100% Price Surge: Will Supply Crunch Of This Critical Asset Trigger Massive Inflation?

The current lithium market represents a classic commodity cycle of boom and bust, where taking profits during froth and buying during hated market bottoms is the contrarian strategy for maximizing returns.

“it's a classic commodity cycle you know it's always boom and bust and there's when there's a lot of excitement and froth you know that's probably a good time to be taking some profits and when everybody's haed it and it's really at the bottom and and and it's uh you see Supply going offline and things like that that's probably a good time to be buying”

The mega-trend of global electrification driving lithium demand remains on track, with 20% compound annual growth in EV sales this year proving the underlying demand thesis has not broken despite market negativity.

“the big thing here is that the what's driving all of this the the mega trend of electrification is still on track and when we're seeing 20% growth uh or compound annual growth and EV sales this year I mean it's not like we're seeing you know a fall back down to 2% growth rate I mean 20% growth rate in a market like if you can keep that going and it has been going at that rate uh you know I mean that's that's a big Trend and it's going to turn at some point”

There are two primary sources of lithium: hard rock (bedrock) mining found in Canada, Australia, Brazil, Europe, and Africa, and brine sources concentrated in South America's lithium triangle (Chile, Argentina, Bolivia), with hard rock providing greater geographic and geopolitical diversity.

“there's really two sources of lithium one is from Hard Rock uh or Bedrock is what we have in Canada and the other is from brins so salty water and the brins are really concentrated in South America and what's called the lithium triangle so this is an area in the atakama desert between Chile Argentina and Bolivia and traditionally that's where lithium has been produced from that was the majority of the production up until about a few years ago but also lithium comes in a mineral form within rocks it's think of it like a granite and there's a crystal in that Granite that's got a lot of lithium in it”

From an industrial application perspective, brine-source and hard rock-source lithium produce the same battery-grade lithium carbonate product and sell at equivalent market prices, making the refined chemical identical regardless of source.

“from an industrial application standpoint or point of view does it make a difference uh if it's brime or hard rock not really it's just you you process it down into the same thing which is a a you know a battery grade lithium carbonate and that's what the battery manufacturers use is the is the market price different for different sources no not for the refined chemical”

Battery manufacturers did not anticipate the scale of EV demand and panic-bought lithium supplies once they received orders from automakers, driving lithium prices to $80,000 per ton in the 2021-2022 spike, with each EV battery requiring 50-80 kg of lithium.

“the battery manufacturers were getting order ERS from car producers and so BMW calls up the battery manufacturer and says I need a million battery cells and the the battery producer says yep sure we'll get on that and then they get off the phone they turn around and they're like well we don't have any of the raw materials to do this so they started just buying up every unit of of lithium that they could get their hands on and that's why the price Rose so much because in an EV uh the battery the the amount of lithium is is between it's called 5050 and 80 kg of lithium and at the time it was trading at 10 bucks a kilogram so you know you're talking about like hundreds of dollars of difference in in the raw materials going into the car”

Approximately 80-85% of the world's lithium refining capacity is concentrated in China, creating a geopolitical chokepoint where China could squeeze global supply if it chose to do so.

“within the lithium supply chain the refining part of the supply chain is dominated by China and so I think it's about 80 to 85% of the world's lithium gets refined in China and if they did decide to squeeze everybody on that they would have the ability to”

The Chinese have achieved approximately a decade lead in lithium refining technology and efficiency compared to Western producers, making them able to achieve 99.5% purity lithium carbonate at costs Western producers cannot currently match.

“the West is really behind in terms of catching up to the Chinese and and their ability to pump out lithium chemicals and uh a lot of other industrial processes as well so right now there are two lithium conversion facilities that have been built in Western Australia by a couple of the world's largest lithium producers so Alam maral and and iGo and they haven't been able to get up to name plate capacity and and produce what uh what they should be producing at the cost that they should be producing at it's a difficult chemical process to get down to get to 99.5% Purity lithium carbonate and the the Chinese are probably about a decade ahead of of the West because they got on this about a decade ago”

In the last two weeks there have been two announcements of mines going offline: a mine in China operated by one of the biggest battery producers representing approximately 5% of global lithium production, and another in Australia representing about 3% of global production.

