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Commonly known as “white gold” because of its heady value and silver-colored appearance, lithium has multiple uses. It’s arguably most known for fueling the boom in electric vehicles (EVs): most of today’s EVs use lithium-ion batteries since they can hold at least three times the energy of conventional rechargeable lead batteries. But demand for the commodity’s now so strong that the lithium market’s expected to be in a supply deficit between 2025 and 2030. According to McKinsey*, demand for lithium could hit between 3.3 million and 3.8 million metric tons of lithium carbonate equivalent (LCE) depending on the scenarios in the chart below. To put that into context, only 0.54 million metric tons of LCE were produced in 2021, and while that marks a hefty 32% year-on-year increase, it’s still significantly below the scale needed to keep up with expected future demand.
The lithium deficit isn’t surprising. See, the single biggest driver on the demand side has been the rapid adoption of EVs. In fact, lithium-ion batteries for EVs are projected to make up 85% of all lithium use by the end of 2023, up from 22% back in 2006*.
Meanwhile, the lithium industry’s been up against its fair share of challenges on the supply side. The industry as a whole has high barriers to entry: producers require access to resources, capital, and technology in order to extract the commodity profitably. And although many companies are investing heavily with a view to supplying more lithium in the future, new projects can take six to 15 years** to materialize. Plus, because the majority of lithium resources are concentrated in only a few countries, namely Chile, Australia, and Argentina, technology companies in Asia, Europe, and the United States have been scrambling to diversify their supply sources.
Lithium extraction can be an environmentally challenging project, depending on where the natural resources are located. Traditional lithium mining projects require extensive use of water, chemicals, and land. However, technological advances like direct lithium extraction (DLE) can help reduce the industry’s environmental, social, and governance (ESG) footprint: it has a much decreased impact on land and other natural resources.
E3 Lithium is an Alberta-based lithium resource and technology company, with a goal to power the growing electrical revolution. The firm has the biggest Measured and Indicated lithium resource in Canada and aims to produce high-purity, battery-grade lithium products in 2026. That’s all while it works to become one of the lowest GHG emitters in the lithium industry too.
E3 has a vision for a brighter energy future, so it plans to deliver lithium products with reduced carbon emissions and minimal environmental harm. For example, it’s projected to use less than 3% of the land that typical lithium projects use.
The adoption of EVs might only be in its infancy stage, but the International Energy Agency believes the switch is crucial in the journey toward global net-zero targets*. That’s part of the reason demand for lithium is expected to hold up over the next decade, but other factors could influence demand in the future – think potential alternative uses of lithium, the proportion of lithium recycled, and the risk of lithium substitution.
The energy transition needs lithium – and with lithium demand expected to outpace supply for some years, lithium producers are worth keeping an eye on. Mind you, there are plenty of other reasons to be excited about E3’s potential.
Firstly, the company is expected to start production on its “Clearwater Project” in 2026, the first step in its path to becoming one of Canada’s main lithium producers. E3’s recent upgrade of its lithium resources is not only the biggest of its kind in Canada, it also places the firm on the map with global producers. What’s more, this resource upgrade will likely increase confidence within the company and its investors about E3’s plans to commercialize its lithium resources in 2026. And with the majority of current lithium production concentrated in only a few countries, E3’s expected expansion of Canadian lithium supply should help alleviate risks of short supply and diversify supply sources for customers.
Secondly, E3’s resources are located in Alberta: the province is home to a mature oil and gas industry, meaning many of the factors needed to produce lithium at scale – like infrastructure and access to skilled labor – can already be found in the area. As a result, firms don’t need to spend as much capital or time building out new infrastructure. E3 has plenty of support in the region too: the company has teamed up with Imperial Oil (IMO) – a subsidiary of ExxonMobil – and has received support from the government of Canada in the run up to its first production.
Thirdly, E3 can address global concerns surrounding the environmental footprint of lithium extraction with its DLE technology. This technology not only increases the recovery and concentration of the type of lithium that E3 extracts, but it’s able to do so with a lower carbon footprint and environmental cost compared to its rivals.
Finally, the valuation of E3’s “Clearwater Project” provides material upside to the firm’s current market value. An early economic assessment* of this project indicates a net present value (NPV) of $1.1 billion when you use a discount rate of 8%, with a pre-tax return of 32%. The estimated value of the project is almost ten times** E3’s current market value – and the project’s worth could rise even more depending on future lithium prices and the total amount of resources recoverable.
For the world to hit net zero emissions by 2050, EVs will need to become more mainstream. And while there are plenty of ways to invest in this growing electric trend, lithium can be a clear and direct way for investors to buy into the revolution. If you’re interested in lithium, you could invest in lithium producers – and you’re not short on choice. There are many major listed producers like Albemarle, SQM, Ganfeng Lithium, Tianqi Lithium, and Mineral Resources – although many of these companies aren’t pure-play lithium producers. That means there will be other factors deciding their share price performances, not just the price of lithium or the amount produced. Nowadays, not many listed pure-play lithium producers are based in developed markets, so you’ll usually have to contend with higher political risks if you choose to get involved.
That said, there are also risks related to investing in E3. The main ones include potentially lower lithium prices, lower or slower-than-expected adoption of EVs, stricter regulations on lithium extraction (in turn, increasing the cost of production), and any delays to the company’s plan for lithium commercialization in 2026.
Each and every step that E3 takes to further shore up confidence in its 2026 commercialization plans will be key to unlocking share value increases in the near term. To keep tabs on E3’s development, you’ll want to keep an eye out for future-feeding catalysts like a field pilot plant and pre-feasibility study by late 2023.
This guide was produced by Finimize in partnership with E3 Lithium.
Check out E3 Lithium’s mini-website at finimize.com.
Disclaimer: This content is for US investors only, if you are not a US investor please ignore this content. This content is a paid advertisement for E3 Lithium from NativeAds and Finimize. This is not Finimize editorial content. Finimize received a fixed fee for producing, hosting and promoting this content on behalf of E3 Lithium, totaling $20,000. Other than the compensation received for this service, Finimize and its principals are not affiliated with either NativeAds or E3 Lithium. Finimize and its principals have no ownership in E3 Lithium. The content on this page should not be taken as advice, an endorsement, or a recommendation from Finimize and its principals to buy or sell any security. Finimize and its principals have not evaluated the accuracy of any claims made on this page. Finimize and its principals recommend that investors do their own independent research and consult with a qualified investment professional before buying or selling any security. Investing is inherently risky and capital is at risk. Past performance is not indicative of future results.
*The PEA is preliminary in nature and the cost estimate includes inferred mineral resources. These are considered too geologically speculative to have the economic considerations applied that would enable them to be categorized as mineral reserves. There is no certainty the Clearwater Project outlined by the PEA will be realized.
**Market value as of 30th March 2023.