April 10, 2018 - 9:05 AM EDT
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Lithium Powered Batteries Taking Front Seat to Replace Energy Grid Peaker Plants

With costs of lithium batteries seeing cost reductions due to economics of scale, industry experts believe that li-ion plants may well become cheaper than natural gas peakers on a per-unit of power basis within the next ten years.

The demand for the lithium already has resource companies hopping to create greater supplies including Critical Elements (TSXV: CRE), Pilbara Minerals Ltd (OTC: PILBF), Lithium X Energy Corp. (TSXV: LIX) (OTC: LIXXF) and NRG Metals Inc. (TSXV: NGZ) (OTC: NRGMF).

Lithium which is already in demand by electric vehicle producers who use lithium as a material in their rechargeable batteries, could see whole new draws on the supplies as the power grid infrastructure gets a major overhaul.

Market watchers predict that the increase in demand by automakers, power storage systems and new high tech applications will create a potential significant shortfall.

Many lithium companies are seeing their share prices rising based on the new demand and positive outlook for new resources including LSC Lithium Corp. (TSXV: LSC), Critical Elements (TSXV: CRE), and Lithium X Energy Corp. (TSXV: LIX) (OTC: LIXXF).

One junior company in this sector, NRG Metals Inc. (TSXV: NGZ) (OTCMKTS: NRGMF) is on a fast track development in the most prolific lithium region. NRG Metals is advancing a huge lithium brine project in South America positioned near major producers FMC and SMQ.

BATTERY POWER TAKING OVER THE GRID

As the push for renewable energy continues to gather steam, battery technology is becoming an increasingly critical component of the economy. Lithium-ion technology provides the bulk of rechargeable batteries that are powering everything from smartphones to electricity grids.

A relatively recent application of the technology is related to providing backup power, and this could see giant lithium batteries replace natural gas peaker plants around the globe.

In the US, competition between natural-gas peaker plants and li-ion batteries has been growing fast in recent years.

The US will need to add about 20 gigawatts of peaking capacity to its grid within the next decade, with over 7000 megawatts coming within the next two years.

Energy storage will play a big role in realizing this dream, with the latter years of that period being crucial in allowing the technology to gain an economic advantage. By the year 2027, natural gas peakers will be a thing of rarity as li-ion storage takes over.

Further afield in Australia, the synergy between energy storage and the electric grid has been demonstrated to the world.

In southern Australia, heatwaves sweltering over 40o C have put the national grid to tests never experienced before. The region had to add about 2000 MW of new capacity in order to prevent blackouts which had heavily affected industrial and household users.

Included in the haul was 120 megawatts provided by the world’s biggest li-ion battery, that was built by Tesla.

Heatwaves disrupt power grids by cranking up demand for air conditioning and also affecting the conductivity of transmission wires.

Currently, the region is still dependent on standby generators, but with Tesla’s system having worked so well in the two months since it was installed, these generators may be phased out in the coming years by similar storage facilities.

Tesla is currently working on an even larger system to restore power in the hurricane-ravaged island of Puerto Rico.

WHAT IT MEANS FOR LITHIUM DEMAND

Clearly this move to more power based on lithium-ion cells is pushing the demand economics for lithium. South America and Australia are the two big regions for new or near-term producers of lithium.

A likely scenario that will become increasingly popular over the next few years is direct investment into junior lithium exploration companies.

NRG Metals, a recent start-up focused on the development of lithium brine assets in Argentina, has recently attracted a Chinese battery material producer through closing on a $1.4 million private placement to fund ongoing exploration activities in Argentina and the potential, as an Off-Take producer, for future lithium products extracted.

NRG Metals has two projects, with the most significant project being the "Hombre Muerto North Project" or HMNP. HMNP is located in the Salta and Catamarca provinces and comprises a total property package of over 3,000 hectares encompassing six concessions.

The company has reported good surface sample collections, magnesium to lithium ratios, and is located across from Galaxy Resources Sal de Vida lithium development project. Most importantly, the project is within 20km of FMC Corporation's well established Fenix lithium brine project.

The offtake agreement could mean that NRG Metals will sell lithium before it’s even mined and provides a ready market for its asset.

LITHIUM COULD SURPASS COPPER

Coupled with the growth of the consumer electronics and electric vehicle sectors, the proliferation of such largescale batteries in the coming years will be one of the factors that will continue drive lithium demand through the roof.

Currently lithium supply is already lagging behind demand, and this has pushed up the price of the metal, which is a critical element in the manufacture of rechargeable batteries. Mining of lithium is a capital intensive activity hence it may take some time for new mining infrastructure to come online.

Experts believe that the demand for lithium will surpass that of copper in the coming decades and that makes for immense revenue opportunities for mining juniors.

Despite the glaring demand gaps and economic opportunities, lithium supply is likely to follow surge busts that follow price increases. These cycles referred to as “supercycles” are caused by a pattern where short term demand growth causes price hikes which entice miners to invest in mining infrastructure. As supply increases, price stagnates leading to a lull in mining growth.

At this point investors are betting heavily on the lithium demand making miners and juniors even more attractive.

POTENTIAL COMPARABLES

LSC Lithium Corp. (TSXV: LSC)

LSC Lithium Corp. is an emerging lithium producer that has amassed a large portfolio of prospective lithium salars in Northern Argentina and is focused on becoming a significant player in the supply of high quality lithium product to global markets. On August 16th, the company announced that it will complete its previously announced private placement of common shares at an offering price of $1.10 or $0.87 U.S. per common share. In the aggregate, the offering is expected to consist of the issuance and sale of up to 18,181,818 common shares for gross proceeds of up to $20-million. The funds raised in the offering will allow LSC to further pursue the promising exploration results to date by the implementation of an accelerated and expanded exploration program for 2017.

Critical Elements (TSXV: CRE)

Critical Elements Corporation, a junior mining company, acquires, explores, and develops mining properties in Canada. It primarily explores for copper, zinc, gold, silver, nickel, lead, lithium, niobium, tantalum, and platinum group elements. Its flagship project is the Rose lithium-tantalum property that consists of 500 claims covering a total area of 260.90 square kilometers, located in the Eastmain greenstone belt. The company was formerly known as First Gold Exploration Inc. and changed its name to Critical Elements Corporation in February 2011. Critical Elements Corporation is headquartered in Montreal, Canada.

Lithium X Energy Corp. (TSXV: LIX) (OTC: LIXXF)

Lithium X Energy Corp. is a lithium exploration and development company with a goal of becoming a low-cost supplier for the burgeoning lithium battery industry. On July 11th, the company announced that further to its news release of June 29th, 2017, the Company has closed the definitive agreement with Aberdeen International Inc. for the purchase of Aberdeen's remaining 50% interest in Potasio y Litio de Argentina S.A., which controls 100% of the Sal de los Angeles Project. The project consists of 8,154 hectares covering 95% of Salar de Diablillos, and has an NI 43-101 mineral resource estimate of 1.037 million tonnes of lithium carbonate equivalent in the indicated category and 1.007 million tonnes of lithium carbonate equivalent in the inferred category.

For a more in-depth look into NGZ you can view the in-depth report at USA News Group: http://energymetalnews.com/2018/01/13/energy-metals-prices-will-continue-to-grow-past-2024-junior-miners-are-the-catalyst/

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Source: Baystreet US Market Commentary (April 10, 2018 - 9:05 AM EDT)

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