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

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There’s a quiet renaissance going on in the UK mining industry, and it’s coming from an industry that wasn’t on anyone’s radar a decade ago.

Lithium is expected to become one of the most crucial and strategic commodities as the 21st century progresses and it looks like it could be in abundance in Cornwall.

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

Lithium is expected to become one of the most crucial and strategic commodities as the twenty-first century progresses

In addition, China’s increasing control over the world’s commodity markets has caused governments around the world to become doubly nervous about securing local supplies of crucial commodities, such as lithium.

And so, aided by various government incentives, new gigafactories are emerging across Europe to bring battery production closer to home.

In Spain, a US$5 billion production program for the production of batteries for electric vehicles is underway, largely financed by European Union recovery funds.

New factories are also emerging in Germany and Italy, and in the UK, where other factories are in the pipeline, Tesla is rumored to be on the way.

But it’s just beginning. As things stand, only 6 percent of battery production takes place in Europe and the reliance on China remains quite strong.

In Britain, the need is exacerbated by the complications of Brexit and the need to support a sizeable car industry poised to switch to electric vehicles.

The government here is all too aware of that and tries to be as supportive as possible. For example, Nissan announced in early July that it will invest £1 billion in battery production near its main European manufacturing site in Sunderland.

In Spain, a $5 billion electric vehicle production program is underway, largely funded by European Union recovery funds.

In Spain, a $5 billion electric vehicle production program is underway, largely funded by European Union recovery funds.

All of this makes for a very positive environment for those mining and commodities companies with assets at their fingertips. In the lithium space, there aren’t too many of them, which means there will be all the more demand for them.

In the UK, Cornish Lithium, the privately-owned company pioneering brine extraction in Cornwall, and British Lithium, also privately-owned, are leading the way.

Both have carried out extensive drilling campaigns to more clearly define the zones of mineralization they already find.

In the case of Cornish Lithium, the work includes pioneering new technologies for extracting lithium from brine.

And conveniently from an environmental point of view, the heat given off by this brine also has significant geothermal potential – there’s a geothermal well across the road from one of the major Cornish Lithium drilling sites.

But it’s not just private companies that allow UK investors to get some of the action in lithium.

Listed companies also participate.

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

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

In that regard, it comes as no surprise to learn that the UK government has been extremely helpful to both companies and that the red tape is likely to be kept to a minimum.

Finally, for those wondering if a similar dynamic is happening in the Pond in the US, the answer is yes. In mid-July, Bradda Head Ltd (7.5 pence) was listed on Aim, backed by £6.2m in new money.

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

Given the economic forces currently at work – the dynamics of supply and demand combined with resource nationalism – the forecast is that the US will need about 210,000 tons of lithium carbonate by 2025 – a huge increase.

It’s those kinds of opportunities that Bradda Head wants to take advantage of.

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