The bungee plunge in lithium carbonate prices reached a limit of $11-$12/lb a couple weeks ago and has since rebounded into the $19-$20/lb range as battery makers restock lithium feedstock. We avoided a kersplatt for the lithium producers and explorers where the price dropped past $10 into the $3-$5/lb range reached in 2018-2020 when new supply mobilized from Australian pegmatites overwhelmed demand from the EV sector until 2021 when the reverse happened. I don't expect lithium carbonate to get back to the $30+ level but I would not be surprised to see it oscillate between $10-$20 during the rest of the year. This is the ideal scenario because within this range a 1% Li2O grade represents a rock value of $273 to $1,090 per tonne. Lithium Mania 2.0 is about finding near surface pegmatites in Canada that are open pittable. As long as a junior is finding pegmatites with a 1% or better grade and the lithium carbonate price stays above $10/lb that will be the equivalent of having an open-pittable gold discovery grading 8.5 g/t or better, or an open-pittable copper discovery grading 6.2% or better. I've created a graphic to depict the gold and copper grade equivalencies for the rock values indicated by a Li2O 1%-2% grade range and $10-$20/lb lithium carbonate price range. When you consider that these pegmatites can achieve 100 million plus tonnes, you realize there never was anything like that lucrative available for at or near surface copper or gold deposits. The only reason this opportunity exists is because of the extraordinarily short timeline for when the energy transition needs a 600% expansion of lithium supply. The key for the juniors is to demonstrate that there is lateral extent for an outcropping pegmatite grading 1% Li2O or better.
An unprecedented discovery frontier is unfolding for resource juniors focused on pegmatite exploration, in particular in Canada where pegmatites were documented during the past 70 years as a by-product of gold and base metals exploration. Now that investors long lithium juniors have shaken off the bungee plunger's sickening mid-flight question about the reliability of the weight and cord stretch calculations, the marked is poised to resume an uptrend, as soon as the debt ceiling Damocles sword as been taken away or done what it has to do. Patriot Battery Metals has rebounded from the $12-$14 range it settled into after a $17.70 peak in early February which it appears ready to challenge. The latest round of drill results continued to be in the 1.5%-2.0% range. The recently announced Allkem/Livent merger creates a new Quebec lithium champion which could prod Albemarle, Wesfarmers or SQM to make a move on PMET before it becomes too expensive. BHP and Rio Tinto have apparently sniffed that the early winners are too expensive, which leaves the field open to producers Pilbara Minerals or Mineral Resources to make premium-priced paper bids for PMET that establish a world class beachhead in Quebec's James Bay region. By July PMET hopes to have published a maiden inferred resource estimate for the CV5 pegmatite which the market expects to come in at 50-100 million tonnes of 1%-2% Li2O with some brokerage firm analysts offering estimates within the upper end of that range.
With regard to the Canadian resource juniors participating in Lithium Mania 2.0 few of them have drill programs underway, especially not in the James Bay region. Brunswick has reported partial drill results for its Anatacau West property in the southern half of the James Bay region where it has confirmed that Allkem's Cyr pegmatite system does extend onto Brunswick's property with grades of 1% or better. Brunswick started a small drill program on the Hearst pegmatite showing in Ontario in late April which should be due for a "visuals" update. But for Brunswick and nearly all Lithium Mania 2.0 juniors, including, Beyond Lithium Inc, the next big exploration stage involves putting boots on the ground to walk their properties, inspect the locations of documented pegmatites, use a LIPS or XRF gun to shoot outcropping pegmatite for lithium fertility (the XRF gun can only detect heavy element lithium pathfinders such as rubidium, which the LIPS gun is specialized to detect the presence of light elements such as lithium), try to identify spodumene in the field, and at a minimum collect samples for lab confirmation. A key part of this prospecting wave, which will unfold across Canada and I predict will be the biggest such prospecting wave in the history of Canadian exploration, will be to assess the lateral extent of pegmatite outcrops which may have only limited exposure.
Regions such as the southern half of James Bay where big outcropping pegmatites such as Cyr, Wabouchi, Rose and Moblan were found many decades ago will be the focus of "second order" exploration where indicators such as geology, lake bottom sediments and glacial dispersion history will be applied to focus prospectors into areas where pegmatite outcrops may be too subtle or small to have attracted attention in prior decades when lithium was still a smallish market. Some of these areas are more accessible than others which is why Brunswick will shortly be back on the Anatacau West and the much larger main Anatacau block 22 km to the east for boots on the ground inspection. The rumor mills in social media networks will be buzzing this summer with "reports from the field", especially for properties in minimally explored areas like the northern half of James Bay where PMET's Corvette pegmatites sit and where "first order" outcrop discoveries with considerable exposed size are entirely possible. While we may get LIPS or XRF readings indicating high Li2O grades these numbers will not be representative. Trench samples will take 2-3 months for assays to arrive.
With most companies heading into the field this June the earliest wave of surface values will be August, setting the stage for drill programs in September. Most companies will not be able to mobilize a drill program until Q1 of 2024, but the market will be watching the fall drilling juniors very closely for confirmation of another CV5 scale discovery. For by then Patriot Battery Metals may already have disappeared through a buyout by a bigger company. And because the PMET shareholders understand that Corvette is only an incremental solution to the projected 2030 supply requirements, much of the proceeds of a PMET buyout will be recycled into other Lithium Mania 2.0 juniors. But most importantly, the large retail and institutional audience on the sidelines will have seen the rapid wealth creation cycle of PMET, and will finally understand that lithium is evolving into a $100-$200 billion market that puts it in a league with yellow and red gold, but with open pittable rock values that are no longer possible to find at surface for gold and copper anywhere in Canada. By Q4 of 2023 there will be an unprecedented inflow of speculative risk capital into lithium focused resource juniors, and pudgy Jabbas like Rio Tinto and BHP will enter the fray in a big way, in fact in a much bigger way than they did in the 1990s when diamonds were discovered in Canada. |
