“What if you could get 20+ hour charge times for electric vehicles down to less than one minute?
“Four Koreans just found a way to do exactly that.
“And a new ‘clean-tech’ boom has started…
“It’s already sent one American stock soaring 55% in five days, between September 7 and September 12. Another went up 117% in 3 trading sessions.
“I calculate that two more ASX-listed companies are set to follow.
“Read on for a breaking story from clean tech’s ultra-fringe…”
That’s the opening pitch from Dr. Alex Cowie for his Australian Diggers and Drillers newsletter, which is quite similar to the US-based resource stock letters that we write about from time to time (Outstanding Investments, S&A Resource Report, etc — it’s become a pretty big sector, given the commodity bull market and obsession with “hard assets” among investors).
And given that, you can probably guess that he’s not teasing the actual science or the technology, but the commodities that make that technology possible … and the miners who he thinks will enrich you as a result. Not unlike the pitches from Byron King recently for graphene, vanadium and beryllium.
Probably Australian companies too, I’d gather — so this will be of special interest to our growing and much-beloved cadre of Aussie readers, though it’s generally pretty easy for most US investors to trade Aussie stocks if they wish to, and sometimes these Australian companies end up having US or Canadian listings, too … we’ll see.
The pitch about the “blood vessel battery” is basically that it’s going to make electric car batteries recharge dramatically faster, which would remove a major impediment to widespread adoption of electric cars — they’re fine for commuting, but since they take hours to recharge they take away the “I can go anywhwere” freedom that Americans, particularly, have come to see as a core part of their being.
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And if that impediment is removed, the logic goes, then electric cars would finally take off as most experts expect them to eventually do — which would dramatically increase the volume of battery ingredients that’s required. Assuming that it’s still lithium-ion batteries that offer the best weight/safety/power equation when this happens, then the ingredients of those batteries should be in high demand.
Principally, those ingredients are graphite and lithium — part of the reason we’ve seen so many teases for those two “strategic” commodities over the last few years. But I’ll let Cowie tell a bit more of his story before we dig into which picks he’s touting:
“Electric cars need to be roughly equal to petrol cars for lots of people to buy them. But a study by the University of Illinois concluded that a car travelling at 50km p/h uses about the same power as 100 hundred-watt light bulbs.
“To charge that car in just a few minutes would mean transferring the power into the battery 20 times faster than it discharges.
“Or it was…until August 8, 2012…
“On that day these four scientists from the city of Ulsan, South Korea went to their local Yonhap News Agency with a startling discovery…
“It’s a discovery that — almost by accident — has catapulted conventional battery technology 25 years into the future
“Western media hasn’t got a hold of this yet. You need fluent Korean to read most of the sites reporting it. The only Western outlets that have cottoned on are fringe, nerdy tech-sites like zdnet.com and engadget.com….
“His team has worked out an ingenious way to reduce the resistance inside the battery. What they’ve done is taken the lithium and soaked it in a solution containing graphite. The graphite then turns into web of ‘superconductors’ that all start charging at once.
“Professor Cho likens these super-conductors to BLOOD VESSELS
“Just think how your own blood circulatory system is working. Blood is travelling through 120,000 capillaries across every square inch of your body. That’s the delivery system that gets your cells their nutrients. This same delivery system is behind this new radical charging technique….
“Basically every part of the battery charges at the same time — accelerating the recharge process between 30 to 120 times over.
“Hydrogen Fuel News is the latest tech mag I’ve seen pick up on the Blood Cell Battery breakthrough.
“On September 22, 2012 it reported that Professor Cho’s discovery ‘may be just what the world of clean transportation needs to find widespread favour amongst consumers.’
“Look, this technology is still very much in the lab.
“But as I’ll show you in a second, since the results were made public on August 8 2012, insiders and Wall Street hedge funds have been buying a record number of shares in a set of small to mid-range lithium miners.”
OK … so, assuming that you highlighted the “this technology is still very much in the lab” bit in your own mind … what are the stocks?
“I have identified two more Australian-listed stocks. This South Korean discovery could result in massive upward re-ratings in both shares. One of these local stocks has ALREADY gone up 41% since I tipped it two months ago. But as I’ll show, that’s just the warm-up act….
