Print This Post
Lithium: Could It Become the Hottest Commodity of All?
Here is a comprehensive discussion of the properties of and market for lithium and the companies that produce it. The easiest way to invest in this commodity, as far as I can tell now, is through ownership of a NYSE traded ADR in a Chilean company called Sociedad Quimica y Minera de Chile, SA, symbol SQM.
I note that a number of astute funds are owners of SQM. It sports a very attractive chart. The EIS portfolio has added this stock recently. There is further discussion of lithium in an post that follows this one.
Thanks very much to EIS reader Paul W. M. for bringing this article and others to my attention and sharing his thoughts on lithium with me.
More on this topic
(What's this?)
"A Solution to the Commodities Problem — Hsu’s Asia Edge Idea"
(Stock Gumshoe, 1/7/08)
Copper Could Predict a Commodities Collapse
(Contrarian Profits, 3/12/08)
Uncovering Hidden Commodities Exposure
(Hard Assets Investor, 2/25/08)
Tags: energy investments
Print This Post
6 responses so far ↓
1 gordo // Feb 3, 2008 at 10:52 am
Western Uranium Corp has 25 billion lbs of lithium in a stable area. As I posted earlier here is the profile of WUC:
Uranium prices in 2000 averaged $7 and in December 2007 is trading around $93. Fans of the silvery metal are cheering while some old timers say there is no way for it to remain at this level. These same critics state that as new mines come online and more product reaches market, the influx will flood the system and punish prices. Stories abound about prospective gluts of uranium based on possible new mines opening. The fear of depressed prices is and will be just talk for the foreseeable future. We have seen just the reverse of the above scenario. Mines such as Cigar Lake in Canada flooded with water and delayed for over two years- this mine alone was expected to add 11% to the world supply of uranium. Environmental problems were locals are reluctant to issue permits to drill. Native Americans who because of prior incidents have fought vociferously to stop any uranium mining. And raw materials shortages of sulphuric acid and water also delaying mine development. With a slew of new nuclear plants confirmed for construction, the increasing demand for uranium is absolute and with the current limited supply of the metal, new inventory is desperately needed.
China and India are in the midst of an unprecedented growth. Their energy usage is stretched to the limit and both have begun the process of adding more nuclear plants. China added in 2006 alone 100 gigawatts of capacity, which equals France’s total current usage,. has placed orders for three plants and has five more on the drawing board. This will double their capacity yet would still amount to only around 4% of that country’s demand. With their power demand growing about 15% per year, China has had no choice but to build one new coal fired plant per week until new sources such as nuclear are up and running. India is beginning work on eight new nuclear plants. India will need over 60,000 tonnes of uranium over 60 years just for the new plants. This will double what India currently needs yearly. In the interim, they have actually been turning off their plants several hours a day due to uranium shortages.
Unexpected countries are also beginning the exploration of nuclear power as a replacement energy for oil. Egypt, Senegal, Uganda, Nigeria , Jordan, Arab Emirates and Mexico have all expressed interest and begun studies into opening plants within the next decade. All these potential markets for uranium underline the need for new supplies.
Knowing that the need is there is important, but the ability to actually search out and mine the mineral both economically and efficiently is even more crucial.
About 30% of all new project ideas will not make it to the feasibility study and a bit less than 20% make it past that. When economics, accesiblity, management and other decisions are included the number of mines that actually make it from idea to financing is between 5-10%. As such, it is imperative to find investment opportunities that offer the best chance for survival and eventual success. It should include solid management, good location with rich reserves, a feasible timetable to bring it to market, and enough cash in the bank to make it happen.
Western Uranium is poised to become a leader in a land of many juniors. WUC easily stands out as a undervalued gem when looking at the three most important ingredients for valuation- product, cash, and management. Western Uranium has properties in Nevada, New Mexico and the Thelon Basin in Canada. Historical resources place estimates at around 31 million pounds of U308, which at current prices would have an in-situ value of $2.79 billion or valuing the in ground reserves at $5 per pound results in a $155 Million estimate. . The most exciting of these properties are in the Kings Valley area of Nevada and were previously discovered and worked by Chevron Resources and Anaconda Minerals. WUC is currently evaluating their three sites; Kings Valley North, Kings Valley South, & Moonlight. The potential for this area is so great and valued, that monster miner Comeco signed a partnership agreement with WUC earlier this year. This is only the third time in Cameco’s history that they have bought stock in a junior miner having purchases 10% of the company at $3.80 this past summer..
