Mining for EV Plays: 8 Million Tons of Untapped Lithium in South America

With all the hype about Tesla getting added to the S&P 500, you would think it’s the only story when it comes to EVs. 

It’s true: Tesla became the world’s most valuable car manufacturer on July 1, 2020. 

But buying shares of TSLA is far from the only way to get into the electric vehicle race. Turns out that even though they do not burn fossil fuels, building EVs – and the batteries that power them – requires a special kind of natural resources: base metals. 

Back to the Bases: The Metals Powering the EV Revolution 

For people who are used to being around cars, it can be a strange thing to pop open the hood of a car and not see an engine there. But just because EVs don’t have a four-cylinder motor doesn’t mean they run on nothing. 

In fact, building a rechargeable battery that can power an electric vehicle is one of the most challenging parts of the manufacturing process. Certain metals are required for this. At the moment, one of the most important ingredients is lithium. 

The world mines roughly 400,000 tons of lithium a year, or enough to power 2-3 million electric vehicles. So when Elon Musk announced he has a plan to build about 2-3 million electric vehicles by the end of the decade with the help of Piedmont Lithium (NASDAQ: PLL), Piedmont stocks went soaring: 

The fact that PLL shares more than tripled shows the raw power Tesla holds in the market right now. The deal secures a third of the startup’s production for five years beginning in 2022. 

Global Volume of Lithium to Triple by 2025

But with demand for EVs surging, and Tesla will be far from the only company working to meet this demand. All of the other manufacturers will need the raw materials to build EVs and their batteries. That’s why the global lithium supply is set to triple by 2025. 

New mines, brine lakes, and expanded output from existing projects should put global production above 1.5 million metric tons. Chile alone has an estimated 8 million tons of mineable lithium. Australia has roughly 2.7 million tons, and China has about 1 million tons. In total, the global reserves are an estimated 14 million tons. 

As of July 2019, investments in lithium extraction in Chile amounted to more than $1.8 billion. The largest planned investment is geared toward the expansion of Sociedad Química y Minera de Chile S.A. (NYSE:SQM). In the third quarter, it sold roughly 17,600 metric tons of lithium, a 56% year-over-year increase. 

SQM expects a massive 30% increase in lithium sales in 2021, which means it should be on your radar if you are looking to invest in EVs.

EV Batteries: A Second Life? 

Finite supplies of lithium will eventually force one of two things to happen: batteries will be built using other metals that can be mined from the earth; or we’ll have to find an efficient way to recycle batteries. At the moment, only 5% of EV batteries are recycled every year, but in the next 20 years, the global EV battery recycling market will be worth over $31 billion. 

Experts believe that most batteries can be effective for an additional seven to 10 years after they are taken out of vehicles. Many companies around the world are busy working to perfect the battery remanufacturing process. 

In September, China’s largest lithium producer, Ganfeng Lithium Co. (OTCMKTS: GNENF), announced plans to build a battery recycling plant in Mexico to supply the US. The Mexican facility will recycle batteries from Tesla cars and the Chinese electric buses in use across Latin America. 

Ganfeng already has agreements with Tesla and LG Chem to supply lithium, and this plant in North America is a step toward ensuring a cyclical supply chain. 

Ontario-based company Li-Cycle Corp. came up with its own solution when it opened a lithium-ion battery recycling plant in upstate New York. Its Spoke 2 facility in Rochester is now fully operational and can process up to 5,000 metric tons of spent lithium-ion batteries a year. 

An interesting startup in this space is Redwood Materials. The company’s founder, J.B. Straubel, was co-founder and CTO of Tesla until 2019. Redwood made headlines when it announced publicly that it’s working with Panasonic and Amazon. 

According to the company, Redwood’s recycling process allows them to recover between 95% to 98% of a battery’s nickel, cobalt, copper, aluminum, and graphite, and more than 80% of its lithium. It’s not publicly traded just yet, but keep an eye on this one going forward. 

An Urgent Challenge for 2021 

The EV race and the evolution of battery technology will be among the most intriguing global economic stories of the 2020s. This is by no means a static space, and it’s an urgent challenge for manufacturers to adapt, innovate, and execute. 

It’s not unlike what traders will have to do to be successful in 2021. Because if you think things are going to be just how they were in 2020, you’re setting yourself up for failure. 

The traders who think they know it all already – and trust me, I have been there before – are the same ones who get wiped out before long. 

Meanwhile, it seems to be that the traders who are the most committed to learning and adapting with market conditions are the ones who are the most successful. 

This is why I am officially opening up my Inner Circle to the most dedicated traders… 

It’s called the Elite Trader Challenge, and it’s launching on January 1, 2021. 

With this group, I’ll be sharing my trading blueprint and all of the trading ideas I’m working on for 2021. It really is an all-star group of traders we’ve put together: experts like Tony Saliba, Roger Scott, and Jack Carter, we’ll be sharing trading tips and strategies so that you can stay ahead of the game 2021. 

There’s probably no better way to be ready for the markets in 2021 than to be part of the Elite Trader Challenge. We are vetting every single application that comes through and are selecting only the most qualified candidates for this program. 

Follow this link if you’d like to learn more information about the Elite Trader Challenge

Make sure you apply before midnight on December 31, 2020 so that you can take advantage of the huge discount before it expires. And like I always say… 

I’ll catch you on the flipside,