FN Media Group Presents Oilprice.com Market Commentary
LONDON, Feb. 18, 2022 /PRNewswire/ -- 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. (NASDAQ: BLDP), Lithium Americas Corp. (NYSE: LAC), Enphase Energy, Inc. (NASDAQ: ENPH), First Solar, Inc. (NASDAQ: FSLR), HP Inc. (NYSE: HPQ).
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.
We think a setup like this is the sort that set up a tiny company for the major leagues, possibly through an investor-rewarding JV deal once you near the development phase.
Avanti has spent the past eight months securing this huge land package in ancient shale formations, and now it's doing its first drill campaign at the beginning of a helium supply crunch that has absolutely no way of producing the numbers we need without big new discoveries. With the maiden drill hole completed, this is one to watch for exciting news flow as more results come in and drilling continues on the project.
Other companies that could be impacted by the commodity supply squeeze:
As a global leader in hydrogen fuel cell technology, Ballard Power Systems (BLDP) a Canadian company, with headquarters in Montreal is pushing for progress on the hydrogen car front. They design and manufacture fuel cell products that have helped make their mark across several industries including transportation where they are making strides towards greening our cities by helping reduce emissions from both private vehicles as well public transit buses to help save money at home or abroad!
In a recent release, the company stated, "In the starting phase of work under the framework agreement, a demonstration platform with a fuel cell powertrain solution will be co-developed, with Ballard providing the fuel cell subsystem and Linamar providing the rolling chassis, tanks, enclosures, cradles and other balance of plant. Following successful testing of the demonstration platform, Ballard and Linamar expect to form a joint venture"
For those looking for an alternative energy source, Enphase Energy (ENPH has been leading the industry with its innovative power monitoring technology. The company was founded by four engineers from Silicon Valley who were trying to create a more efficient and affordable solar panel system that could be used by all sorts of people across America - not just techies like them! Nowadays they don't even need rooftops anymore: their products are tiny enough so you can put one on your desk at work or in any room as needed without blocking access points where other equipment might go.
First Solar (FSLR) a global renewable energy company headquartered in Tempe, Arizona with over 27 years of experience and expertise designing photovoltaic products for residential use or large-scale power plants, is now one of the most recognizable brands across all industries within their industry. The FirstSolar headquarters are where they manufacture thin-film modules made from cadmium telluride which can be used as an alternative to traditional silicon based cells on rooftops around America's cities allowing homeowners more options when it comes time to decide how much dough they want to put into solar panels themselves!
Hewlett-Packard (HPQ) is another computer maker in the hydrogen game. In fact, it even beat Apple to the punch. It was already on the forefront of the push back in 2017, designing and testing new and exciting ways to harness the power of hydrogen fuel cells to build carbon-free data centers.
"Hydrogen fuel cells lie at the heart of this strategy. These devices create energy through the electrochemical reaction between air and hydrogen. The electricity produced can be stored in batteries or used to drive an electric motor that powers a vehicle. Daimler and other automotive manufacturers, for example, have been successfully testing fuel cells in cars for many years," the company wrote on its website, adding, "the advantage of fuel cells over traditional fossil fuel-powered devices is they are sustainable and carbon-neutral-their only by-product is water. This means data centers no longer need to rely on diesel generators or other carbon-heavy backup power sources to cover any power gaps."
By. Tom Kool
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Forward-Looking Statements
This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that prices for helium will significantly increase due to global demand and use in a wide array of industries and that helium will retain its value in future due to the demand increases and overall shortage of supply; that Avanti will able to successfully pursue exploration of its licenses and properties; that Avanti's licenses and properties can achieve drilling and mining success for commercial amounts of helium; that indications of potential for economic helium in Avanti's initial wells will predict future results; that Avanti will be able fulfill its obligations under its licenses and in respect of its properties; that Avanti will be able acquire the rights to the helium on its prospective helium properties; that the Avanti team will be able to develop and implement its helium exploration models, including their own proprietary models, that may result in successful exploration and development efforts; that historical geological information and estimations will prove to be accurate or at least very indicative of helium; that high helium content targets exist on Avanti's projects; and that Avanti will be able to carry out its business plans, including timing for drilling and exploration. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that demand for helium is not as great as expected; that alternative commodities or compounds are used in applications which currently use helium, thus reducing the need for helium in the future; that the Company may not fulfill the requirements under its licenses for various reasons or otherwise cannot pursue exploration on the project as planned or at all; that the Company may not be able to acquire the helium rights on its properties as contemplated or at all; that the Avanti team may be unable to develop any helium exploration models, including proprietary models, which allow successful exploration efforts on any of the Company's current or future projects; that Avanti may not be able to finance its intended drilling programs to explore for helium or may otherwise not raise sufficient funds to carry out its business plans; that geological interpretations and technological results based on current data may change with more detailed information, analysis or testing; and that despite promise, results of the recent drilling and exploration may be inaccurate or otherwise fail to result in locating or developing any commercial helium reserves on the Avanti properties, and that there may be no commercially viable helium or other resources on any of Avanti's properties. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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