(Cypress Development's (Cypress Development Corp. --TSX VENTURE: CYP) (CYDVF) (C1Z1.F); "Cypress" or the "Company") 'Primer' is for the benefit of all investors, particularly those interested in the burgeoning Lithium market in light of all the press regarding Tesla's automotive and 'Powerwall' products. There is a myriad of other major electronics manufacturers positioning for the growth as well as Electric Vehicles (EV) and hybrid electric vehicles (HEV) ex Tesla.
Virtually every electronic device has a critical need for Lithium in their batteries, the future growth is already compelling. The article has links to both competitors' sites and salient information. We hope to give readers a good grounding to begin to understand this market and make informed investment decisions.
The key to choosing Lithium as a potential investment should likely never necessarily be based on the price, because cost per tonne is calculated between participants as well as differing wildly from region to region.
What that means is that the potential investor demographic is beyond needing to be convinced. Having that fact at hand can only help to make an informed investment decision.
For those reasons---and many others--, investors would do well to consider Cypress Development for your portfolio.
Eight Lithium Investment Drivers.
- Not a power source. Critical to battery power storage agnostic as to the source; solar, wind, water etc.
- Lithium is abundant in hard rock, brine and clay deposits. Ironically, there are very few accessible economically viable deposits.
- Demand will outstrip supply for decades
- Traditional global fossil fuel buying battery assets
- Lithium production dominated by 3 global companies. 2016 production already sold out.
- As carmakers increase demand for batteries there's going to need to be lots of gigafactories. Just to supply auto demand you need 200 gigafactories. (Elon Musk 2014)
- Lithium component years ahead of any competing metal.
- the annual lithium market will grow 259% by 2025, representing a compound annual growth rate of 14% across all demand sectors. Lithium-ion battery-based electric vehicles will be a key driver of this demand.
Why has Lithium become such a big deal?
French oil and gas behemoth Total, recently paid $1.1 billion of Paris based battery manufacturer Saft. Why this is of significant importance, it is the first foray into the battery market---including Lithium ion---by a traditional fossil fueler.
Lithium is a component in a myriad of products including medical, glass, ceramics, lubricants and, of course, Lithium Ion batteries.
Within the sector, in 2015, global Lithium leader Albemarle acquired Rockwood Holdings (the parent company of both Rockwood Lithium, a leading provider of lithium, cesium, barium and zirconium compounds, and Chemetall, a global market leader in the surface treatment industry) for $6.5 billion.
On June 9, 2014, the Financialist stated that demand for lithium was growing at more than 12 percent a year; according to Credit Suisse, this rate exceeds projected availability by 25 percent. The publication compared the 2014 lithium situation with oil, whereby "higher oil prices spurred investment in expensive deep-water and oil sands production techniques"; that is, the price of lithium will continue to rise until more expensive production methods that can boost total output receive the attention of investors.
It is relatively safe to conclude that when one adds other factories to Tesla's gigafactory (to be built by 2016) that current 37k production has already become inadequate to meet the demand and will likely remain short for many years.
As we said, the investment potential appears compelling.
Where does Lithium come from in the US?
(Green areas represent Cypress Development Lands in Clayton Valley Nevada)
Clayton Valley is one of the few locations globally known to contain commercial-grade Lithium-Enriched Brines.
USGS: Identified lithium resources in the United States total 5.5 million tons and approximately 34 million tons globally. Identified lithium resources for Bolivia and Chile are 9 million tons and more than 7.5 million tons, respectively. Identified lithium resources for major producing countries are: Argentina, 6.5 million tons; Australia, 1.7 million tons; and China, 5.4 million tons. In addition, Canada, Congo (Kinshasa), Russia, and Serbia have resources of approximately 1 million tons each. Identified lithium resources for Brazil total 180,000 tons.
Canadian mining legend, Frank Giustra, has already invested in Lithium X Energy Corp., (TSX.V: LIX) which is exploring and developing a large land package in Nevada's Clayton Valley. The stock price of LIX has risen 495% since they started trading on November 30, 2015 (from .40 to 1.98).
Lithium X's property is contiguous to the only producing lithium operation in North America---Silver Peak, owned and operated by Albemarle Corporation (NYSE: ALB), the world's largest lithium producer. ALB has a market capitalization of $8.5 billion. The stock price has increased 35% year-to-date.
Another player in the Clayton Valley is Pure Energy Minerals Limited, (TSX.V: PE) a lithium-brine developer with approximately 9,324 acres in three claim groups in the southern half of the valley. PE has already established an NI 43-101 compliant inferred mineral resource of 816,000 metric tonnes of Lithium Carbonate Equivalent (LCE).
