Five small-cap miners for Clean Tech investors
The Rise of the Electron
Very soon the world is going to need a lot more lithium, critical, and rare earth metals as demand for Li-Ion batteries and renewable energy tech continues on its exponential growth curve. There is around 100 times more demand for Li-Ion batteries today than 10 years ago, yet EVs still represent only 13% of global car sales. And as the market has grown, the cost of Li-Ion batters per kWh has dropped by a factor of 10 since 2010. Boston Consulting Group estimates that 59% of all light vehicles and vans sold globally in 2035 will be fully electric or hybrid electric.
[source: Goldman Sachs]
The transition to EVs is being driven in large part by government commitment to Net Zero decarbonisation programmes. The UK, Germany, the Netherlands, Belgium, Greece, Norway, Sweden, Iceland, and Israel have all set government targets for phasing out sales of internal combustion passenger vehicles by 2025-2030, while China and the US set their targets for 2035, and dozens of other countries are aiming for 2030-2040.
Simultaneously, governments are aggressively adding wind, solar, and other renewable sources to their energy supply grids in order to charge the hundreds of millions of future EVs with green energy.
[source: Goldman Sachs]
Demand Drivers
There are reasons for setting such aggressive targets besides the obvious desire to avert a climate catastrophe. Energy and resource security is a key goal for nations that rely on imports for most of their energy needs. Nowhere is that more evident than in Europe at the moment where the gas shortage resulting form the war in Ukraine pushed electricity and gas prices to eyewatering levels.
A current quote from Octopus Energy in the UK for a business account lists a 83.21p/kWh price for electricity and 26.78p/kWh for gas. This represents an over 5x increase compared to 2 years ago. Consumers have been spared the worst of soaring energy prices by the recently implemented Energy Price Guarantee which locked prices at c. 34p/kWh for electricity and 10p/kWh for gas. Gas prices may now be falling again, but governments are looking for ways to avert such crises in future.
Moreover, relying on finite resources such as oil and gas exposes nations to future risk. The high cost of importing LNG in a post-Russian energy era is an additional consideration, and so are the environmental and community effects of hydraulic fracturing extraction of oil (recently made legal again in the UK), as conventionally retrievable reserves deplete over the next decades.
Finally, renewable energy is simply a superior and cheaper technology compared to fossil fuel generation. Solar and wind are currently the cheapest ways to generate electricity in Europe. As wind turbines continue to grow in size (a twofold increase in swept area yields a fourfold increase in energy generated), solar panels continue to become more efficient, and economies of scale make manufacturing cheaper, the gap will continue to grow.
Similarly, EVs are cheaper to run, have much fewer moving parts, last longer, have lower maintenance costs, better performance, and don't require regular trips to petrol stations. As batteries continue to get cheaper, petrol cars will simply be uncompetitive with EVs by the end of the decade, even without government targets.
Load Balancing
However, it is currently impossible to rely on 100% renewable generation, and will remain so until the energy can be cost-effectively stored and used when needed. Progress is rapidly being made in this area, with grid scale LiFePo battery installations now cheaper than gas peaker plants in many areas.
In the future, degraded EV batteries (with less than 70% original capacity) can be repurposed as grid storage batteries. Hydrogen and pumped water are other battery-like technologies that will help store renewable energy. Grid storage is still a fledgling industry, but the economics increasingly make sense for companies to go in that direction, much akin to solar and wind 10 years ago.
[source: EBA, Irena]
Lithium, REEs, Critical Metals
All of these factors will contribute to lithium's expected astronomical rise in demand over the next decade. In the past year alone, the price of lithium has increased five fold.
[Source: Bloomberg, Statista]
Besides lithium, REEs and other critical metals are also widely used in wind turbines, solar, other renewable energy technologies, and electronics in general. Li-Ion batteries use nickel, cobalt, and graphite in addition to lithium - the exception is the LiFePo variety that has a lower energy density and is typically used in grid storage, home batteries, and some cheaper EVs. The math on future demand for these metals therefore follows closely that of lithium as the world continues to strive for net zero.
