The lithium market is growing at a dramatic rate, as demand for the metal, driven primarily right now by the forecast explosion in demand for electric vehicles, rises.
Companies like Tesla Motors Inc (NASDAQ:TSLA), General Motors Company(NYSE:GM) and Ford Motor Company (NYSE:F) are working on, and in some cases already commercializing, their individual offerings in the space.
Tesla is spearheading the movement from a marketing and public perception perspective, but chances are the company’s models will only account for a fraction (albeit likely a reasonably substantial fraction) of the 41 million electric vehicles expected to be on the road by 2040.
The demand boom is already resulting in a supply constriction, and the lack of any globally established lithium market is bringing with it challenges as yet unseen by companies such as those above mentioned. Tesla is going direct to source, dealing with explorers and securing rights to as yet unmined lithium. Chances are many other companies will follow this strategy.
There’s a secondary issue, however, and even closer to source than the issue above. The demand is expected to be so great, that explorers are going to have to broaden their scope of exploration. In addition, those companies that will absorb demand, are going to have to broaden the base of locations from which they source supply.
We’re already seeing this happen.
At the end of last year, Canada and London-listed Bacanora Minerals (TSX-V:BCN) (LON:BCN) picked up a large upside revaluation as it reported that its lead Mexican project was more than three times richer in lithium than it had first projected. A couple of months earlier, Tesla had picked up rights to lithium produced at the mine, in a deal that mimicked those it has already established with companies closer to home, in the North American lithium hotspot of Nevada.
These two factors, the higher than expected deposit concentration and the willingness of companies like Tesla to claim unmined material outside of the traditional South American “lithium triangle” have highlighted something of an opportunity. Specifically, identify a company that is likely to hold claims in the newly-identified-as-rich Mexico, and that is an active explorer in the lithium space, with active explorer defined as holding claims already, and taking strides to acquire more.