Lithium: On the Launch Pad of Opportunity

The resource space is cyclical. Ebbs and flows and the recent consolidation in the lithium space screams bottom to me. A bottom I’ve personally taken advantage of and one you should be looking to take advantage of as well. 

I sent my take to Junior Resource Monthly subscribers last week and wanted to share that take with you because if you’re allocating capital in the resource space I think it’s an important one. 

Where to start if you’re new or underinvested in the lithium space? 

Lithium: On the Launch Pad of Opportunity

Check out our latest free research reports for in depth analysis on specific market trends. View Reports

You can start with quality names in Quebec. 

There was huge news recently which further bolstered the case for Quebec as the next major player in the battery metals space. The same Quebec host to my two favorite lithium plays.

Northvolt, which was founded in 2016 in Stockholm, Sweden and charged with pioneering a sustainable model for battery manufacturing, is expanding production capabilities to meet $55 billion in orders from key customers including BMW, Fluence, Scania, Volvo Cars and the Volkswagen Group.
Enter Quebec.

On September 28, 2023, Northvolt announced the creation of a fully integrated lithium-ion battery gigafactory in Saint-Basile-le-Grand and McMasterville, a suburb of Montreal, Quebec, Canada. The factory, titled Northvolt Six, will have an annual cell production capacity of 60 GWh, with adjacent facilities for the production of cathode active materials and recycling, enabling circular production entirely on site.

Construction of the first 30 GWh phase of the project is expected to begin by the end of 2023 and the first batteries are expected to be delivered in 2026. This first phase of cathode manufacturing, cells and recycling will require a total investment of 5 billion USD (7 billion CAD) and will employ up to 3,000 people.

The credits from the Inflation Reduction Act coupled with a mandate to purchase lithium from the region is as bullish an announcement for the region and more specifically the owner of what will be the biggest hard rock lithium deposit in North America, Patriot Battery Metals (TSX-V: PMET)(OTC: PMETF).

The project is being developed with financial support from the governments of Canada and Quebec and represents the largest private investment in the history of Quebec. Ever is a long time.

Peter Carlsson, CEO and co-founder of Northvolt, commented:

“Since we founded Northvolt seven years ago, we have pursued one goal: to establish a new sustainable model for battery manufacturing. Today, we are expanding Northvolt’s ambitions in Canada.”

He then went on to tell you everything I’ve been telling you. That the region, blessed with some of the cheapest electricity inputs, was a major deciding factor in choosing the location.

The choice of the 170-hectare site for Northvolt Six in McMasterville and Saint-Basile-le-Grand, in the suburbs of Montreal, came about after an in-depth review of potential sites in North America. It meets a multitude of criteria necessary to enable the company to meet its commitment to sustainable battery production.

Check out our premium publications for more trading recommendations and exclusive coverage on the markets. View Publications

Paolo Cerruti, co-founder of Northvolt, will lead the project as CEO of Northvolt in North America, headquartered in Montreal.

“The potential of Northvolt Six is ‚Äč‚Äčenormous, not only to rapidly develop our capacity to deliver sustainable batteries to the North American market, but also to accelerate the emergence of Quebec as a key player in the global energy transition.

With its unique access to 100% renewable energy and raw materials, we consider Quebec to be the ideal base of operations for Northvolt’s first gigafactory outside of Europe. We look forward to collaborating with all local stakeholders and the province, to make Northvolt Six an example of sustainable investment."

As for my macro take, let  me defer to a gentleman that is an actual expert in the lithium market Joe Lowry– they call him “Mr. Lithium” – and he has his finger on the pulse as much as anyone in the space.

Here is an excellent summary of the recent spot price drop and why this is simply a reaction to short-term oversupply from the panic buying in 2022 that sent the spot price to $80k/MT.

Use the weakness in the overall sector to add to your lithium exposure. You know my two top picks.

Gerardo Del Real

Gerardo Del Real
Editor, Resource Stock Digest