Mike Fagan,
Editor
May 4, 2022
As the world seeks to go green, will commodities be able to keep up?
That’s the billion-dollar question… especially with the dearth of major new mineral discoveries over the last couple of decades.
Even as investment in the mineral exploration space rises, it’s becoming increasingly difficult to unearth large, economically viable deposits of the minerals and metals the world will need for a cleaner energy future.
In other words… most of the “easy” mineral deposits have already been found.
It’s a pattern that’s been firmly entrenched in the mining industry for decades:
A major mineral discovery is announced and is immediately followed by a stampede of mining firms seeking to “strike-it-rich” next door. The surrounding ground is canvassed… and the resulting area-play, if one emerges, eventually reaches its max potential with the vast majority of players folding up their tents empty-handed.
We’re seeing that exact scenario play out in the EV megatrend as it relates to its most critical battery metal — lithium — aka, the white petroleum.
Just last month, I said, “...in an EV market that’s projected to quadruple by the end of the current decade — there simply may not be enough lithium to go around.”
It looks like President Biden is finally getting that message as he has now turned to a Cold War-era law — the 1950 Defense Production Act — to boost domestic production of lithium and other critical minerals used to power electric vehicles and other green energy technologies.
Lithium brine operation.
Biden’s order directs the Defense Department to consider at least five metals — lithium, cobalt, nickel, graphite, and manganese — as essential to national security while authorizing steps to bolster domestic supply.
It’s about time… and one only needs to look at the dominant players, and the devolving geopolitical scenarios therein, to understand why.
Russia controls the global nickel market and the Democratic Republic of Congo is the world’s largest cobalt producer.
And while China isn’t exactly blessed with the planet’s largest lithium reserves, it has systematically wrestled control of an astounding 80% of the world’s raw lithium material refining, 77% of the world’s cell capacity, and 60% of the world’s component manufacturing.
They’ve done it through strategic investment, which is something a reactionary US now finds itself behind-the-eight-ball on.
Just over the last ten or so years, the Chinese government has spent somewhere in the neighborhood of $100B to increase its domestic market for lithium batteries by subsidizing the production of low-price EVs while helping companies build out the lithium mining and refining infrastructure to support them.
China has also done the same thing with rare earth metals… currently to the tune of about 85%!
And while the United States has virtually zero chance of ever catching up with China on lithium or rare earths — Biden’s action is an important first step.
It authorizes the Pentagon to allocate funds for a range of mining-related activities, including feasibility studies to determine the economic viability of proposed mine sites.
That could help jumpstart a domestic lithium industry, which shows the United States as having the world’s fourth-largest lithium reserves at 4% — measured at 6.8 million tonnes according to the USGS — but only about 2% of global production.
In fact, the US currently has just one active lithium mine, Albemarle’s (NYSE: ALB) Silver Peak mine located in Clayton Valley, Nevada, which has been in production for more than five decades.
The sheer size of that mine alone shows the very real potential for other large-scale lithium operations in the United States… and not just in Nevada.
New and potential lithium mining and extraction projects are also in various stages of development in Maine, North Carolina, and California.
California Governor Gavin Newsom has even called the Golden State “The Saudi Arabia of Lithium” with two projects slated for production by 2024.
Lithium prices have responded in predictable fashion… rising some 400% since the start of 2021.
Even Tesla CEO Elon Musk tweeted (in fact, he’ll probably be tweeting a lot more starting soon), “Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.”
With or without Musk’s involvement, there’ll be no shortage of hurdles to overcome in the domestic lithium mining space, including environmental concerns, native land encroachment issues, water rights, and a lengthy permitting process that can oftentimes take years to navigate.
Yet, as a nation committed to combating climate change through green energy initiatives, we have to start somewhere or risk being further under-the-thumb of countries and regimes that do not have our best interests in mind.
“We need to end our long-term reliance on China and other countries for inputs that will power the future,” Biden said, vowing to “use every tool I have to make that happen.”
Part of that toolbox is the $750M the Defense Department will now have at its disposal to help bolster America’s strategic and critical material stockpile while also focusing on reclamation and cleanup of abandoned mine sites.
It won’t be easy. Like I said, most of the “easy” mineral deposits have already been found. Yet, with the right geologic teams at the helm, new discoveries are indeed on the near-term horizon in the junior exploration space.
Our own Gerardo Del Real has recommended two companies that are onto new lithium discoveries in North America.
One is already up 400%. A second just made a new lithium discovery last month... And its shares are just now starting to take off.
And while mining is never a perfect endeavor, we are seeing a “perfect storm” of rising demand coupled with rising commodity prices in a burgeoning domestic lithium market with plenty of opportunities for substantial wealth-building ahead.
Get Gerardo’s latest lithium stock research here.
Mike Fagan
Editor, Daily Profit Cycle