“in the last two weeks there's been two announcements that minds are going offline there's a big uh mine in China That's operated by one of the biggest battery producers and so that's between I think it's about six six to s% of the Global Production and and or sorry it's about 5% and then there's another one in Australia that's going offline that's about 3%”

Canada has lithium reserves of 930,000 tons and is the world's 6th largest by reserves, yet produced only 500 tons in 2022, while the US has reserves of 1 million tons but shows no production, primarily because lithium as a commodity demand only accelerated significantly after 2020.

“World reserves of lithium by Country Canada is number six at 930,000 tons the US actually is ahead of Canada at a million tons but we're seeing I'm not seeing any production here on this table from the US and only 500 tons of production from Canada given a 930,000 ton Reserve why such a difference in reserves in actual production between in Canada and the US”

The most critical factor for Lift Power's success is completing permitting with all boxes ticked early and thoroughly, as inadequate baseline data collection can delay projects by up to 5 years.

“the biggest thing is permitting and so really making sure that you've ticked all the boxes because you can get into a quagmire pretty quickly where they might say oh you didn't collect enough data here go collect this it could delay the project by five years so that's the biggest thing is is getting on the permitting track early and also making sure that you have all the the te's crossed and the eyes dotted”

Lipolite is a purple-colored lithium-bearing mineral that represents lower-quality swing supply brought online during the 2021-2022 lithium price spike, which becomes uneconomic at lower prices and offsets lower-cost hard rock and brine sources.

“there's cheaper sources or there's lower quality sources of lithium out there that are more expensive to produce and this would be minerals like lipolite uh it's a purple mineral with lithium in it”

The Wuchi deposit (previously held by Namamasa Lithium) reached a $2 billion valuation based on just 50,000 meters of drilling at the top of a prior cycle, which prompted McDonald to investigate lithium as significantly more capital-efficient than gold or copper deposits requiring orders of magnitude more drilling.

“the wuchi deposit this was in a company called Nam Masa lithium previously and at at the top of I think it was two cycles ago they hit about a $2 billion valuation and that was all based off of 50,000 meters of drilling that they'd done and this is one of the main reasons that I had started looking at lithium was the amount of drilling that you needed was almost an order of magnitude less to get to an economic feasibility study compared to gold or copper deposits in Canada”

Lift Power's value creation strategy involves: (1) demonstrating a world-class asset through resource estimates, (2) conducting economic studies to prove extraction feasibility, (3) advancing permitting, and (4) potentially pursuing a takeout offer or moving to production.

“it's about showing that we have a world class asset and that's we're on the cusp of that and that's going to be like I said in in October and then after that it's really going into economic studies and showing that we can get this out of the ground and uh and and getting into the permitting process as well so how do we drive shareholder value it's it's defining the resource showing its economic really pushing it towards production”

Tesla is building a lithium refinery in Texas as part of a strategy to achieve full vertical integration from mining through refining to EV production.

“Tesla uh I think is is building a lithium refinery in Texas and so I think that's part of the plan is to have a fully integrated car company that uh also is is a lithium producer”

Canada blocked three Chinese firms from divesting Canadian lithium operations in 2022, and is currently blocking Chinese rare earth mineral exports as part of broader geopolitical trade war positioning.

“Canada in 2022 blocked three Chinese firms to divest its Canadian lithium operations uh under Trudeau recently uh Canada is blocking Chinese rare Earths uh exports”

The US Inflation Reduction Act provides substantial funding (in the billions) through loans from the Department of Energy for critical minerals projects, demonstrating US government commitment to supporting domestic supply chains.