Since Lithium production comes from 4 main producers (Albemarle, SQM, FMC and Tianqi. A March 2016 report by Cormark Securities notes that growth from the majors is expected to be limited. In February last, Albermarle's CEO Luther Kissam stated in several sources that his Company's 2016 supply is virtually sold out.
Given the demand building, juniors have an excellent chance of supplementing unsatisfied demand.
There is much information regarding the traditional mining areas noted above, but the latest investor interest is focused on the Clayton valley area of Nevada. Besides a great existing infrastructure, this fast growing area is a mere 3.5-hour drive to Tesla's initial gigafactory in Sparks Nevada; slated to open by the end of 2016.
In an article by Christopher Ecclestone, he characterises the area thusly: "Clayton Valley is located in Esmeralda County, Nevada, USA approximately 180 km north of Death Valley, CA. Clayton Valley is a closed basin with an area of 1,342 km2 and a playa surface of 72 km2.
It is located in a closed-basin system with an arid climate. The Li-rich brines are currently being produced from six different aquifers in the playa. The brines have formed from a complex process involving evaporation, mixing, and halite. Climate fluctuations in Clayton Valley over time (at least since ~ 1Ma) have played a role in the preservation of Lithium.
As you'll note, Cypress' (market cap $4million) 1520-acre property lies 0.5 miles south of the Lithium brine wells of Albermarle's (market cap $9 Billion) Silver Peak Mine and shares its western boundary with Pure Energy's (Market cap $103 million) Northern Resource area.
The Cypress project is not merely some random 'closeology' play, but has the development plans and potential to become a significant producer in the area.
CYP's planned 2016 drilling program targets Lithium rich brines and surface claystones. The program will feature shallow holes targeting the wide areas of Lithium rich claystones discovered at surface. Cypress has received approval from the Bureau of Land Management (BLM) in Nevada that will encompass a detailed auguring program, to depths of 100 feet to test the lithium rich claystones. The upcoming detailed shallow auger testing will allow Cypress to estimate some serious tonnage with high grade lithium content and potentially lead to developing a heap leach situation on the property.
How is it mined?
Elon Musk, CEO of Tesla stated recently; "Tesla is accessing tiny start-ups to large name lithium companies all around the world and working with them to figure out the most economical or efficient ways ... to have the capacity ready when we need it".
While an accurate observation, there are only a few areas where the concentration of lithium makes economic sense for a mining operation.
From a Credit Suisse report: "Lithium brine deposits typically outperform hard rock and clay Lithium sources on cost, sustainability and permitting. This gap is becoming more pronounced when we take into account technological advancements in brine processing. Even though Lithium is relatively abundant, it's the 33rd most common element --- it's very diffuse throughout nature, meaning that collecting and concentrating it is a very difficult task."
The third method of Lithium extraction is one that Cypress is pioneering; the cost-effective and less toxic method of extracting Lithium from softer claystones.
Initially mined from hard rock and chemically separated, extraction from brine and clay costs are not only more than 50% less than hard rock mining (exploration and milling) more and more miners, including Cypress, use a much less toxic chemical cocktail.
The unique chemical extraction process (Weak Aqua Regia digestion) uses a much cheaper diluted acid mixture of one part HNO3 (nitric acid), one part HCl (hydrochloric acid) and one-part water (H20) replacing the industry's expensive and caustic standard 4-acid method of a corrosive combination of HCl (hydrochloric acid), HNO3 (nitric acid), HF (hydrofluoric acid) and HClO4 (perchloric acid).
These extraction methods while still producing exceptional Lithium recovery rates averaging 95% matches the much more toxic method.
- 47 samples selected for further study average 1334 ppm Li using 4-acid leach
- The 47 selected samples average 1276 ppm Li using dilute acid leach
- The weak acid method recovered 95% of the lithium found by the 4 acid method
- These data indicate that a readily soluble mineral form of lithium has been found
- Further work using a pure de-ionized water leach is ongoing
- Selected samples cover a 2 kilometer strike length of exposed lithium mineralization Strong acid digestion assays (industry standard four-acid method) previously reported by Cypress show a continuously mineralized volume of lithium in claystones at surface on extensive portions of Cypress' Clayton Valley property. The compiled results show 2 kilometers of north-south strike of outcropping claystones that assay approximately 1,100 ppm Li on average and include a 1.0 kilometer strike length zone that averages 1350 ppm Li.
Cypress' significant 2016 sampling results, which evidence 2 kilometers of north-south strike of Lithium rich outcropping claystones; assays are approximately 1,100 ppm Li on average and include a 1.0 kilometer strike length zone that averages approximately 1400 ppm Li.
