From gold rush to lithium rush, junior miners chase sustainable high prices

The gold rush has become a lithium rush in North America as several junior miners shift operations to take advantage of the silvery metal's in-demand future, junior miners told S&P Global Commodity Insights at the 121 Mining Investment conference in New York on June 5-6.

Lithium is expected to be in deficit from 2024 through 2027, according to forecasts by Commodity Insights. Consumption is estimated to more than double from 2022 levels to 1.8 million metric tons of lithium carbonate equivalent in 2027, while pricing remains well above historical levels.

A recent slowdown in Chinese demand for lithium has not changed the industry outlook. Lithium will be bolstered by ongoing demand for lithium-ion batteries in the electric vehicle and stationary storage sectors for years to come, industry participants said. That provides a big opportunity for junior mining companies that focus on exploration and believe that they should be able to attract more investment money. A junior mining company is one that generates under $50 million in annual revenue, according to Commodity Insights classification.

"When we see the price of a commodity dramatically increase or we see the potential, such as the lithium battery market in forecasts ... when those kind of macro factors come into the marketplace, there is a rush to find that commodity and advance those projects. We've seen more investment go into this sector as a result. And we've seen more companies get started up with the idea of finding lithium," Stephen Hanson, founder, president and CEO of Canada-based junior explorer ACME Lithium Inc., told Commodity Insights at the conference.

"I call it a white gold rush," Hanson said.

The gold commodity cycle does not compare to the forecast long-term strength of lithium prices, said David Jamieson, president and CEO of Canada-based junior explorer Midex Resources Ltd. Gold prices rose above $1,600 per ounce in February 2020, and the price spiked above $2,000 in August of that year, doing so again in March 2022 and April 2023.

"We're looking at sustained high prices, which for gold companies is the bane of your existence because you have a window to hit and you're always off," said Jamieson. "The money comes in when the prices are high. You get all the work done and by the time you're ready to produce, the prices are low again."

The lithium price is well off its peak of Nov. 30, 2022, when the Lithium Carbonate EXW China battery price hit $79,650 per metric ton, according to S&P Global Market Intelligence data. The price has fallen 47.1% to $42,100 as of May 31, still well above historical levels when prices were below $20,000/t before September 2021.

"Even if the price comes down a lot, there's still huge margins there for anybody that can get it out of the ground," Jamieson said.

Midex Resources left the gold industry completely in the hopes of grabbing a portion of the wealth flowing into the lithium sector. Jamieson said gold explorers and miners can easily switch between exploring for gold and lithium-containing spodumene mineralization.

"It's actually simpler because you don't have to drill," the Midex executive said. "These complicated gold deposits can be a cruel mistress."

In the first quarter, drilling for specialty metals such as lithium increased 92.9% year over year to 135 sites, while gold drilling projects lagged by 35.4% to 541 sites, according to Market Intelligence data.

The energy transition and talk of electric vehicles has also helped critical minerals-focused mining companies gain exposure within the investor space, executives with junior miners said.

"Those that formerly weren't [investing] in mining are now looking to, in particular for battery metals," said ACME Lithium's Hanson.

Traditional investors in the mining sector are gaining interest in lithium, and junior miners are benefiting from lithium's new high profile, according to David Christie, president and CEO of junior explorer Orford Mining Corp.

"Retail shareholders love lithium," Christie said. Orford Mining recently expanded its focus from gold to critical minerals such as lithium in Quebec.

"This year we decided, 'Let's look at lithium a little harder,' and people started taking everything and anything. I said, 'We need to stake it before someone else does,'" Christie said, adding that Orford Mining's share price "went nuts" after the company announced its first lithium project known as Nunavik Lithium.

"Companies gravitate towards places where you can raise money," said Darren Collins, CEO of US Critical Metals Corp. The lithium sector has more capital available to its participants and is also able "to attract valuation," Collins said.

US Critical Minerals received a drill permit in May for the Clayton Ridge lithium project in Nevada, and its portfolio also includes the Sheep Creek rare earths project in Montana and the Haynes cobalt project in Idaho.

Industry participants at the conference were hopeful that additional capital flowing into the mining sector overall would push for further innovation in extraction technology.

"Oil and gas is way ahead of us on technology," said Michael Williams, chairman of Aftermath Silver Ltd.

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