“The two stocks I’ve found are NOT battery technology companies.
“They’re not even ‘clean tech’ companies.
“But they ARE locked into a developing tech story that is already giving investors gains like 117% in 3 days.
“And these stocks are part of a bigger plan; a brand new Australian ‘Strategic Mineral Hit-List’ that I’ve been compiling since the start of the year….
“I’m telling YOU about this discovery because I believe it’s going to inject lightning into two little-known Australian stocks.”
And thankfully, Cowie does throw in the somewhat customary warning:
“These stocks are ULTRA-speculative. Definitely not something to throw your life savings into. They are super risky because you’re not just betting on a rising share price. You’re betting on…
“The winner of a race to change the entire world”
That’s right, you shouldn’t bet your life on any junior stock but DON’T BE A WUSS BECAUSE IT MIGHT CHANGE THE WORLD AND OH MY GOD YOU’LL BE SO RICH!
Sorry, I added that last bit of subtext myself. For some reason, that’s what jumped into my mind when I read the ad … gee, I wonder if that’s the message the copywriters are subtly trying to impart?
So … do we get any specific hints about the lithium stocks he’s picking?
“… owning good lithium stocks has been part of my new ‘Strategic Mineral’ strategy all year. But the MASSIVE increase in demand…one that will almost certainly cause severe lithium shortages — at least in the short-term — will come when electric vehicles go mainstream…
“I believe there will be more corporate fireworks in the lithium space. That means more takeovers.
“And I’ve found what I believe is next on the list of potential takeover targets.
“It’s an advanced-stage lithium explorer that’s discovered a massive new deposit overseas. How big? This deposit contains 6.4 million tonnes of lithium carbonate.
“This makes it a huge, world-class project.
“In fact, this is already more lithium than they could realistically ever need. At the planned production rate of 17,500 tonnes a year, the deposit would last 365 years.
“All the exploration is done. And this Aussie company is the only new lithium brine producers to go to start production for years.”
Well, the “lithium brine” part is good — that’s the primary method for producing lithium now, largely from the Atacama desert in Chile where world-dominating producers SQM (SQM) and Rockwood Holdings (ROC) essentially split the market (along with FMC Corp), and it’s the primary method because it’s a lot cheaper than mining lithium from hard rock (the brine is essentially a lithium salt deposit that they pump into the desert, let evaporate, then scoop up the lithium). Thanks to the fact that lots of people see that potential huge boom in demand coming in the 2015-202 timeframe there is a fair amount of investment in this area looking at new production methods or exploring for new deposits, and there are lots of other methods for producing lithium, which is present almost everywhere on earth in lower concentrations, and in sea water, but those South American deserts (that used to be seabeds) are where the low-cost production mostly comes from now.
But which company is this? Well, the Thinkolator tells us it must be Orocobre (ORE in Australia, ORL in Canada, OROCF on the pink sheets), which is trading in the neighborhood of $2 a share and is planning to start construction of their Olaroz lithium brine operation in Argentina in the very near future (financing with their Japanese partner is apparently just closing now). The 6.4 million tonnes of lithium carbonate is a match, as is the targeted production rate of 17,500 tonnes per year, though the feasibility study last year “conservatively” said they can produce 16,400 tonnes per year of “battery quality” lithium carbonate. They do have some other projects as well, including a Boron project that they recentljy bought nearby (Borax Argentina) that sounds like it will largely be used to strategically support Olaroz and to help process and sell borates and some of the non-lithium product they generate from the salts.
This is a good-sized company for a junior project developer, with a market cap just over $200 million, but it’s still quite teensy compared to the big lithium players — and it would, if they generated that kind of production, quite quickly jump into the top tier of producers — current demand is apparently somewhere in the neighborhood of 120,000 tonnes per year, so at that rate they’d be supplying more than 10% of global demand … though the electric car-driven projections are, of course, that the demand will multiply several times over the coming decade to well over 400,000 tonnes per year. Do note that those are still projections and guesses, and the bright future for “inevitable” electric cars has been forecast several times before without coming to fruition, so this puts a lot of weight on new battery technologies to improve charging speed as well as on environmental concerns and high oil prices. And, of course, that assumes that lithium remains the key battery ingredient — which is widely expected, given its reactive and electrical properties and light weight and relativel low cost of production, but not guaranteed. Figuring out what the simultaneous ramp-up in supply (from this and other new projects) and demand (from electric cars) might do to the lithium price over the next 5-8 years is, I’m sure, a variable-juggling morass that I won’t even try to climb into.
