Παρασκευή 11 Αυγούστου 2017

Τhe $10 Billion Treasure Hidden In A Dead Volcano

Τhe $10 Billion Treasure Hidden In A Dead Volcano
By James Burgess
Right on the other side of the biggest lithium volcano in the world is … even more lithium.

If an investor had gotten in on the north side of the volcano before it proved up its lithium reserves, and then watched prices suddenly skyrocket, they’d be multi-millionaires today.

Well, now we have that opportunity on the other side of the volcano, with one little known company.


And it’s right here that investors could find the biggest risk-reward play on the market today for a metal that is the driving force of demand for everything from batteries to electric vehicles and countless consumer electronics.

Welcome to Argentina, tens of thousands of years ago in the Pocitos salar basin, when a swamp turned into hot bubbles that over millennia became land--and then mountains spewing fiery magma.

But this is how Mother Nature pays us back: Today, this is a vast salt flat with massive amounts of lithium.



On one side of the volcano, ADY Resources has already proven up the massive lithium offerings, handing investors huge returns--but this is a private company.

It’s the other side of the volcano that we’re interested in.

Proving up the lithium on the south side of this volcano is a huge deal—and that’s exactly what Southern Lithium (TSX:SNL.V) is doing right now with its Cruz property.

And not only is this the mother of all lithium volcanos … it’s also right in the middle of the ‘Lithium Triangle’ of Argentina, Bolivia and Chile—home to the largest lithium resources on Earth.

Even better: The third largest producer comes from Argentina. Think infrastructure in place, political stability and massive brine-based potential. It’s made Argentina the darling of the lithium boom for brilliant new entrants like Lithium-X and Millennial—all targeting the Salta Province.

But there’s only one actual producer, and that’s ADY, north of the volcano. Since we’ve missed the boat on ADY, the best place to look is on the other side, where proving up reserves is the next major disruptive force on this scene.

This is a multi-billion-dollar asset that promises to mint millionaires if it proves up the same lithium, from the same raging magma. And it’s fully funded to drill, right as lithium demand is poised for a lucrative supply gap driven by unprecedented lithium-ion battery hunger.

We believe there is no better risk-reward play for any metal, anywhere in the world right now.

Here are 5 reasons to keep a close eye on Southern Lithium (TSX:SNL.V)

#1 The Next Multi-Billion-Dollar Side of the Volcano

Southern Lithium’s Cruz property in the Pocitos Salar basin in Argentina’s Salta Province—grand central station for global lithium—encompasses a massive 22,000+ acres. And it’s in the same basin and only 11 kilometers to the south of the already proven reserves of ADY Resources’ Salar del Rincon property. This is the only lithium operation in Salta Province.

ADY Resources (Enirgi Group Corporation) got in on this when lithium was dirt-cheap. When Chinese lithium spot prices jumped from $7,000 per ton in September 2015 to a high of $20,000 per ton in early 2017, this volcano wasn’t spewing out magma anymore; it was spewing out millionaires.

Prices have almost quadrupled over the past two years. So ADY Resources is now sitting on probable reserves of lithium worth somewhere in the neighborhood of $5 billion or more.



(Click to enlarge)

This same opportunity, with the same volcanic geology, is now staring right at us again, today—with Southern Lithium.



(Click to enlarge)

While we’ve already seen one price explosion, lithium has nowhere to go but up because demand cannot keep pace with future supply.

The $20,000 per ton was just the price lithium reached at the thought of the fantastically tight future supply.

Even with new supply coming online, it’s just barely keeping pace with demand already this year.

According to the most sought-after lithium industry consultant in the world, Joe Lowry, even with the recent spate of new project announcements, a supply shortage could still cause significant issues in the battery supply chain by 2023.

Elon Musk is planning on using the entire world’s supply of lithium for his $5-billion battery factory in Nevada, which started producing in January. This trend is not limited to just Tesla. Every car manufacturer in the world is looking to get into the future of battery-operated vehicles. Earlier this year, Volvo announced that it is committed to making one million EVs by 2025 as it aims to get in front of this major shift to electric cars. What does this mean? It means the future demand will simply skyrocket.

#2 Already Drilling and Fully Funded to Drill to Completion

Southern Lithium’s (TSX:SNL.V) Cruz property covers an expansive 22,306 acres in the Pocitos Salar basins.

Not only is Southern Lithium sitting on the next volcanic eruption of lithium in the heart of the Lithium Triangle, it’s also already drilling, and it’s got the cash to finish the job.

So far, so great. Geomagnetic and geo-chemical work to date indicates the exact same type of geology as ADY’s project, and right now, Southern Lithium is in the process of drilling three holes to prove it all up.

In February, a ground geophysical survey located bodies of subsurface brine over 6 kilometers long and 250 meters deep—geological measures that typically have indicated a high content of lithium brine on other salar basins in the area.

Once they prove this up, it will already be too late to get in at the best risk/reward ratio. And this company moves fast.

They got their permit to drill on the 4th of July, and they launched first-phase drilling just 7 days later.

We expect the news flow to be fast and hot on this one, and if they prove it up—then it’s going to be the most volcanic play to ever hit this sector.

