Critical Elements Lithium - Why Investors Should Pay Attention

• Critical Elements Lithium is focused on developing the high purity Rose lithium-tantalum project in the James Bay region of Quebec.
• Eric Zaunscherb, Chair of the board of directors, discusses the company's progress and plans.
• They have hired engineering firms for the front-end engineering design of phase one (mine and concentrator) of the Rose project.
• The project's economics are sensitive to metal prices rather than capital costs, with a potential for significant impact on NPV due to metal price changes.
• Lithium demand is driven by the electric vehicle (EV) revolution, with car manufacturers investing heavily in EV production, creating a demand-supply gap, which could lead to potential investment opportunities.

About Critical Elements Lithium Corporation

Critical Elements Lithium Corporation (TSX-V: CRE) is a Canada-based mining company focused on developing high purity lithium projects in Quebec. The company's flagship asset is the Rose Lithium-Tantalum project, which is progressing towards production. Critical Elements aims to become a low-cost, high purity lithium producer to supply the rapidly growing electric vehicle and energy storage markets.

Interview with Chairman Eric Zaunscherb

The Supply and Demand Imbalance Driving Lithium's Growth

The lithium market is expected to experience a major supply deficit by the mid 2020s. This is being driven by surging demand from the electric vehicle industry while supply is lagging behind. Major automakers like GM, Ford, VW, Hyundai and others have announced ambitious electrification plans, with some committing to convert their entire vehicle lineups to electric by 2030 or sooner.

To meet their production targets, automakers are investing tens of billions to retool factories and build new battery plants. This rapid transition to EVs is expected to drive lithium demand growth of 20-30% per year. Meanwhile, supply is constrained as few new mining projects are coming online.

Eric Zaunscherb, Chair of Critical Elements Lithium, explains that it takes 5-7 years to discover and build a new lithium mine. The long development timeline makes it difficult to bring new supply online fast enough to meet rapidly rising demand. This sets the stage for a large deficit by the mid 2020s. Estimates from industry analysts like Canaccord project a supply deficit ranging from 400,000 to 900,000 tonnes by 2030.

Capitalizing on High Prices from the Coming Lithium Shortage

This forthcoming supply shortage has led to bullish price forecasts for lithium in the coming years. Investment bank UBS predicts lithium prices will climb to $75,000/tonne by 2025 while consultant Roskill sees prices surpassing $100,000/tonne. These prices are dramatically higher than today's spot market of around $70,000/tonne.

For mining companies, higher prices drive profitability and cash flows. Zaunscherb notes that "the project is highly leveraged to metal prices." Critical Elements estimates that a 20% rise in lithium prices would boost the after-tax NPV of their Rose project by over 40%.

With low costs and an excellent location in mining-friendly Quebec, the company is positioning itself to take full advantage when lithium prices take off on the supply squeeze.

The Keys to Success in Lithium Mining

In screening potential lithium mining investments, Zaunscherb believes that the quality of the people, project, location and valuation multiple are key factors for success.

On the people side, look for teams with expertise in lithium. Many miners are skilled at other metals like gold or copper but lack experience in the specialized lithium market. Location is critical as mining-friendly jurisdictions like Australia and Quebec reduce project risks. Investors should be wary of new deposits in questionable or unstable countries.

The project itself needs strong geology with attractive lithium grades and metallurgy. Environmental impacts, water usage and community factors also play a role in getting permitting approved. Finally, pay close attention to valuation and sentiment cycles in determining entry and exit points.

Positioning for the Lithium Bull Market

Lithium demand is projected to grow at over 20% per year for the next decade, driven overwhelmingly by EV adoption. However new mines take 5-7 years to build. This sets up a potentially massive mismatch between supply and demand, spurring predictions of a lithium "supply shock" by the mid 2020s.

Critical Elements Lithium is looking to start production at its large, high quality Rose deposit in Quebec just as this shortfall hits. With experienced leadership, low costs and exposure to rising lithium prices, the company presents an attractive investment opportunity as the energy transition accelerates. The lithium bull market is just getting started.

Conclusion

Critical Elements Lithium aims to become a major supplier of high purity lithium concentrate and spodumene, key materials for lithium-ion batteries. The company is advancing development of its large Rose Lithium-Tantalum project in northern Quebec. Recently, Critical Elements hired engineering firms Bumigeme and WSP Canada to complete studies required for permitting. These firms have experience building similar projects worldwide. Critical Elements believes Rose can produce annually 20,000 tonnes of lithium oxide and 133,000 tonnes of spodumene concentrate once at commercial production. The concentrates will feed the growing lithium-ion battery and EV markets. The company is awaiting key permits from the Quebec provincial government, a major milestone before construction can begin.