“through the IRA this is quite a substantial funding scheme that critical minerals projects can tap and the loans that are available through the IRA I think we saw ther pass I don't know the number specifically but it was in the billions of dollars that they got loans from I think from the Department of energy so that's you know you really see the US government stepping up here and and providing funding options for the critical mineral supply chain”

Major automotive manufacturers including BMW and Volkswagen are actively evaluating critical minerals projects and seeking direct offtake agreements for battery materials to secure supply chain integration.

“we've seen some of the car manufacturers like for um BMW Volkswagen they're all looking at at critical minerals projects and and especially off take from from these of of the battery materials that go into the to the batteries”

In 2016, McDonald co-founded Canland Minerals with three other geologists, acquiring mineral claims and convincing larger companies to fund exploration—a low-risk capital model that attracted $100+ million in funding from companies including Barrick Gold, Newmont, Freeport-McMoRan, Sumitomo, and Santander.

“in 2016 I uh went entrepreneurial and I and I co-founded a company with three other geologists that I'd worked with in my career uh that company is called canland minerals and we were acquiring mineral claims and then convincing other companies to spend their money on it so very lowrisk way to play the mineral exploration space and we did that pretty well we brought in about $100 million in funding from companies like baric numont free Freeport McMoRan Sumitomo from Japan santura and made a greenfields gold Discovery in Quebec”

A realistic equilibrium price for lithium is approximately $20k/ton, roughly 100% higher than current levels, at which many lithium projects become economical and profitable without requiring extreme supply shortage conditions.

“I think realistically there's probably a cap and we don't need $80,000 a ton as an industry to be making money if we were sustaining you know let's say $20,000 a ton lithium carbonate I think that a lot of these projects would be making a lot of money so the equilibrium price for you would be about 100% increase from current levels”

McDonald and his co-founders chose to focus on Canadian lithium rather than Australian or Chilean deposits because they were Canadian and had deeper expertise in the Canadian market, though Canada's geology mirrors Australia's lithium-bearing formations.

“we were focused in Canada as a company because we were all Canadian and that was where our expertise lied but at the same time like I was saying before Canada has very similar geology to Australia”

As a junior mining company (Lift Power vs. Newmont), decision-making is faster and more nimble, with organizational bureaucracy removed; example: a greenstone belt exploration approval took Newmont ~1 year but takes Lift Power just a few hours.

“I would say doing it for myself and ourselves in in these different companies it's there's a lot less bureaucracy and decisions can be made a lot quicker so that allows you to be very Nimble and to give you an example of this uh when I was working at a project in nunit for Newmont there was a w wi open greenstone belt and greenstone belts are very productive for gold deposits for for copper deposits and this was right beside our operations and it took us about a year to get the approval to go out and stake that greenstone belt uh versus in in canland minerals and lift power I mean we make these decisions within you know a few hours”

Francis McDonald has 10+ years of background in exploration geology, including early-stage projects for Newmont Mining (world's largest gold producer) across the Canadian Arctic and Africa, focusing on greenfield gold and copper exploration.

“my background is in Exploration geology and I was the field guy for for about 10 years I was working for Newmont which is the go the largest gold producer and that was in the Canadian Arctic and then across Africa uh that was all early stage exploration projects mainly for gold but a bit for copper as well”

Global EV sales year-to-date are up 20% overall, with China representing 60% of global EV sales and experiencing 30% year-over-year growth, while North America accounts for only 10% of EV sales and Europe 20%.

“North America is only 10% of the EV sales globally Europe is 20% and China is 60% and so when you want to look at what's driving the EV Market you really have to look at China and this year globally sales year to date are up 20% in China they're up 30%”

Lift Power drilled approximately 50,000 meters of core samples on the Yellowknife project in the Northwest Territories over the past year, with a measured resource estimate expected to be released around October 1st.

“we are just outside of town so 20 minutes by paved Highway um to get to some of the bigger deposits we have been drilling these in the last year we drilled about 50,000 M of of core and that's all going into a maen resource estimate that should be out around the 1st of October”