[source: ScienceDirect.com]
These metals are not uniformly distributed throughout the world, though. For lithium, 4 countries are responsible for 92% of global production: Australia, Chile, Argentina, and China, with the first two contributing 52.9% and 21.5% respectively.
As demand for critical metals increases, we can expect countries to become more protective of their resources - a phenomenon known as "resource nationalism", which represents an additional geopolitical driver to development of renewable energy metals. Companies mining these metals will become increasingly valuable.
But soaring prices will encourage further mine development that will inevitably see markets swing from the current supply deficit to surplus, and bring prices down again. As a result, investors still need to remain circumspect, and assessing the quality and efficiency of mining operations will be key.
5 Companies for Following the Green Revolution
As alluded above, Australia and Latin America are 2 regions rich not only in lithium, but generally in metals critical to green technology. Greenland is emerging as hotspot as well, with vast recently reported graphite deposits. These regions rank near the top for existing and new mining companies to seek new licenses, and many small-cap players are currently deploying financial resources there to tap into soaring global demand.
We are highlighting five of them here that have recently been in the spotlight with promising interim results and drilling updates - Cleantech Lithium, Rockfire Resources, Majestic Corp, GreenRoc Mining, and AfriTin are all worth following as EV sales and renewable energy deployments continue growing at an exponential rate.
[Source: VC Elements]
CleanTech Lithium
Chile-focused explorer ( ) saw its shares jump 7% when it announced interim results last month. Shares are up 22% YTD and 41% in the past 6 months.
CleanTech's AIM listing in mid-March 2022 raised £5.6m, which funded successful initial drilling campaigns at its Laguna Verde and Francisco Basin projects in Chile. The company ended 1H with £4.67m, compared to £185K a year ago. Lithium grades of up to 409mg/L at Laguna Verde and up to 324 mg/L at Francisco Basin were announced, and the company said it successfully produced 1kg of battery-grade lithium at Laguna Verde, with independent lab results confirming over 99.9% Li2CO3 and very low impurities.
Post-period, CleanTech Lithium announced an updated JORC resource at Laguna Verde, increasing the total resource by 22%. A maiden JORC resource for Francisco Basin was announced on 3 October, adding another 0.53m tonnes of LCE for a total of 2m tonnes across the company's two active projects. CleanTech also added a third asset at Llamara, with a potential area of 344 km2, and an initial exploration well expected in 4Q22.
At Francsico Basin, 3 more wells will commence in the coming weeks, which are expected to further expand the resource estimate. A scoping study will also commence in 4Q22 with a base case production rate of 20,000 tonnes of green LCE per year.
The company also completed on 20 October 2022 a £12.3m fundraise via an oversubscribed placing and retail offer. The placing initially targeted £10m but was expanded due to investor demand. 26.1m fundraising shares will be issued at 47p, subject to shareholder approval, representing 24.83% of the enlarged share capital of the company.
The new capital will enable CleanTech to progress its resource evaluation programmes on all three projects, and undertake additional drilling at Llamara. Results of the three drilling campaigns are expected in 1Q23 and 2Q23, and should provide material upgrades to the portfolio's overall resource base.
In summary, CleanTech's rapid development of its Chilean assets since IPO in March has set it up for continued growth in Q422 and 2023. Upcoming development at Llamara, three expected new wells at Francisco Basin, and scoping studies at both projects, represent near-term value inflection points as confidence increases in the company's projects. Moreover, Cleantech has already produced battery-grade lithium using DLE processes, and is moving forward with its planned pilot plant, helped by its new relationship with DLE specialists SunResin. The pilot plant testing programme is set to begin in 1Q23.
DLE or direct lithium extraction is a greener method of lithium extraction that minimises aquifer depletion and has a smaller geographical footprint than conventional evaporation brines. In addition to employing DLE methods, CleanTech is committed to using 100% renewable energy in processing LCE, and is therefore an attractive option for clients, investors, and governments that have set net zero goals.
CleanTech has indicated active interest in its projects from potential strategic or future offtake partners. It said it was in early stage discussions with companies of "substantial scale", including car manufacturers, trading houses, battery manufacturers, and large mining companies.
