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Feb. 18, 2022, 8:05 a.m. EST

Lithium And Helium: 2 Commodities That Are Exploding In 2022

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Feb 18, 2022 (Financial News Media via COMTEX) -- FN Media Group Presents Oilprice.com Market Commentary

London - February 18, 2022 – A new commodity supercycle is being driven by a massive energy transition ...And two elements are experiencing a supply squeeze that is creating huge opportunities for investors. Mentioned in today's commentary includes: Ballard Power Systems Inc. /zigman2/quotes/205070617/composite BLDP +1.48% , Lithium Americas Corp. /zigman2/quotes/206933779/composite LAC +1.39% , Enphase Energy, Inc. /zigman2/quotes/207948472/composite ENPH -1.14% , First Solar, Inc. /zigman2/quotes/209356097/composite FSLR +0.68% , HP Inc. /zigman2/quotes/203461582/composite HPQ +4.02% .

The first is lithium, the super metal fueling the EV and energy storage boom. The second is helium, the key to future tech innovation and an irreplaceable necessity for semiconductors, which are also undergoing a long-running supply squeeze. Lithium prices have surged 500% over the past year on the fast-paced global adoption of EVs.

BNEF predicts that before the end of this decade, the battery sector's lithium consumption will soar to 5X current levels.

Mining.com's EV Battery Metals Index has more than quadrupled since mid-2020, and rapidly falling EV battery prices are shifting this race into fifth gear.

Helium, too, is in dangerously short supply ever since the U.S. Federal Helium Reserve in Texas auctioned off its remaining stockpile and closed its doors forever, taking some 40% of supply off the market late last year ...

That's a nightmare for the auto industry, at large, with the giants forced to suspend production and miss vehicle targets. Why? Because a single car typically needs over 3,000 semiconductor chips .

They need helium to manufacture those chips, and there may be no element that can replace it or come close to its cooling powers, which also makes this gas critical to the world's most important scientific research and technological innovations ... from space travel, cryogenics and the Large Hadron Collider, to everyday technology such as MRIs and fiber optics.

With prices hitting $280/Mcf in 2019 during Fed auctions, helium can now sell for up to $600/Mcf . It's wildly more expensive than natural gas-even in the middle of an unprecedented gas price surge.

Now, for both lithium and helium, it's all about who can make the next significant discovery the fastest, creating new opportunities for investors to get in on what could be the supply squeezes of the decade.

Lithium

Upgraded by three analysts last week alone, Lithium Americas (LAC) is solidly positioned to take advantage of the lithium craze with its Thacker Pass mine in Nevada.

Would-be investors have been horribly impatient with lithium, that's largely because the soothsayers started pumping up lithium long before it was ready for the supply squeeze and the surge in EV and energy storage demand. But all good things come to those who wait...LAC is up around 34% over the past 12 months, and looks very well-positioned for more growth this year, in tandem with a global lithium market that is set to top $8B over the next 5-6 years.

For LAC, the investor reward is more of the juicy potential returns you can only get from a pure-play. This is an exploration play. There aren't any revenues-yet. But the potential is enormous, in the form of two world-class projects in Argentina and Nevada.

While Nevada is an exciting exploration-stage play that brings lithium to North America at exactly the right time, LAC's Argentina play is already close to production. In fact, it should come online in the middle of this year and that will be LAC's first major revenues. We're looking at production from Argentina of around 40,000 tonnes per year, with lithium prices soaring right now. And that production number is just Cauchari Olaroz's Phase 1. They're also planning a 20,000-tonne expansion and this is being billed as a "low-cost" lithium brine project.

In Nevada, at LAC's Thacker Pass project, mineral reserves are 3.1 million tonnes of LCE at 3,283 ppm Li. LAC is expecting all major permits to move forward with this by the end of this quarter.

Yes, it's a lot of spending right now before we get into production, but with market prices what they are, investors should be willing to wait for this one out because the exploration risk appears to be much lower.

Helium

The other critical element supply crunch in this new commodity supercycle is helium, and because it's flown under the radar, there could be even more potential upside ...Especially when you get a micro-cap company that's just completed its first helium well with very encouraging results.

Avanti Energy Inc. ( AVN.V ; ARGYF ) is a smart early mover on this supply squeeze, and its initial 3-6-well program in its 100%-operated Greater Knappen project that runs from Montana to Alberta could have the potential to be an important element in North America's ability to secure enough helium supplies.

All the better when a tiny company like this reports encouraging results in its maiden drill program. Drilled to a depth of 5,860 feet, Avanti's first well (Rankin 01-17) encountered ALL the targeted zones for helium potential .

Avanti's maiden helium well open-hole logging indicated five zones with reservoir characteristics (good porosity and low water saturation) suggesting further testing is warranted.

Drill stem tests were also performed to high-grade zones for completions and two of the targeted zones showed economic helium potential. Avanti has secured nearly 70,000 acres spanning Alberta and Montana in highly prospective helium territory.

And geological interpretations suggest anywhere from 1.4 billion cubic feet of helium to 8.9 billion cubic feet . But the biggest thing investors may be latching onto here is the potential payback time ...Avanti estimates that their wells, if commercially successful, could yield ~55,000 cubic feet of helium per day, and require just 104 days to fully pay back drilling costs.

Avanti estimates that its wells may yield at a high level of 55-60 mcf helium a day for the first five years, then gradually decline at ~10% annually thereafter for a total productive life of ~20 years. That could mean some two decades of major production and steady cash flow.

/zigman2/quotes/205070617/composite
US : U.S.: Nasdaq
$ 6.86
+0.10 +1.48%
Volume: 3.92M
June 24, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.02 billion
Rev. per Employee
$78,956
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/zigman2/quotes/206933779/composite
US : U.S.: NYSE
$ 21.82
+0.30 +1.39%
Volume: 2.03M
June 24, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.90 billion
Rev. per Employee
N/A
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/zigman2/quotes/207948472/composite
US : U.S.: Nasdaq
$ 198.39
-2.28 -1.14%
Volume: 3.45M
June 24, 2022 4:00p
P/E Ratio
169.00
Dividend Yield
N/A
Market Cap
$27.10 billion
Rev. per Employee
$673,269
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/zigman2/quotes/209356097/composite
US : U.S.: Nasdaq
$ 70.07
+0.47 +0.68%
Volume: 1.27M
June 24, 2022 4:00p
P/E Ratio
34.76
Dividend Yield
N/A
Market Cap
$7.42 billion
Rev. per Employee
$518,134
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/zigman2/quotes/203461582/composite
US : U.S.: NYSE
$ 35.23
+1.36 +4.02%
Volume: 10.53M
June 24, 2022 4:03p
P/E Ratio
6.33
Dividend Yield
2.84%
Market Cap
$35.03 billion
Rev. per Employee
$1.28M
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