There's Only One Megatrend We Like More Than AI in 2024: The White Gold Rush

Artificial intelligence (AI) is undoubtedly one of the most disruptive and transformative technologies of our time.

You could call it the megatrend of this decade... all set to revolutionise our lives the same way internet did back in the 2000s...

However, there's another megatrend that we like even more than AI in 2024 - it's the rise of lithium mining in India.

Lithium is the lightest metal. It is a rare element that is essential for production of high density and high efficiency batteries. These batteries power the modern world.

From your smartphones (where you are probably reading this article) and laptops to electronic vehicles (EV) and renewable energy storage systems, everything is powered by lithium.

The global demand for lithium is projected to grow exponentially in the coming years, as more countries adopt policies to reduce carbon emissions and promote clean energy.

However, the supply of lithium is limited and concentrated in a few countries, mainly in South America and Australia. China, the world's largest consumer and producer of lithium, has also secured a dominant position in the lithium value chain, from mining to refining to manufacturing.

This poses a challenge for India, which is one of the fastest-growing markets for EVs and electronics. India currently imports all its lithium needs, which makes it vulnerable to price fluctuations and geopolitical risks.

Moreover, India's dependence on imported lithium hampers its ambition to become a global leader in EVs and clean energy.

That is why we're excited about the recent developments in lithium mining in India. India has made significant strides in exploring and acquiring lithium resources, both domestically and internationally, in the past few years.

Just last night, it was reported that India signed an agreement to acquire five lithium brine blocks for exploration and development in Argentina.

All these efforts combined could transform India's lithium landscape and create new opportunities for investors and businesses.

Understanding the Global Lithium Economy

In 2023, global lithium production reached approximately 0.4 million (m) tonnes, quadrupling since 2010. The primary demand driver is the surging EV market.

Chile, Argentina, and Bolivia - jointly referred to as the "Lithium Triangle" - hold more than 75% of the world's supply beneath their salt flats.

As of today, Chile is the leader in production of Lithium with 170,000 tonnes followed by China which mined and refined over 70,000 tonnes of Lithium. Argentina and Australia added about 60,000 tonnes and 50,000 tonnes of Lithium to the global supply chain.Here's a summary of the proven Lithium reserves in the world and production -

India's Lithium Market and the Opportunities

The main drivers of the lithium market in India are the increasing adoption of EVs and the expansion of the electronics and renewable energy sectors.

India has set a target of achieving 30% electric mobility by 2030, which would require about 40 GWh of battery capacity per year.

India also plans to install 450 GW of renewable energy by 2030, which would require about 300 GWh of battery storage capacity.

These goals create a huge demand for lithium batteries, which are the most efficient and cost-effective option for EVs and energy storage.

Currently, India imports nearly all its lithium. Domestic production can significantly reduce this dependence, saving foreign exchange, and strengthening energy security.

India's Global Lithium Acquisition and Mining

Apart from domestic exploration, India has also taken steps to acquire lithium assets overseas, especially in the lithium triangle.

In 2021, the Ministry of Mines created a joint venture company called Khanij Bidesh India Ltd (KABIL), which is mandated to identify and acquire mineral assets abroad, that are critical and strategic in nature, such as lithium, cobalt, and nickel.

Engagements are underway with select source countries such as Australia, Argentina, Bolivia, and Chile, which are endowed with the cited critical and strategic minerals specifically lithium and cobalt.

India & Australia have committed an initial investment of US$ 6 million for the joint due diligence process in the 50:50 ratio of participating interest.

In addition to this, the Mines Ministry has finalised an agreement to acquire five lithium blocks for exploration and development in Argentina.

India's Lithium Reserves and Exploration

India's first lithium reserve of 1,600 tonnes was discovered in 2021 in Mandya, Karnataka, by the Department of Atomic Energy. Although this amount is negligible compared to the global reserves, it marked the beginning of India's lithium exploration.

Since then, the Geological Survey of India (GSI) has conducted surveys in six states and the Union Territory of Jammu and Kashmir, where it found 5.9 million tonnes of lithium reserves in 2023.

The GSI also identified potential lithium-bearing zones in Arunachal Pradesh, Andhra Pradesh, Chhattisgarh, Jharkhand, Karnataka, and Rajasthan.

These discoveries indicate that India has more lithium resources than previously thought, and that there is scope for further exploration and extraction.

Here's a summary of proven lithium resources in India:

Top Lithium Stocks to Watch Out

Without further ado, let's look at the companies involved, directly or indirectly, in this space be it lithium mining, manufacturing, or something else...

Our aim is to highlight the listed players in the space so you could research on your own and see if it fits within your risk appetite.

