Lithium Miners In Enviable Position As Musk Underlines Long-Term Lithium Shortfall

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Wednesday, February 17, 2021

2021 is shaping up as a tipping point for electric vehicles. Newly minted President Joe Biden says he wants to replace the entire fleet of over 650,000 government vehicles with electric versions. General Motors (NYSE:GM) says it will phase out gas and diesel vehicles by 2035. Sales are booming in Europe, which overtook China for electric vehicle (EV) sales in 2020 with 1.4 million units purchased.

Indeed, the EV movement is gaining momentum. One headwind, though, is ballooning demand for the materials needed to make electric cars and trucks. This is particularly true for lithium, a critical ingredient in the rechargeable batteries that make EVs go. Some thought it laughable when Tesla (NASDAQ:TSLA) CEO Elon Musk spoke of the necessity to build Tesla’s Gigafactory in Nevada because when the EV maker ramped to 500,000 vehicles annually, it would consume the world’s entire Li-ion (lithium ion) battery production each year.

The demand is showing through in pricing, as evidenced by the prices for lithium carbonate, a stable salt that is refined for use in batteries, swelling 37% in January to overtake the price for lithium hydroxide. The lithium carbonate market is booming because, in part, it can be used in a wider array of EV batteries than lithium hydroxide.

In September, Musk tweeted that he thought 30+ million EVs per year were possible for the industry in 5-7 years. By current standards, that would equate to a need for approximately 1.8 million tons of lithium carbonate, meaning a 5-fold increase from 2019 production.

Musk has been spot on in pointing out that the need is real and a supply crunch looming. In fact, Musk recently said that he has “made it very clear” to his cell suppliers – including Panasonic and CATL – that Tesla will take every battery that they can produce. The shortage of cells is what is keeping Tesla from putting its much-hyped Semi truck into production.

For its part to respond to the market opportunity, Far Resources Ltd. (CSE:FAT) (OTCPK:FRRSF) (FSE:FOR) recently announced its planned winter drilling program at its Zoro lithium property near the historic mining town of Snow Lake in east-central Manitoba. Zoro spans 3,603 hectares, a portion of which has been subject to over $5 million in exploration suggesting the potential for a sizeable lithium resource.

Five drill campaigns have been completed, resulting in the discovery of at least 13 lithium-bearing pegmatite dykes as part of a major dyke swarm. Grades have been reported up to 1.4% Li2O (lithium oxide) across 49.8 meters. Limited shallow drilling on Dyke 8 has returned values including 12.3 meters grading 1.1% Li2O. In most cases, mineralization remains open at depth, warranting additional drilling to better define the resource. Furthermore, MMI (mobile metal ions) geological anomalies indicate that more dykes are awaiting discovery.

A maiden resource report covering just one dyke (Dyke 1) shows 1.074 million tonnes inferred at 0.91% Li2O. Hard rock mining also has the benefit of byproducts for which the maiden resource shows 182 ppm Be (Beryllium), 198 ppm Cs (Cesium), 51ppm Ga (Gallium), 1,212ppm Rb (Rubidium), and 43ppm Ta (Tantalum) at a cut-off of 0.3% Li2O. Niobium (used with Ta in superalloys) has also been reported at Zoro.

The new drill program is scheduled to include up to 5,000 meters of diamond core drilling on several lithium-bearing pegmatites at Zoro. Approximately 2,500 meters is targeted on testing for additional mineralization on Dyke 1 included in the resource report and another 2,500 meters on outside targets, particularly the newly discovered Dyke 8.

As if the Lithium angle wasn’t enough, adding to its upside opportunity, FAR is a diversified explorer also developing the Winston Gold Project in the historic Black Range Mining District of New Mexico. The company just shared with investors on February 2nd, 2021 recent sampling data from their wholly-owned Winston Project, and the results were spectacular. High grade gold and silver values were confirmed from three historic mines, Ivanhoe, Emporio and Little Granite, in the south part of the company’s land holdings. Twenty ore characterisation samples from these three mines returned peak values of 66.5 g/t gold and 2940 g/t silver from Little Granite, 26.8 g/t gold and 1670 g/t silver from Ivanhoe and 46.1 g/t gold and 517 g/t silver from Emporio.

Against the backdrop of protracted increases in demand as the EV market accelerates, Far Resources is in an enviable position to keep proving the resources at Zoro. Simply, every cut of Li2O adds value. If Musk is even remotely close to the market he foresees in the next few years, high-grade lithium producers are going to be at a premium as battery suppliers scour to secure consistent suppliers.

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