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SMALL CAP SHARE IDEAS: Renaissance in British mining driven by lithium

There’s a quiet renaissance going on in the British mining industry, and it’s coming from a sector that ten years ago wasn’t on anyone’s radar.

Lithium is set to become one of the most crucial and strategic of commodities as the 21st century rolls on and, as it happens, it looks as though it could be present in abundance in Cornwall.

The pressure to develop this resource has been greatly stimulated by Donald Trump’s tariff wars and the coronavirus, which together have woken up businesses and governments to the vulnerability of globalized international supply chains.

Lithium is set to become one of the most crucial and strategic of commodities as the twenty-first century rolls on

What’s more, the increasing control that China is exerting on the world’s commodities markets has meant that governments the world have become doubly nervous about securing local supplies of crucial raw materials, like lithium.

And so, aided by various government incentives, new gigafactories are springing up all over Europe, with a view to bringing battery manufacturing closer to home.

In Spain, a US$5bn electric vehicle battery production programme is being kick-started and mostly funded by European Union recovery funds.

New factories are also springing up in Germany and Italy, and in the UK, where other factories are in the pipeline, rumours persist that Tesla is on its way.

But it’s only just beginning. As things stand, only 6 per cent of battery manufacturing takes place in Europe, and the reliance on China remains pretty strong.

In Britain the imperative is added to by the complications of Brexit, and the need to support a sizeable car manufacturing industry that’s on the cusp of switching over to electric vehicles.

The government here is only too aware of this and is trying to be as supportive as possible. Thus, the beginning of July, Nissan announced that it will invest £1bn to produce batteries near its main European production plant in Sunderland.

In Spain, a US$5bn electric vehicle battery production programme is being kick-started and mostly funded by European Union recovery funds

In Spain, a US$5bn electric vehicle battery production programme is being kick-started and mostly funded by European Union recovery funds

All of which makes for a highly positive environment for those mining and resource companies with assets close at hand. In the lithium space, there aren’t too many of these, which means they will be all the more in demand.

In the UK, Cornish Lithium, the private company which is pioneering extraction from brines in Cornwall, and British Lithium, also private, are leading the way.

Both have been conducting extensive drilling campaigns to delineate more clearly the zones of mineralization they are already finding.

In Cornish Lithium’s case, the work involves pioneering new technologies in the extraction of lithium from brines.

And handily from an environmental point of view, the heat given off by these brines also has significant geothermal potential – there’s a geothermal well just across the road from one of Cornish Lithium’s main drill sites.

But it’s not just private companies that are enabling the UK’s investors to get a piece of the action in lithium.

Listed companies are getting in on the action too. 

In Europe, Savannah Resources (current share price 3.3p) has a major deposit in Portugal, European Metals Holdings (81.5p) retains an interest the Cinovec deposit in the Czech Republic, while Zinnwald Lithium (23p) is working up a deposit just across the Czech border in Germany, near Dresden.

Spain is the European Union’s second largest car producer after Germany, so Savannah will be well positioned to ship its product over the Portuguese border, while European Metals and Zinnwald can target the major German hubs, in the same way that Cornish Lithium and Cornish Metals can look to the British car industry.

In that context it comes as no surprise to learn that the British government is being extremely helpful to both companies and that red tape is likely to be kept to a minimum.

Finally, for those who are wondering if a similar dynamic is playing out across the Pond in the USA, the answer is yes. In mid-July Bradda Head Ltd (7.5p) listed on Aim, backed by £6.2mln in new money.

Bradda has lithium assets in Nevada and Arizona and is well placed to serve a local market that currently only produces 5,000 tonnes of lithium carbonate locally per year. And in case there’s any doubt, that’s not a lot.

Given the economic forces currently at work – the supply-demand dynamic combined with resource nationalism – the projection is that the US will need around 210,000 tonnes of lithium carbonate by 2025 – a huge increase.

It’s that kind of opportunity that Bradda Head is looking to capitalize on.

Read more at DailyMail.co.uk