facility in Canada. Tanco, the owner of the facility is desperate for additional lithium resource to keep the processing circuit working for years to come. Because of Tanco’s need for additional lithium, Grid has a ready buyer for its lithium resource without having to spend large amounts of capital building processing facilities in-house.

Grid expects to receive an advanced exploration permit in 2023 so it can begin bulk sampling of the pegmatite dykes discovered at its Donner Lake property and will continue to drill and prove out lithium resources throughout the year.

Donner Lake Lithium Drill Map

Grid also has the largest land package in the Bird River Belt, an established battery metal mining area.

The company has already discovered a significant copper and nickel resource at the Makwa Mayville project and is now at the Preliminary Economic Assessment (PEA) stage which will determine the potential economic value of the resource and move the company towards signing commercial agreements with a potential acquirer or partner.

Early Potential Resource of Makwa Mayville Property

Stria Lithium: Owner of Underexplored Acreage in the Prolific James Bay Lithium District

Stria Lithium is a small cap lithium miner that owns underexplored acreage in the heart of Quebec lithium country.

Stria is neighbor to multiple major lithium projects including world class drill results by Patriot Battery Metals at their Corvette project.

Patriot Battery Metals Stock Price On Fire

Patriot identified drill samples of more than 200 meters with lithium concentrations above 2%. The best lithium mines in the world have estimated lithium concentrations around 1.5%-1.8% for reference.

Project Map of James Bay

Source: Stria Lithium

In addition to big resource upside, Stria signed a smart deal with Cygnus Gold, an Australian explorer, who will pay for all exploration expenses in 2023 in exchange for up to a 70% ownership in Stria. As a result Stria is fully funded to execute on an ambitious drilling program this year.

Pontax Lithium is the company’s main asset and has already returned initial drill samples with high concetrations of lithium.

The company still has significant resource to prove out in all directions of the main Pontax Central pegamatite outcrop. A 10,000 meter drilling program is planned for 2023 which is a significant increase from the 1,500 meters drilled in 2022.

Pontax Drilling Map

With an ambitious drilling program planned for 2023 and promising initial drill results, we think Stria could end the year as the owner of the next major lithium discovery in North America.

Stria Lithium is a market awareness client of Capital 10X.

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.


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