#3 More Lithium Assets in Tesla’s Back Yard

But they’ve got more than this volcano. They’ve also got a lithium play in the ground zero of this boom in North America: Clayton Valley, Nevada.

Lithium millionaires are in the process of being minted in Nevada alone—even without the biggest volcano in the world, and even without the ‘Lithium Triangle’.

Southern Lithium has both, and in Nevada—Tesla’s electric vehicle and battery giga-factory back yard—the company is right next to Pure Energy, the pioneer of the great Nevada lithium rush.

The United States Geological Survey (USGS) calls Clayton Valley the best-known lithium deposit in the world, with the only producing lithium mine in all of North America.

Pure Energy’s recent lithium discovery put it on the map, and it’s only a few hour’s drive from Tesla’s battery giga-factory.

This is exactly where Southern Lithium (TSX:SNL.V) has positioned itself—right next to Pure Energy, and right next to Albemarle’s mine, the only one actually producing lithium in North America.

Southern Lithium’s 2,100-acre East Fault project is just on the eastern border of Pure Energy’s Clayton Valley claims, and just south of Albemarle’s.



#4 Lithium Demand Will Skyrocket

The top four companies that hold (for now) the oligopoly on lithium supplies can’t keep up with demand, which is creating the opportunity for new players to enter the market. Even Albemarle’s CEO, Luke Kissam, told investors last year that “from a lithium standpoint, we are pretty much sold out.”

The catalysts keep coming, and they are dramatic.

• Tesla opened the doors on its battery giga-factory in January, and expects to be producing so much by next year that it will double the world’s battery production single-handedly. And it started producing its Model 3 on 7 July.
German BMZ has launched the first phase of its German battery factory, and LG Chem is planning one in Poland, which is slated to open next year. Samsung also hopes to start making batteries in Hungary beginning in 2018.
• Mass production of Tesla’s Model 3 electric sedan promises to push lithium supply to its bursting point.
• Massive energy storage systems with a voracious appetite for lithium-ion batteries also threaten the supply picture, to the delight of miners.

This is one metal for which demand is not only visible, it’s palpable.

• According to Macquarie Bank (ASX:MQG), the share of lithium demand from electric and hybrid vehicles alone is due to surge from 10 percent in 2015 to 33 percent by 2021.

• Battery manufacturing capacity will triple in the next four years, according to Bloomberg.

• ‘Mr. Lithium’, Joe Lowry says demand should double between now and 2020, driven by the massive battery market, producers are in no position to keep up with this in the medium or long term.

• Volkswagen says the situation is desperate, and the industry needs 40 giga-factories. The auto giant foresees a huge shortage of batteries by 2025.


#5 Huge Investment Gain Potential

The ability to extract lucrative lithium from brine is a major coup—and a major opportunity for first-in investors. But the biggest money to be made here is in the new discoveries. So, when a small-cap is sitting on the right side of a major volcano of lithium and is gunning it full throttle to prove up resources, the risk-reward ratio is high, but also mouthwatering.

If this $7-million market cap company proves up its resources, it could run to 250-500 million quickly, giving investors a huge return on investment.

Down on the ground, with the roads in place, Southern Lithium has already found indications that their side of the volcano is exactly like ADY’s side.



(Click to enlarge)

So at this point, it seems to be more a question of not if, but how much lithium they will find.

Lithium is here to stay and it’s only going to get bigger and bigger, and the way to play this game is to get your hands on as many prospective lithium areas as possible, and geology dictates that we’ve only just begun to tap into the ‘white petroleum’ of both Nevada and the ‘Lithium Triangle’.

But a volcano … well, that’s even better, and Southern Lithium (TSX:SNL.V) is tackling this force of nature with a fierce momentum that won’t wait for anyone.

Honorable Mentions in the lithium and EV space:

FMC (NYSE:FMC): This mining giant may even end up taking their small lithium business into an IPO, and this should garner a significant amount of market interest.

Teck Resources (NYSE:TECK): Zinc hasn’t been Teck’s best friend of late, but that looks set to change in the medium term, as supply continue to dwindle and as we hear news that the world’s top producer of the metal—Glencore—isn’t planning to bring shuttered mines back online. Supply will remain tight. Keep in mind this, though: Teck’s Q1 earnings and revenue fell short of expectations because of weaknesses at its zinc unit, sending it shares down about 6% in late April. In particular, there’s been a 23% drop in production at its Red Dog mine due to lower grades of zinc.

AES Corp. (NYSE:AES): AES is one of the biggest names in energy storage, the major bottleneck in energy at this moment in time. Next to battery giants Tesla and Panasonic, we see AES as the most influential and innovative battery manufacturer

Alphabet (NYSE:GOOGL; NASDAQ:GOOG): With a market cap of over $657 billion, this is the second-largest by market capitalization in the S&P 500. We love Alphabet because its foundation is intellectual property—not tangible assets. Oh, and self-driving cars … definitely a huge part of our energy revolution and the artificial intelligence side of things.

General Motors (NYSE:GM): GM, though it’s been surpassed in market cap by Tesla (of all companies) is still the furthest ahead of the Big 3 car makers from Detroit in terms of EVs and self-driving cars. Recently, GM acquired Cruise Automation—a self-driving car company, and it seems determined to forge ahead even faster to play catch-up with the future.

By James Burgess

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