With An Anticipated Supply Gap, Has The Recent Sell-Off In Lithium Equities Created Opportunities For Investors?

“Lithium Ionic Corp. drilling at the Bandeira Lithium Project, Minas Gerais, Brazil”

When demand exceeds supply, new opportunities arise. Such seems to be the case for Lithium Ionic Corp. (TSXV:  LTH) LTHCF, a company that is quickly advancing its lithium projects in Brazil, with first production expected within the next 24 months. 

Lithium is among the most important metals required for electric vehicles and energy storage. With demand for metal ramping up, analysts are forecasting a lithium shortage as soon as 2025. That means demand for lithium could increase exponentially in the coming years, with research firm Wood Mackenzie predicting a widening supply-demand gap in the coming years. Companies involved could stand to benefit, especially those with near-term production profiles.

With the goal of generating long-term value for its shareholders through the discovery and future extraction of high-quality lithium and keeping in mind the anticipated supply gap, Lithium Ionic may present an opportunity for investors interested in ownership of a company that could potentially become a major player in the global lithium supply chain to support the transition to a green economy. The recent sell-off in lithium equities has presented an opportunity for interested investors to build positions in high-quality emerging companies such as this one.  

Coming Soon: Bandeira Lithium Project 

There are currently just 101 lithium mines in the world. While hundreds more are currently under exploration, few are prepared to handle the geological complexities and time-sucking permitting processes involved. In contrast, Lithium Ionic stands out in this regard. 

Lithium Ionic is developing lithium properties in Brazil with the goal of extracting lithium in the near future. Located in the mining-friendly Minas Gerais state in Brazil – right next door to Sigma Lithium’s already producing Grota de Cirilo Project and in the heart of Brazil’s “Lithium Valley” – Lithium Ionic’s properties span 14,182 hectares, or more than 35,044 acres, in this prolific lithium province in Brazil. 

Lithium Ionic’s extensive exploration work conducted in 2023, including over 85,000 meters drilled across four targets, significantly improved its understanding of the lithium-bearing pegmatites in the region and demonstrated both the large-scale and future discovery potential of lithium deposits in this district.

Lithium Ionic is rapidly advancing Bandeira, its flagship project, toward a production decision with a Feasibility Study underway and construction permits expected mid-year, all the while continuing to explore other promising regional targets.

Lithium Ionic's Bandeira project is high-quality and notable for several reasons. Jurisdiction is an important factor in the mining sector, and the Bandeira Project is in the same district where Companhia Brasileira de Litio’s Cachoeira mine has produced lithium for over 30 years. Thus, Lithium Ionic’s location in a mining-friendly locale is a huge boon for the company.

Within a few kilometers from the Bandeira Project, Sigma Lithium operates the largest hard rock lithium deposit in the Americas – its Grota do Cirillo project. Developing a lithium operation next to a multi-billion dollar lithium producer could allow Lithium Ionic to mirror its successful development. 

The Bandeira project is expected to be a major cash generator. Based on an initial engineering study published last year the project showed an NPV of US$1.6 billion and a 121% internal rate of return, with a CAPEX of only $233 million, which can be paid back in just over 1 year. Lithium Ionic also shared that investors can expect results of a more detailed Feasibility Study this quarter.  

Lithium Ionic Following Blueprint Nextdoor? Sigma Lithium’s ~2,500% rise from Feasibility Study to First Production 

Bandeira is expected to achieve first production within the next 24 months, which the company reports is well ahead of any other upcoming major lithium project in the Americas. Lithium Ionic also reports that the project is following the exact template for development and production as its neighbor, Sigma Lithium, which, from Feasibility Stage to first production, experienced a share price increase of nearly 2,500%, rising from about $1.50 to $40 (stock price from Feb 2020 and Oct 2022). As such, investors who liked their returns on Sigma Lithium or who may have missed this opportunity may want to keep an eye on Lithium Ionic.

On its own, Bandeira seems to be a promising project, though it only represents 1% of Lithium Ionic's total land package. The company’s drilling activities continue to demonstrate consistency in the rocks, meaning Lithium Ionic could have several meaningful projects in Brazil's Lithium Valley in the near future. 

Major development milestones are on the horizon, as well. Lithium Ionic says it is preparing for some major announcements in the first half of this year, including the release of a definitive feasibility study – the final engineering study prior to construction of the project. 

Lithium Ionic is also preparing to release an initial resource estimate on the Salinas project – located approximately 100 km North of Bandeira, which it says will demonstrate the size and scale of its endeavors in this “Lithium Valley.” 

As demand for EV batteries and renewable technologies continues to grow, analysts are expecting lithium demand to rise. This, plus supportive government policies and growing consumer demand, could help bolster companies with strong footing in the lithium supply chain. 

With a large-scale project coming online soon, Lithium Ionic is one of a small set of companies that seem prepared to take advantage of this moment in the lithium industry. 

Featured photo by Lithium Ionic Corp. 

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