Cypress' planned 2016 drilling program targets Lithium rich brines and surface claystones. The program will feature shallow holes targeting the wide areas of Lithium rich claystones discovered at surface. Cypress has received approval from the Bureau of Land Management (BLM) in Nevada that will encompass a detailed auguring program, to depths of 100 feet to test the lithium rich claystones. The upcoming detailed shallow auger testing will allow Cypress to estimate some serious tonnage with high grade lithium content and potentially lead to developing a heap leach situation on the property.
Markets & Growth Potential
Tesla Motors, Inc is set to open its Gigafactory in Nevada in July due to the massive pre-orders for Model 3, per a report from Nikkei. The automaker had opened advance bookings for Model 3 in April and reservations reached 325,000 units in the first week itself. As a result of the unprecedented pre-order figures, Tesla decided to ramp up its production volume to 500,000 units by 2018, rather than 2020 as planned earlier.
The lithium market is changing on a daily basis. No matter what Albemarle says about being number 1 and capturing 50% of future lithium ion battery growth going forward, the former "Big 3" lithium companies now supply less than half the market and Albemarle, despite having the world's largest lithium business on a sales basis, currently has a shrinking piece of the lithium ion battery business". (Joe Lowry June 2016).
Logic dictates that the market growth for Lithium is compelling. Global lithium giant Albemarle stated at a March 2016 Goldman Sachs forecast that the three major Li battery markets---Transportation, Energy Storage and Consumer devices will see approximately CAGR's of 25%, more than 30% and in excess of 15%, respectively.
As well, a large amount of the supply of lithium carbonate will come from Nevada production because of the major tax incentives Tesla received ($1.3 billion tax incentives over the next 10 years for Tesla).
Why would I want to own Cypress Development?
As you will see below, the metrics and potential of Cypress as a viable Lithium producer---a mere 3.5 hours from tesla's first Gigafactory, are extremely compelling.
Cypress' plans focus on the extraction of Lithium from mineral rich and softer claystones, using the profoundly less toxic chemical cocktail known as the Weak Aqua Regia method. The importance of the process cannot be understated as it has proven in many dozens of samples to extract 95% or more of the amounts extracted by the more significantly toxic cocktail. Both of those facts alone should impress investor as to the unique, cost-effective and environmentally friendly initiatives. As the Company moves toward delineating a resource and potentially develop a significant open-pit operation, the plans and facts are adding up to a property with an extremely compelling investment and risk profile.
At the moment, most risk averse investors are focused on the large players; Albemarle, SQM and FMC. Valuations vary greatly and the underlying but overarching interest by several sources, including Musk, is that juniors are quickly becoming interesting.
Chances are that the big three companies will maintain their dominance, but quality juniors have the potential of emerging as viable mines or being swallowed by a neighbor or area player.
As you are currently on Cypress' site, note that YTD 2016 its share price has tripled to C$0.15.
Not a stretch to consider that unless pricing gets stupid, Tesla will likely take as much production as Clayton Valley can extract. That said, as the gorilla, Tesla's reputation for cost control means that it likely won't be higher prices that win the day for investors. It will be lower exploration, mining and transportation costs. Even though in demand and short supply, Telsa is a high class version of Wal-Mart: Keep the supply coming and make it as cheap as possible. Cost control is your problem. Here's what we will pay. Tesla is already starting to make forward deals with Companies in the area.
Last year, Clayton Valley constituent Pure Energy Minerals and Tesla announced an early stage supply agreement whereby Tesla would buy an undisclosed amount of lithium from the company within a certain time frame. Tesla would pay a "predetermined price that is below current market rates," according to the release at the time.
That will also lead the way to determining what competitors' will pay. Short of an unforeseen explosion in Hybrid and Electric vehicle demand, pricing will likely not be the sole factor in growth, but should grow reasonably. Realistically, companies will sell more and attendant lower costs of production will be a significant determinant of ultimate profits; particularly as the market matures over the next 20 years.
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About Cypress Development Corp.:
Cypress Development Corp. (TSX-V: CYP) is a publicly traded lithium and zinc-silver exploration company developing projects in Nevada, U.S.A.
Cypress' flagship Clayton Valley Lithium Project is located in the heart of the Clayton Valley lithium brine exploration area of Esmeralda County, Nevada. The Company's 1,520-acre Clayton Valley Project is located within 0.5-mile south of lithium brine wells belonging to the Albemarle Silver Peak Mine and the property shares its western boundary with the Northern Resource Area of Pure Energy's Clayton Valley South project. A drilling program at Cypress' Clayton Valley Project targeting lithium rich brines will also include shallow holes targeting the wide 2 kilometer long discovery zone of 1,100 ppm lithium in a highly soluble mineralized claystone discovered in 2016 at surface.