Who’s to Benefit from the World’s Largest Lithium Reserves

Potentially world's largest lithium deposits discovered in the US could shake up the market for miners looking to get into the highly in-demand commodity used to power EVs

New Supplies to Meet Demand

The world of electromobility got a shock last week with the announcement that a deposit of between 20-40M tonnes of lithium had been discovered in the western United States. That would be larger than the current world's largest, located in Bolivia, with an estimate of up to 20M tonnes. The essay results are preliminary, and ownership of the area is contested. Still, at least some of it is expected to be commercialized by the mining company in charge of the discovery, Lithium Americas Corporation, which said it planned to commence mining as early as 2026.

Lithium Americas is a dual-listed Canadian-American company which is new in the business. It just recently started production at its first mining site in Argentina and still hasn't recorded a profit. This puts it in a position to be acquired by a bigger, more experienced firm with the resources to exploit a large deposit of this kind. For context, the company has just $502M in cash on hand at the end of its reporting period, which is mainly directed at financing its more mature Argentine operations. The new finding in the US, located in the McDermott caldera on the Oregon-Nevada border, still needs to be fully assayed to determine whether the preliminary estimates about the size are correct.

Rio Tinto Looking to Expand Lithium Operations in the US

The UK-listed Australian mining giant Rio Tinto has been looking to get into lithium for years. It even has a lithium production site in the US, in Boron, California, extracting battery-grade metal from waste products. But so far, the company still needs to get its ore production in the US. Recently, its lithium ambitions suffered a significant setback with the failure to develop a large site in Serbia. The company has been on a buying spree, and for a couple of months, it signed agreements to buy assets in Canada. But those were for exploration, which might or might not yield results. Acquiring a property - or a development stake - which is confirmed to have deposits would help accelerate production for the company.

The US market is particularly interesting since the government has been emphasising the domestic supply of lithium for its growing EV fleet. The US is the second largest EV market but has the fastest growth, seeing plug-in car sales growing at 55% in the last year alone. A company that manages to secure a significant sized lithium production in the US could be in a privileged position to take advantage of the world's largest economy and drive the fleet's transition to electric vehicles.

Rio Tinto Inverse H&S Potential

Rio Tinto may be forming the right shoulder of a head-and-shoulders pattern, with slightly increased chances of falling back to 4750. If the neckline top is in at 5335, falling shy of 5410, the short-term price action could drive the stock lower to complete the right shoulder. Otherwise, breaking past the peak could instigate further upside towards 6410 long-term, potentially leaving a bearish flag behind and a low in at 4510.

Source: SpreadEx / RIO TINTO

Key Takeaways

A significant deposit of lithium, potentially the world's largest, has been found in the western United States. Estimates suggest it could contain between 20 to 40 million tons of lithium. While further testing is needed, mining company Lithium Americas Corporation plans to begin mining operations in the area by 2026. This discovery presents an opportunity for Lithium Americas and UK-listed Australian mining company Rio Tinto to expand their lithium operations. Given the US government's focus on domestic lithium supply for electric vehicles, securing production in the US market would be advantageous.