The world is going green. But supplying the industry with the “battery metals” necessary to fuel the transition to EVs is becoming a greater and greater challenge.
Originally, it was the supply of cobalt that was seen as the big bottleneck in supplying lithium-ion battery manufacturers with the necessary inputs to meet EV demand. Today, however, increasingly, the focus is on lithium itself.
This new Bloomberg article captures market sentiment.
The Lithium Market Is Hotter Than Ever and Traders Are Moving In
For most retail investors, trading in “futures” markets for commodities is not very practical. However, investing in the commodity producers is not only easy, it provides investors with (by far) the cheapest exposure to the lithium market.
For investors looking for a high-leverage prospect in lithium, Rover Metals Corp (TSXV:ROVR/OTC:ROVMF) offers an interesting opportunity in a rising jurisdiction for lithium mining. More on this later.
When Bloomberg starts comparing lithium trading with the oil market, you know that lithium is becoming a big story. Why all the buzz?
Less than a year ago, lithium was trading at under USD$20,000 per tonne. In recent weeks, lithium prices have soared past $71,000 per tonne. But the greater-than-tripling in price is only half the story in this hot commodity market.
The reason why lithium prices are going ballistic is that when both traders and end-users look ahead in this large-and-growing commodity market, they see lithium moving into a supply deficit.
Where are mining companies going to go to come up with the additional lithium needed for EVs? One mining jurisdiction that has been drawing an increasing amount of attention is Nevada.
Nevada sees lithium ‘white gold rush’ as demand set to skyrocket
In fact, the only commercial lithium mining operating in the U.S. today is in Nevada, Albemarle’s huge Silver Peak lithium brine operation.
One of the companies seeking to help develop more of Nevada’s lithium riches is Rover Metals Corp (TSXV:ROVR/OTC:ROVMF). On September 20, 2022, Rover Metals announced acquiring the option for a 100% interest in the Nevada Claystone Lithium Project, which management has dubbed its “Let’s Go Lithium” Project.
To earn a 100% interest in this Project, Rover Metals is required to undertake exploration expenditures of at least USD$200,000 on the property within 24 months of signing a definitive agreement.
Previous lithium sampling on this property has registered lithium values of up to 1,218 ppm Li. Management has indicated their intention to complete a $200,000 reverse circulation drill program to follow up on this sampling work.
The Company describes this as “a shovel-ready exploration project.” The Let’s Go Lithium Project has direct road access, access to hydropower, and an abundant local workforce.
Management sees similarities in the geology with other Nevada lithium projects, including Cypress Development’s Clayton Valley project and American Lithium’s TLC project, among others.
In addressing the potential of the Project, Judson Culter, CEO of Rover Metals, pointed to another important factor.
“The Biden Administration’s Bill for Inflation Reduction and Energy puts milestones in place for critical minerals like Lithium to be effective January 1, 2023. Rover’s management looked all over the U.S. and Canada and ultimately decided on Nevada as the best jurisdiction to advance a lithium project.”
With supply chains fracturing all over the world, the U.S. government is placing a lot more emphasis on developing domestic supplies of “critical minerals” like lithium.
Indeed, Elon Musk himself was recently in the news, inquiring about acquiring a large stake in commodities giant Glencore. This EV icon can see the commodity supply pressures on the horizon.
That explains why mining companies are heading to Nevada to uncover new supplies of lithium. But why should investors look at Rover Metals rather than one of its Nevada peers?
A clue to that answer comes in the name of Rover’s 6,000-acre property: the Nevada Claystone Lithium Project.
Experienced mining investors know that most of the world’s accessible supplies of lithium are found in lithium brine deposits. But there is a Catch-22 here.
It takes large quantities of fresh water to extract the lithium from these brines. Yet lithium brines, by their very nature, typically occur in some of the most arid regions on Earth.
Lithium clay deposits (like Rover Metals’ Project) require substantially less water to extract the lithium.
Nevada has lots of lithium. Nevada does not have much water.
All other things being equal, which lithium projects are most likely to get approval to go into production? The ones that will utilize Nevada’s precious water resources most efficiently.
The Let’s Go Lithium Project could also benefit from being close to the (future) Claystone Lithium Refinery, currently at the PFS stage of development.
That’s a strong value proposition for a junior mining company that (after the recent carnage in markets) has a market cap of only CAD$2.4 million.
Lithium prices are at all-time highs. Many (most?) lithium mining stocks are trading near/at 52-week lows. That’s a huge price disconnect.
For investors interested in a high-leverage opportunity in lithium in a very prospective jurisdiction, Rover Metals offers an inexpensive entry point with a very attractive share structure.
FULL DISCLOSURE: This is a paid article by The Market Herald.