And that’s about all I know about Orocobre and Olaroz — they did also just get some new analyst coverage yesterday and that came with a A$2.98 share price target even after the stock has come up quite nicely in recent months (yes, it has climbed roughly 40% since the Korean research was published — though I highly doubt that there’s any real direct connection, since it’s been an eventful couple months for the company as well), so there’s at least some optimism about their impending project construction and startup. Their Japanese partner(s) have a 25% stake and their local Argentinean partner has a small stake, so Orocobre’s share of the Olaroz project is 66.5%, just FYI.
If you’re interested in the lithium story in general, there’s a nice quick overview in this Bloomberg article about a (private, tiny) company trying to bring on a new kind of fast , low cost production.
Cowie doesn’t tease a second lithium stock in this piece, but does imply that he has two favorite stocks for the lithium-ion battery surge, so I suppose it must be his hinted-at graphite stock that he’s referring to as the second idea — since lithium batteries have even more graphite in them than they do lithium, roughly 100 pounds of graphite for an electric car battery … so let’s see if we can quickly ID that one for you:
“A hundred years worth of top-quality graphite to market
“If you pushed me on what the most promising graphite explorer in the world is right now, this company wins hands-down.
“This company is set to bring its maiden graphite resource to market within three months. I spent a long time looking at the drilling results and laboratory assays, and have come up with my own calculations…
“The whole resource this company is sitting on is over 200 million tonnes of graphite.
“This would make it at least an order of magnitude larger than nearly all other graphite deposits. It would provide enough ore for over a hundred years of mine life.
“Now what I didn’t discover until September is the grade of the graphite this company controls. Recent drill results show grades up to 21.9% TGC.
“If you do your own research on the web you’ll find that is freakishly high for such a large deposit.
“Most are in the 5–8% range. Some are as low as 1.8%. And the few grading above 10% have deposits a fraction the size of the company I’ve recommended here to my readers.”
On this one the Thinkolator says we’re almost certainly looking at Syrah Resources (SYR in Australia, doesn’t appear to trade anywhere else), which has had a spectacular year on the back of their graphite discoveries in Mozambique — the stock has gone from a few cents a share to about A$2.50, and I do know that Cowie has recommended it at least once along the way, with probably gains of about 100% from the brief commentary I saw from him on the company about six months ago.
Their prime asset is the Balama graphite deposite in Mozambique, not too far from the East African coast and supplied with at least some infrastructure — it is extremely early days, they do indeed say that they’ll be releasing their “maiden” resource estimate in the next few months and a more detailed JORC-compliant resource report in the first quarter next year, but it does look like it might be a truly massive graphite deposit, with pretty high grade stuff, near the surface and extending at high grades for a couple hundred meters over much of their exploration site, assuming that the initial drill results (which were extremely good, it appears) are really indicative of what they’ll find on the rest of the site. So there’s at least the potential for a very low-cost, high volume graphite operation that may indeed produce for decades. May.
Since they’re still quite early on in defining the resource and they’re not just re-starting an old project as some of the advanced stage graphite juniors are, I assume it will be several years, at least, before they’re shipping their graphite out of Pemba and making money, but from what I can tell the potential size of the high-grade deposit looks like it’s substantially larger than the better-known and more advanced projects in Canada and Sweden that we’ve seen teased for much of the past year. Might be worth investigating for those of you with a yen for sniffing through drill core assay results … oh, and they think the vanadium on site might also be a valuable byproduct to help offset costs.
For that, they’ve so far gotten to a market cap of over $350 million, and been one of the most spectacular stock fliers in Australia over the past year … so is it too late, or is the fun just beginning? That, of course, is your call to make.