The James Bay Lithium Index was designed to include all companies with exposure to the James Bay region of Quebec on the premise that because of the novelty of the idea that LCT-type pegmatites could have a world class value any junior could make a major discovery simply by putting boots on the ground. The 2023 summer fire closure prevented the biggest prospecting boom in Canada's history from unfolding, with only a portion of the juniors getting any work done, often with only a few weeks in the field. Meanwhile the lithium carbonate price slump, slowing EV sales, and a general market aversion to the resource sector has vaporized market interest in the idea of Lithium Mania 2.0.
Only a handful of James Bay juniors mounted winter drill programs, including the three I made 2024 Favorites: Brunswick Exploration Ltd, Patriot Battery Metals Corp and Winsome Resources Ltd. All three suffered major declines in January when the market feared another coming lithium winter like 2018-2021 when lithium carbonate prices crashed below $3/lb. Winsome and PMET have recovered some of their declines, but Brunswick has yet to rebound. The winter drilling season ends at the end of April and no work will be done in May while the exploration sector pauses for the annual First Nations goose hunting season. The JBLI bottomed on February 13, 2024 when it was down 46% from its start on August 1, 2023. It has recovered modestly but is still down 40%.
I do not expect the JBLI as a whole to show any major improvement until perhaps September because it has 71 members and many of them are either lifestyle juniors who jumped onto the lithium bandwagon or are down and out toiling geologist type juniors like Dios Exploration Inc. We are in a very poor funding environment and we need leaders such as my three Favorites to develop sustained uptrends to breathe life back into the rest. The big question mark hanging over the market is whether or not Quebec and much of Canada will suffer another hot summer of forest fires that shuts down exploration. Many juniors have claims in areas where there is nothing left to burn, but if fires erupt elsewhere airplanes and helicopters will be requisitioned to fight those fires. There will thus not be an anticipatory buildup ahead of the summer exploration season.
PMET I believe can double because it has already demonstrated solid lithium assets that will support a $2 billion plus valuation once the market is comfortable lithium carbonate prices have stabilized. Winsome will benefit when we see the fruit of the winter drilling at Adina, helped out by the drilling efforts of others in this area - a big question mark about Winsome's Adina is whether it will achieve critical mass for standalone development or need to be consolidated with other pegmatites in the area.. Brunswick is the most important bellwether for the James Bay lithium area; it needs to show that drilling has made Mirage bigger and better, and ideally find the source of the spodumeme boulder field which is not explained by the current focus of their winter drill campaign. For the rest to get any upside movement the overall sentiment with regard to the future of pegmatite sourced lithium supply needs to improve.
There has been a lot of negative press about the slowing EV sales, and the Republican Party has made hostility toward electric vehicles and the energy transition a major talking point, but the shift is still happening. Toyota, which steered clear of electric vehicles while developing its hybrid fleet while quietly working on solving the problems needed to offer a truly desirable and affordable EV, is looking like a genius right now. President Biden's recent increase of emission reduction goals does not ban ICE car sales; it merely forces carmakers to lower their average emission footprint. The growing popularity of hybrids among consumers will help companies like Toyota achieve those lower emission goals while it races to deliver a Tesla killer EV for the masses.
On March 5, 2024 Toyota announced a decision to buy out Panasonic's 49% stake in their Prime Planet Energy & Solutions JV they have operated since 1996. This JV has made batteries for Toyota's hybrid and plug-in hybrid vehicles and is moving into making batteries for electric vehicles, a sector Toyota has so far largely shunned. Last October Toyota announced it would invest an additional $8 billion in its North Carolina battery manufacturing facility into which it had already invested $5.9 billion. Although Toyota is a Japanese company, it builds the cars it sells to American consumers in the United States. The American carmakers are going to have to roll up their sleeves over the next five years if they do not want Toyota and Tesla to eat their lunch.
Nissan and Honda, Japan's second and third largest carmakers after Toyota and normally rivals, have already read the writing on the wall and this week announced they are teaming up to develop an EV for the masses. Lithium Mania 2.0 has merely stalled, but the underlying logic that will drive it not only remains intact, but is becoming stronger as carmakers focus on delivering a solid state lithium ion battery powered EV by 2030. For the Canadian hardrock lithium explorers this is a welcome development, because it will take until 2030 to delineate, permit and construct the mines needed to meet demand set to skyrocket at the start of the next decade. PMET, which has $100 million working capital courtesy of Albemarle, will lead the turnaround. |
