American Lithium - Poised to Benefit from Rising Gov't Support & EV Demand with Strategic Lithium Supply

• American Lithium owns major lithium projects in Nevada and Peru well-positioned to supply domestic U.S. lithium
• U.S. government increasingly supportive of domestic critical mineral supply chains through funding, offtake agreements, stockpiling
• Lithium prices have bottomed and are expected to rebound as EV demand grows and supply remains constrained
• American Lithium's projects have low costs and can produce battery-grade lithium without relying on China
• Company plans to spin out uranium asset to unlock additional value for shareholders

American Lithium is emerging as a key player in the shift to secure domestic U.S. supplies of critical minerals like lithium. With major projects in Nevada and Peru, the company is strategically positioned to benefit from increasing government support and a rebound in lithium prices as electric vehicle demand grows. Investors have an opportunity to gain exposure to the accelerating energy transition.

U.S. Government Support

One of the key tailwinds for American Lithium is the rising support from the U.S. government for domestic critical mineral production. Recent actions like the Inflation Reduction Act and a ban on Russian uranium imports underscore the government's commitment to onshoring supply chains.

According to CEO Simon Clarke, "it's very clear that the administration is getting more and more concerned about the supply of uranium ... and a lot of other critical minerals."

This support is likely to take various forms that could directly benefit American Lithium and other domestic producers. The Department of Energy is providing funding for projects, with a focus on producers that can manufacture battery-grade materials without relying on China. Clarke notes, "the DoE is not going to fund a big pegmatite project that has to then ship concentrate to China for refining."

The government may also step in with offtake agreements to support the industry.

"I do think you're going to see the U.S. government provide offtakes," Clarke says. "If they were prepared to guarantee lithium prices at $20-25,000 per ton, that would obviously make a huge impact."

Such initiatives would derisk projects and help spur development.

Interview with CEO & Director Simon Clarke

Lithium Market Outlook

The recent pullback in lithium prices is not reflective of the robust demand growth on the horizon. Prices have stabilized above the previous cycle peak, with battery-grade lithium carbonate holding in the $14,500-15,500/ton range. Most analysts expect prices to strengthen in the second half of 2024 before a larger supply deficit emerges mid-decade.

While some lithium stocks sold off over the past year, Clarke believes the bottom is in:

"There is talk of a big short squeeze coming in the U.S. markets," he says. "EV sales are bouncing back and I just think you're seeing more and more support for domestic supply."

A potential two-tier market with a premium for lithium produced in the U.S. and allied nations could further bolster pricing for American Lithium.

Low-Cost Scalable Projects

American Lithium has a top-tier asset base with the scale to be a major supplier.

"On a combined basis, we have a top three global lithium resource," says Clarke. The company's TLC project is the second largest lithium claystone deposit in the U.S. behind Lithium Americas, while its Falchani project in Peru ranks as the world's sixth largest hard rock deposit.

Importantly, both projects have inherently low costs, with all-in sustaining costs estimated at $5,000/ton at Falchani and $7,500-8,500/ton in Nevada. "Even at current lithium prices, you would make a reasonable return," Clarke points out. By using an acid leaching process, the company can produce a high purity battery-grade product on site without having to send concentrate to China. This streamlined process is a key differentiator as U.S. policy aims to cut China out of the supply chain.

Near-Term Catalysts

In the near term, American Lithium is focused on advancing its Peruvian project.

"The permitting process in Peru is significantly quicker than the U.S. and it's a project where the metallurgy is more baked," Clarke explains.

Key milestones in the coming months include completing a pre-feasibility study and filing an environmental impact assessment.

The company also plans to spin out its uranium asset to unlock additional value for shareholders. The recent run in uranium prices on the back of supply concerns has drawn more attention to American Lithium's large-scale uranium project. While the timing is still to be determined, Clarke is committed to the spinout. "We're focused on it, we will do it, we're just going to make sure we do it at the right time and with the right structure."

Conclusion

With its strategic positioning, American Lithium offers investors an attractive way to gain exposure to the energy transition and the push to secure domestic critical mineral supply chains. The company's large, low-cost resource base is a key competitive advantage in an environment of rising government support and robust lithium demand. As the macro picture continues to brighten, American Lithium is poised to deliver value for shareholders in the coming years.

The Investment Thesis for American Lithium

• Leverage to increasing U.S. government support for domestic critical minerals
• Low-cost scalable lithium projects in stable jurisdictions
• Ability to produce battery-grade lithium without relying on Chinese refining
• Additional upside potential from planned uranium spinout
• Reasonable valuation with major near-term catalysts

Actionable Advice

• Consider establishing a position ahead of the next leg higher in lithium prices
• Monitor progress on pre-feasibility study and environmental permitting in Peru
• Watch for details on timing and structure of planned uranium spinout

Macro Thematic Analysis

The energy transition is unleashing a wave of demand for critical minerals like lithium that is rapidly outpacing supply. Governments are waking up to the national security implications of relying on geopolitical rivals for the raw materials powering the 21st century economy. This is catalyzing a shift to friendshore supply chains and support domestic production through incentives, funding, and offtake agreements.

In this context, lithium projects in the U.S. and allied nations are taking on new strategic importance. The scale of the demand growth ahead, driven by exponential EV adoption, will require tremendous investment in new mining projects. However, not all lithium is created equal. Producing battery-grade lithium chemicals at low costs remains a challenge, with China currently dominating the refining space.

Companies like American Lithium that have low-cost projects with an ability to produce battery-grade material without relying on China will have a distinct competitive advantage. CEO Simon Clarke sums it up well: "I think for companies like us, a lot of these initiatives from the government are really supportive and we support them as well."

As the U.S. and other Western governments increasingly put their thumb on the scale to support domestic champions, companies with large, scalable, low-cost assets in favorable jurisdictions will be best positioned to ride the rising lithium tide. The recent pullback in lithium stocks appears overdone given the robust demand outlook, creating an attractive entry point for long-term investors. Those who position ahead of major announcements around government support and offtake agreements may be handsomely rewarded.