While lithium prices remain in the doldrums and miners race to add new capacity despite their troubled financials, the world’s hunt for critical minerals continues. Additionally, a mega lithium discovery in the U.S. is a key development this week.
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The Hunt for Critical Minerals
The global economy is currently facing an oversupply of lithium. However, countries are racing to secure their supply of critical minerals such as lithium, nickel, and cobalt amid rising supply chain rifts.
Amid this dynamic, western countries are focusing more and more on setting up their supplies. A step in this direction is the recent signing of a critical mineral cooperation and investment pact between the E.U. and Australia. The move involves potential joint ventures, R&D cooperation, and investments in critical mineral projects.
Meanwhile, China, which has a firm grip on the global supply chain of critical minerals, is making rapid strides in Africa. According to the Griffith Asia Institute, new investments from China into Africa jumped by nearly 114% last year. According to Reuters, these investments have been largely focused on critical minerals. Some of these projects include cobalt and lithium mines in countries such as Namibia, Zambia, and Zimbabwe.
A Mega Lithium Discovery in the U.S.
While China scouts for minerals, the U.S. may just have hit a jackpot with the discovery of a mega lithium source in Pennsylvania. According to CBSNews, the lithium from the Marcellus Shale Gas wells’ wastewater could be enough to meet up to 40% of the United States’ lithium demand.
Doubts over The Thacker Pass Project
On the other hand, the future trajectory of another major U.S. lithium project has been mired by doubts. The Thacker Pass project is the largest known Measured and Indicated (M&I) lithium resource in North America. However, the share price of Lithium Americas (NYSE:LAC) (TSE:LAC), which is developing Thacker Pass, has tanked by nearly 25% over the past month amid short-seller action. Recently, Bleecker Street Research revealed a short position in the stock. Bleecker believes that the Thacker Pass project is uneconomical.
Is LIT ETF a Buy?
In the meantime, the Global Lithium & Battery Tech ETF (LIT) at $43.58 per share is down by nearly 14.2% year-to-date. This price weakness looks set to continue as the TipRanks Technical Analysis tool is flashing a Sell signal on the ETF on a monthly timeframe.
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