Proactive Investors - This year could bring about an inflection point for companies developing lithium projects, according to analysts at Stifel GMP, as demand continues to increase but the type of projects begins to change.
In a note titled “Revenge of the Miners,” the firm predicted that 2023 will mark a shift from majority brownfield expansionary sources to riskier greenfield sources. Brownfield refers to lithium production on top of previously existing infrastructure, whereas greenfield projects require new infrastructure to be built.
“The majority of the supply response from the global lithium market over the last seven years has been dominated by six brownfield asset expansions, while average global grades have dropped 29%,” analysts said. “We expect supply growth in 2024-2025 to come from a more balanced 48%/52% of brownfield expansions/greenfields builds, as opposed to 85% of supply in 2022 coming from brownfield expansions.”
Additionally, Stifel projects “an increasing cadence of capital deployed from non-traditional sources for critical mineral projects,” arguing that “lithium majors are cashed up and likely on the hunt for resource growth to protect incumbent market share.”
That’s a boon for companies developing lithium projects, Stifel said.
“We see investing in lithium projects as one of the strongest ways to invest in global EV adoption, as these firms control lithium units OEMs increasingly require,” analysts noted.
Stifel’s notes highlighted a few larger companies, but there are plenty of North American small-cap companies developing lithium projects.
Canada Silver Cobalt Works Inc (TSXV:CCW)owns a greenfield project in Ontario that it expanded in November by staking new claims. The land package in the Cochrane district now spans 230 square kilometers.
Li FT Power Ltd (CSE:LIFT) operates the Yellowknife Lithium Project in the Northwest Territories and is working toward putting out an inferred resources estimate in 2024.
Victory Battery Metals Corp (CSE:VR, OTC:VRCFF) recently shared initial plans related to future exploration on its Stingray property array in the James Bay Lithium District of Quebec.
“With much recent focus amongst majors being paid to building/optimizing conversion capacity, we see these companies set to return focus to resource growth,” Stifel said. “North American lithium developers could prove to be an attractive destination for this dry powder as producers look to grow production and maintain market share within proximity to the West’s largest auto market and increasingly protectionist onshoring policies, all the while benefiting from low carbon electricity and a talented labor pool.”
“We now forecast LCE demand of 819 kilotonnes in 2023, increasing to 1.5 metric million tonnes/2.7MMt in 2026/2030 respectively, implying a 20% CAGR,” the firm added.