Rockfire Resources
( ) is a gold and base metal explorer with assets in Greece and Australia. The company's main focus this year has been on its battery metal and critical metal Molaoi zinc-lead-silver-germanium deposit in Greece, as zinc prices have materially increased during the energy crisis.
Rockfire acquired the Molaoi deposit in March 2022 and on 23 May 2022 delivered a maiden JORC mineral resource for Molaoi of 2.3 million tonnes @ 11 % ZnEq. for 250,000 tonnes of ZnEq. In August, Rockfire announced that metallurgical test work on the Molaoi historical core returned recoveries of zinc (89% Zn) and lead (74% Pb). Additionally, commercially saleable grades of zinc (57% Zn), silver (856 g/t Ag), lead (63.6% Pb), germanium (117 g/t Ge), copper (2.62% Cu) and gold (0.52 g/t Au) are readily returned.
These are highly promising results. 57% Zn concentrate is well above the desired product grade of 50% Zn contained for a saleable concentrate. The 74% lead recovery also far exceeds the market requirement of 40%-50% Pb contained for a saleable concentrate.
Moreover, on 10 May 2022, Rockfire announced the discovery of critical metal germanium at Molaoi during re-analysis of the historical diamond drill core. The company reported the weighted average grade of 51 samples collected during the re-analysis was 51 grams per tonne (g/t) Ge, with a peak value of 197 g/t Ge.
Germanium currently sells for US$1.3m per tonne which, if commercially recoverable in concentrate from Molaoi, would add material value to the overall financial metrics of the Molaoi deposit. The European Commission has identified germanium as a critical metal, owing to risk of supply shortages.
Germanium is used in the manufacture of everyday technology including mobile phones, electronics, solar cells, camera lenses, satellites, computer screens, as well as steering and parking sensors for vehicles. Germanium is also used in numerous military applications, including weapons-sighters and infrared night vision.
Meanwhile at its Plateau deposit in Australia, Rockfire's soil sampling returned a large gold anomaly, extending for over 200m. The anomaly returned very high gold values, with a maximum value of 0.67 g/t Au. In August 2022, Rockfire announced results of rock samples collected in areas of geophysical and geochemical anomalism, including 10.7 g/t Au, 3.2 g/t Au and 2.3 g/t Au.
And at its Copperhead deposit in Australia, Rockfire announced a maiden JORC mineral resource in March of 64 million tonnes @ 0.19 % Cu EQ for 120,000 tonnes of Cu Eq. in the inferred category. The resource contains 80 Kt of Cu (@ 0.12%), 9.4 Kt of Mo (@0.015 %), and 1.1 Moz Ag (@0.55 g/t Ag). Rockfire said Copperhead's mineral resource remains open to the north, east, west and at depth, leaving scope for significant further resource increases.
Majestic Corporation
( ) stands out in this list as it is not in fact a miner, but a recycler. Amid soaring energy costs, environmental concerns, supply chain disruptions, and metal shortages, recycling has become increasingly economical. Currently, using recycled material to produce copper consumes 85% of the energy over producing it from raw materials.
The metal recycling industry was worth $229.6bn in 2021, and is expected to grow at a CAGR of nearly 6% a year to $384bn by 2030 as the battle for mineral resources intensifies in the wake of the Ukraine conflict and environmental regulation is further tightened.
Majestic Corporation has successfully tapped into this growing trend. The company floated on AQSE in March and operates an international network of facilities recycling mainly non-ferrous metals - including platinum group metals (PGM) from auto catalysts, a mining market dominated by Russia – and electronic goods covered under WEEE Regulations.
Majestic's first results since coming to market were impressive, with profits up almost 28% to $980k despite a drop in revenues as a result of macroeconomic headwinds exacerbated by the conflict in Ukraine. That and other supply chain problems meant limited supplies of recycled materials and lower revenues for Majestic, down 16.6% to $12.9m over the year.
But the company’s focus on risk management, including hedging sales, protected its profitability, despite a significant rise in logistics costs exacerbated by delays to container availability, and staff shortages.
Majestic also ended the FY with cash on hand up $200k to $2.7m, underpinning its plans to further expand its facilities. The company currently operates two procurement sites in the US and UK supplied by partners in Mexico, Lithuania, Australia and Italy, and a facility in Malaysia capable of processing 20,000 tonnes a year.
