Sienna Resources Inc. (
TSX: V.SIE,
OTCBB:SNNAF, FSE:A1XCQ0,
Forum), a junior exploration company that is positioned at the forefront of the battery metals revolution, is gearing up for a busy year in 2018.
The company’s main goal is to become a supplier of so-called battery metals, including cobalt and lithium, which are the primary constituents, along with graphite, of lithium-ion batteries used in the production of electric vehicles and to power mobile phones, laptops, and other electronic devices.
Sienna is well positioned for this purpose because its flagship properties are located on the doorstep of two of the world’s largest lithium ion battery production plants. Those include the gigafactory that
Tesla Motors Ltd. (
NASDAQ: TSLA,
Forum) and partner
Panasonic Corp. has built in Nevada to support planned production of 500,000 electric cars annually, as well as a similar sized plant that is being built by Swedish battery firm Northvolt in Sweden.
“There are now more than 20 mega battery manufacturers currently being planned or constructed globally, creating a massive demand for battery metals,” said Sienna President Jason Gigliotti.
Benchmark Mineral Intelligence, which says demand for electric vehicles is expected to push demand for lithium-ion batteries above 400 gigawatt hours by 2025.
As cobalt is a key component of electric vehicle batteries, battery demand for cobalt is forecast to rise to 76,000 tonnes by the end of 2020, compared to 46,000 tonnes in 2016, Benchmark Mineral Intelligence said.
Since early 2016, the price of cobalt has more than tripled to over US$36 a pound, the highest level in 10 years.
BMO Capital Markets estimated that global cobalt mine supply was down about 2.7% in 2017, due to weakness at Glencore AG’s Katanga operation in the Democratic Republic of Congo (DRC) and disputes at Groupement du Terril de Lubumbashi’s (GTL) Big Hill primary cobalt tailings operations which are also located in the DRC.
Yet BMO has explained that the cobalt rally is expected to continue with growth in smart phone sales, as Smartphone batteries are still the main end use market for cobalt.
It has also been estimated that the supply of lithium will need to reach 400,000 to 500,000 tonnes by 2025 if demand forecasts for lithium ion batteries are to be met.
That has prompted some analysts to warn that there is not enough lithium in the pipeline to satisfy the kind of demand that is being predicted in 2025.
“It is our expectation that the lithium industry will struggle to keep up with demand between now and 2021,’’ said Benchark Managing Director Simon Moores, who was quoted by Investing News Network.
Investors are gaining exposure to this trend by taking positions in company’s like Sienna, which is focused on exploring and developing projects that will meet the expected surge in electric vehicle production.
Sienna is working to develop the Slattberg cobalt-nickel-copper project in Sweden and the Clayton Valley Deep Basin Lithium Brine project in Nevada, a U.S. state which is already home to the only lithium mine in the U.S. --
Albemarle Corp.’s [
NYSE: ALB,
Forum] -- Silver Peak Mine.
Located 25 kilometres northwest of Falun, Sweden, Slattberg is a historic mining camp hosting cobalt, nickel-copper rich massive sulphide mineralization that occurs within a two kilometre belt of historic nickel-copper mines.
The project contains drill defined massive sulphide mineralization that extends to a depth of 100 metres and remains open for expansion at depth and along strike. The project is accessible year round, with nearby rail, power and five smelters in the Nordic region. At least 12 historic mines are located on the property with operations dating back to the late 1800s.
The historic mines are positioned along an east-west trend of massive sulphide occurrences developed in and around a similarly oriented body of Leptite. This is a local term used to describe rhyolitic/felsic tuffacaeous rocks commonly associated with sulphide mineralization in Bergslagen. Mafic and ultamafic rocks occur in and around the mine workings.
“We are very pleased to have the opportunity to have access to this project,’’ said Sienna President Jason Gigliotti. “This new cobalt-nickel-copper prospect houses 12 past mines and we are optimistic about what new mining techniques could achieve,’’ he said.
Northvolt wants to locally source as much battery material as possible to feed what is expected to be Europe’s biggest battery factory. It will be built on a site in Skelleftea, in the far north of Sweden near that country’s cluster of mines, eventually employing as many as 2,500 people.
Sienna is already on the ground in Sweden and expects to be drilling the Slattberg property in early 2018.
Sienna is fully funded for its upcoming drill program after recently raising $2.5 million in an over-subscribed private placement.
President Gigliotti said, “Sienna is gearing up to launch a full scale drill program during the first quarter of 2018. We are very optimistic about the prospects in Sweden and are encouraged that new magnetic data has defined additional high-priority drill targets.”
He went on to say that cobalt prices are trading at 10 year highs and demand for ethically sourced cobalt has never been higher. This is a reference to the fact that over 50% of world’s cobalt production – roughly 75,000 tonnes annually – is sourced from the Democratic Republic of Congo, a country that is well known for its mineral wealth, but also civil wars and corruption.
Indeed, in November 2017, Amnesty International released a report warning that electric car companies are “not doing enough” to tackle human rights abuses in the cobalt supply chain.
“Our initial investigations found that cobalt mined by children and adults in horrendous conditions in the DRC is entering the supply chains of some of the world’s biggest brands. When we approached these companies, we were alarmed to find out that many were failing to ask basic questions about where their cobalt comes from,” said Seea Joshi, Head of Business and Human Rights at Amnesty International said.
Roughly 20% of the production from DRC is mined by hand. Amnesty International documented children and adults mining cobalt in man-made tunnels, putting them at risk of fatal accidents and serious lung disease.
The London Metals Exchange responded by launching its own investigation over concerns that cobalt traded on its exchange could be linked to child labour.
The dynamics of the lithium market are somewhat different.
There is no ready market for lithium. Lithium prices are determined by the purity and chemistry of the material as well as the length of the contract between buyer and seller.
Brines (in salt ponds) and spodumene (hard rock) represent the two main sources of commercial lithium production.
Lithium supply is highly concentrated among eight producing countries, of which three – Argentina, Australia and Chile – account for 85% of global output.
In Nevada, Sienna’s Clayton Valley Deep Basin Lithium Brine project is located inside of and completed surrounded by
Pure Energy Minerals Ltd. (
TSX: V.PE,
OTCQB: PEMIF,
Forum) Clayton Valley South Project, which contains an NI-43-101 compliant inferred resource of 218,000 tonnes. Pure Energy has an early stage supply agreement that could make Pure Energy a potential seller of an undisclosed amount of lithium to Tesla.
Under the agreement, Tesla would pay a predetermined price that is below current market rates.
It means that if Pure Energy Minerals can tap into this potentially abundant new resource in Clayton Valley and use technology to lower the costs of lithium mining, it might have a chance to sell its production to Tesla, or others, at a low cost.
According to the Pure Energy Minerals website, “Geophysics shows that the same brine-bearing formations encountered during drilling (by Pure) appear to extend to much greater depths within the basin.”
“We are pleased to be one of the few companies that have property within the only known lithium brine basin with production in North America,’’ said Gigliotti.
Saline brines are higher density than fresh or brackish water and therefore tend to sink. Based on this, management is optimistic regarding this project as it is located in the deeper sections of this basin.
Full Disclosure: Sienna Resources Inc. is a paid client of Stockhouse Publishing.