Khanij Bidesh India (KABIL): A joint venture of three government giants - NALCO, Hindustan Copper and Mineral Exploration & Consultancy Ltd. (MECL), KABIL is tasked with securing overseas lithium resources.

KABIL acts as India's strategic arm, negotiating partnerships and acquisitions in lithium-rich countries like Argentina, Bolivia, and Australia. This ensures a steady flow of lithium for domestic battery production and independence from volatile international markets.

Hindustan Copper (HCL): The copper giant is diversifying its treasure chest. Recognising the growing demand for lithium, HCL has actively acquired exploration licenses in promising Indian regions.

Their existing mining infrastructure and operational expertise provide a significant advantage in extracting this valuable metal, potentially establishing them as a key player in the domestic lithium supply chain.

NALCO (National Aluminium Company): The aluminium powerhouse is going electric. Nalco's foray into lithium mining and battery manufacturing leverages their extensive industrial infrastructure and metallurgical expertise. This vertical integration positions them as a major player in the entire lithium value chain, from resource extraction to finished battery production.

NMDC: NMDC, India's largest iron ore miner, has begun prospecting for lithium in Australia's Mt Bevan region with partner Hancock Prospecting. The state-owned mining enterprise hopes to expand its lithium production to scale up the production of electric vehicles (EVs). NMDC is also in talks with Australia's Hancock Prospecting Pty Ltd for lithium exploration and mining.

Gujarat Mineral Development Corporation (GMDC): GMDC is one of India's leading mining and mineral processing companies. It is expected to play a significant role in India's lithium economy as India's first lithium refinery is set to be established in Gujarat.

Hindustan Zinc (HZL): India's largest zinc producer with a strong presence in Rajasthan has expressed a keen interest in the lithium auctions. With 50 years of experience in mineral extraction, robust infrastructure, and financial muscle, HZL could become one of the most prominent players in the lithium economy.

Vedanta (via Vedanta Resources): This diversified natural resources conglomerate has expressed interest in lithium exploration and is actively seeking mining licenses. Their financial resources and experience in mining various minerals position them as a major contender.

Adani Enterprises: Beyond renewable energy, Adani is making strategic moves in the lithium space through partnerships and acquisitions. Their ambition and infrastructure capabilities make them a force to be reckoned with in the lithium supply chain.

Amara Raja Batteries: Amara Raja is India's biggest battery manufacturer and supplier. It's the largest supplier of industrial storage batteries in India. In fact, it was the first one to set up the lithium battery development hub.

Shree Cement: Cement biggie Shree Cement has intended to partake in auctions for lithium mining rights, aligning with the government's strategy to secure vital mineral production.

The company may apply for lithium mining blocks in Jammu and Kashmir. Additionally, it also plans to bid for blocks in Chhattisgarh, making its foray in the mining sector.

These are just the obvious names we could think of when it comes to lithium mining... we're confident that as this idea becomes mainstream, there will be more companies that will follow suit and explore lithium mining options to diversify their revenue profile.

If that does happen, you could build a watchlist of all stocks and choose the best ones that fit the below criteria:

• Stocks with nil or no promoter pledging
• High promoter stake (preferably above 45%)
• Low debt to equity (preferably below 0.8 times)
• High ROE and ROCE (preferably above 15%)
• Low cash conversion cycle (below 100 days preferably) and low receivable days (preferably below 90).
• And of course, also look for consistency in operating profit margins.

In Conclusion

Lithium mining is the megatrend we like more than AI in 2024 because it has the potential to transform India's energy and economic landscape, and create new opportunities for investors and businesses.

However, India currently lacks the capacity and infrastructure to produce lithium products at scale and relies on imports from China and other countries.

The government has streamlined the mining license process for lithium, reducing bureaucratic hurdles and expediting project approvals. This creates a more investor-friendly environment and encourages rapid development.

Tax breaks and royalty exemptions are being offered to lithium mining companies, making domestic extraction financially attractive and boosting long-term sustainability.

The government is actively pushing for environmentally responsible mining practices, with strict regulations and monitoring to ensure minimal ecological impact.

This is where the opportunity lies for investors and businesses, who can invest in lithium extraction, refining, and manufacturing, and create a competitive and sustainable lithium industry in India.

By doing so, they can not only cater to the domestic and global demand for lithium products, but also leverage India's advantages, such as its large and skilled workforce, its strong research and development capabilities, its favorable policies and incentives, and its strategic location and access to markets.

That's it for today... since you are interested in undiscovered megatrends and the ideas that could do well in 2024, check out this editorial - 3 Red Hot Megatrends of 2024 to Invest in.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.