It now plans to set up a processing facility in the UK, with long-term plans to do the same in Europe and then the US. The company is also investing heavily in its technology infrastructure, in particular building customer-facing apps to help it procure materials and sell recycled products.
Alongside normalising supply chain issues, that should drive further profit growth as revenues bounce back from this year’s disruption. Meanwhile, expansion of its vertically integrated global footprint should help it capture a bigger slice of the fast-growing metal recycling industry.
Majestic is currently working on its inaugural ESG report. But given the importance of metal recycling, it is already a rare example of a company walking the ESG walk rather than just ticking boxes.
GreenRoc Mining
( ) operates the Amitsoq Graphite Project in South Greenland, one of the highest-grade graphite deposits in the world. The company recently announced newly discovered graphite resources located in its recently aquired MEL 22-03 exploration license that expanded Amitsoq significantly to the north and south.
The new areas of interest showed high-grade deposits well in excess of 20% C(g), consistent with discoveries across the primary target zones of the project. They will be subject to follow-up exploration work in the near term, offering potential upside to consolidate exploration targets and discover more graphite deposits in the region.
News will continue to come out of Amitsoq as GreenRoc awaits assay results from its Phase 2 drilling program at the site, followed by an updated and expected higher resource for the project. The latter is expected in c. 2 months, the company said. The March 2022 maiden JORC Resource for Amitsoq showed 8.3m tonnes at an average grade of 19.75% C(g). Based on last month's Phase 2 results, and today's sampling results, a significant upgrade to that resource tonnage is expected.
GreenRoc's current focus is on delivering the upgraded resource tonnage as well as ongoing development work. GreenRoc has now completed its 2nd year environmental baseline work at Amitsoq, with EIA/SIA work in progress, and a view of completing feasibility studies in the near term.
Demand for graphite is forecast to soar as it is a critical metal in Li-Ion batteries. UBS is estimating a natural graphite deficit of 3.7Mt by 2030, representing around 37% of the total global market. And according to Baker Steel, between 2020 and 2040, a 22-fold increase in graphite for energy technology demand is forecast, and a 10-fold increase across all applications, an increase second only to lithium.
GreenRoc’s technical work to date has confirmed that Amitsoq graphite can be upgraded to a more than 99.95% pure graphite product, which is the specification requirement for EV batteries. With sharply rising global demand for graphite on the horizon, Amitsoq's vast deposit is set to play a key role in the transition to net zero.
AfriTin Mining
( ), a Namibia-focused explorer, announced results last week of its lithium and tantalum infill drilling programme at its flagship Uis mine.
AfriTin said the 50-hole drilling programme aimed to increase the confidence of the existing lithium and tantalum mineral resource estimates over the deposit. The company found significant pegmatite intersections including 5m at 0.149% Sn, 77 ppm Ta, 0.94% Li2O; 25m at 0.197% Sn, 140 ppm Ta, 0.60% Li2O; and 34m at 0.186% Sn, 116 ppm Ta, 0.57% Li2O from drill holes V1V2032, V1V2076, and V1V2072 respectively.
AfriTin said pegmatite was intersected in all holes at the depths and apparent widths predicted by its geological model. For the pegmatite intersections reported, the average tantalum grade was approximately 40% higher than the average of the existing mineral resource estimate (119 ppm vs 85 ppm), and the tin grade was approximately 30% higher than the average of the resource estimate (0.174% vs 0.134%).
Earlier in August, AfriTin announced financial results for FY2022. The company reported a 178% increase in revenues to £13.6m, driven by increased production and higher tin prices in FY2022. The company reported an average tin price achieved for the year of US$38,680/tonne, compared to US$22,150/tonne in FY2021.
AfriTin said its annual tin concentrate production increased 70% to 804 tonnes after ramp-up and expansion initiatives.
The group's pre-tax profit swung into positive territory by £6.2m to £0.4m, and its loss after tax narrowed to £474K from £5.8m in FY2021. EBITDA also increased 155% to £2.6m, compared to a loss of £4.7m in FY2021. Cash and cash eq was at £7.4m at the end of the period.
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