Recent financials indicate about $50 million in the bank enough to fund operations for the next few years. Western has approximately 60 million shares outstanding with little debt.
The company has an in depth management team with over 100 years of mining experience and is headed by Pamela Klessig. A geologist by training, she has over 27 years in the business with companies including Homestake & Ivanhoe Mining.
Now for the gravy. Along with the uranium at the Kings Valley project is a sizeable quantity of Lithium. Let me rephrase, a huge quantity of Lithium- about 25 billion pounds. You read it right, 25 billion of pounds. To put that into perspective, estimates indicate that the current world supply of lithium is 40 billion pounds. If correct, WUC is sitting on about half of the worlds possible inventory of the metal.
The market for lithium is a growing one as more products are designed to carry lithium based power sources. Lithium’s benefits are easily understood. It is the lightest metal known and can pack respectable power in an extremely light package. It is also “green” having the ability to be recharged numerous times. The market, however, has grown slowly because of its cost to power ratio. Existing technology, such as nickel cadmium offers slightly less battery life but at a lower percentage of the cost.
That is about to change.
Researchers at Stanford University have recently unveiled a process using “nanowires” that multiplies the life of lithium based batteries ten times. Simply put, where a laptop battery lasted two hours in the past, it will now last 20 hours. The implications are huge. Be it in laptops, cellphones, ipods, and eventually cars and buses, short lifecycles and multiple batteries will be a distant memory. General Motors, Ford and Toyota are all working on plug in hybrids and electric cars with a 2012 goal. The new technology promises to extend the 100 mile range of ‘plug in’s” to electric cars capable of 1000 miles on a single electric charge. Instead of using four tanks of gas and $200 for such a trip, think one electric battery charge.
WUC has to this point not looked at their lithium deposit as anything other then an extra. With this new technology and the fact that WUC might have the largest deposit in the country or world, a reassessment is warranted. Current plans are to spin off the lithium deposit under the name of Western Lithium Corp (WLC) in the first quarter. Valued at only a penny a pound , the lode is possibly worth over $3 a share.
So let us put this all together. We have about 31 million pounds of uranium worth in the ground about $165 million. Some very exciting prospects still to be drilled in Kings Valley as well as in Thelon Basin Canada. Almost $50 million in cash. A 10% investment by the big daddy of uranium- Cameco in a Strategic Alliance with WUC, mostly due to their interest in Kings Valley. And serendipity- a revolutionary discovery that extends lithium battery life tenfold and promises to explode the use of lithium in the next few years. And they are sitting on one gigantic domestic reserve.
Current potentials value- $165 million uranium, $50 million cash, and lithium at one penny a pound -$250 million. With 60 million outstanding, we have $3.58 for the uranium and cash..
The lithium, well who knows.
2 neil // Feb 4, 2008 at 1:43 pm
I know about thorium I did not think there was as much life in lithium till now.
3 Larry // Feb 23, 2008 at 8:07 am
Now to find an Australian listed stock who has an interest in Lithium….hmmm
4 Walter van Schalkwijk, PhD // Mar 16, 2008 at 6:47 pm
Please don’t believe the bunk or hype about the work of the Stanford researchers ….. a lot of what they say is PR to line up more funds for R&D.
So many groups have “invented versions of battery chemistries that would make the perpetual motion machine seem to be at hand.
Walt van Schalkwijk (Editor, Advances in Lithium-Ion Batteries)
5 Paul // Mar 26, 2008 at 7:32 pm
The following article exposes the Standford hype:
http://www.technologyreview.com/Nanotech/20000/
a) Their process cannot be scaled-up economically (that’s the same as saying it’s useless)
b) Their process relates to anodes only
c) Without equally more “potent” cathodes it’s meaningless. They don’t have equivalent cathodes.
What they said in their initial press release “20 instead of 2 hours” is beyond hype.
As to Western Uranium, isn’t it the case that the grade of Lithium needed for batteries comes from evaporation in Lithium salt lakes in desert areas - can the mined stuff from Canada even be extracted and purified competitively ? Or is there also “a cathode missing” ? again ?
6 Mark L // Apr 5, 2008 at 2:00 pm
Interesting article about the demand of lithium consumption: 2005 - 80,000 tons to 2008 - 100,000 tons. No doubt that lithium is going to be a big play over the next 10 years.
http://www.westernuraniumcorp.com/news/index.php?&content_id=62
Leave a Comment