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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.
Tags: energy investments
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14 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
7 Winston on Truth // Feb 12, 2009 at 11:49 am
Lithium is likely to become a very hot commodity as Japan is vying for it against other global companies for its purchase and use in long life laptop computer batteries. Also, a hot commodity is anything to do with putting life back into soil as agri-businesses have been depleteing natural life parts in soil to mass produce farm products in short growth periods. This is killing the soil so inserting life producing minerals back into the soil is a necessity if people want to each produce which has nutritional value. Have you been disgusted with the “taste” value of produce in recent years? Well, that’s why.
8 WarrenBaffling // May 20, 2009 at 1:52 pm
Potash has had a fantastic run in 2008 - and 2009 seems to be the year of lithium and various `Clean Technology`plays.
One group I am following is TNR Gold and their proposed spinoff International Lithium (www.internationallithium.com)
They`have been in an acquisition blitz last few months - Ireland lithium, Canadian lithium, Nevada lithium next to Chemetall-Foote`s brine-lithium producer in Nevada…list goes on. Apparently some majors are taking notice - these guys are being interviewed by CBC, Industrial Minerals UK, etc…
http://www.cbc.ca/canada/north/story/2009/05/05/nwt-tnr-rare-metal.html
http://www.indmin.com/SearchResults.aspx?Keywords=TNR%20Gold&RequiredFields=PUBLICATION_ID%3A696
Western Lithium is a solid group but the technology is not proven - clay hectorite lithium extraction is still too new age. Why not stick with lithium brine and wait for the water to evaporate like Chemetall has done for the last 50 years
9 Patrick Welton // Aug 12, 2009 at 10:20 am
What is the current stock price of WUC and can you buy the stock?
10 Jason H // Aug 14, 2009 at 12:12 pm
Western Lithium is my preferred play on this exploding market. They have the largest deposit in North America, no debt and are well funded.
http://www.goldstockbull.com/articles/western-lithium-to-profit-from-electric-car-stimulus/
11 Lithiumbull // Aug 14, 2009 at 3:49 pm
The absolute best group out of all - International Lithium Corp.
http://www.internationallithium.com
Mothercompany TNR Gold (TNR:TSX) is spinning it off - it’ll be a fresh company with 20 million shares and 16 projects. 3 huge brines in NEvada, Argentina South America.
Western Lithium is great - but no one produces from hectorite clay, do your research!!! I’d gamble a few thousand on WLC for the ride but nothing more! Could be another Timminco black box tech that goes NOWHERE.
12 Interested in Lithium // Sep 11, 2009 at 1:52 am
You say that no one produces from hectorite clay. Knowing that they have such large amounts of lithium would surely induce them to develop the technology to produce from hectorite clay, don’t you think?
13 Tim // Jan 14, 2010 at 4:58 am
What about American Lithium Minerals Inc?
Is that a worthy player in comparison to the others?
14 max // Jan 19, 2010 at 10:36 pm
Found this company
http://www.etnaresources.com
ETN :TSX-V soon to be PL:TSX-V. The next Lithium Producer?
http://www.bullriderletter.com
Written by The Bullrider
Bull Riders,
It’s all in the brine!
We, as a society, are becoming ever more dependent on cordless technology. With every new innovation that’s bigger, brighter and with more bells and whistles, these technologies require more and more power. With this increase in demand to be free of cords and connected to our ever-expanding global communities, the battery makers of the world are consuming record amounts of lithium.
Guess what’s one of the cheapest sources of lithium?
Waste brine!
Etna Resources, soon to be called Pan American Lithium, may have what it takes to be the next lithium producer. This company has secured the rights to the world’s second largest Geothermal Plant’s brine which is the plant’s residual waste. Essentially halite, potash, lithium carbonate, calcium chloride, boric acid and precious metals, as well as fresh water, are already being pumped from the ground but not being extracted from the brine.
We’ve probably piqued your interest, and you’re not the only one. Posco Steel, the world’s 4th largest steel maker, has ear marked 4.9 Billion dollars to search for lithium, and is under taking due diligence to invest an initial $ 5 million in Etna/ Pan American Lithium.
What is Lithium?
Lithium is a soft, silver-white metal that belongs to the alkali metal group of chemical elements. It is represented by the symbol Li, and it has the atomic number 3. Lithium, and its compounds, has several industrial applications, including heat-resistant glass and ceramics, high strength-to-weight alloys used in aircraft, and lithium batteries. Lithium carbonate large contracts in March 09 $2.80/lb to $3.00/lb. (or $6,613/tonne)
Total Global Resources & Reserves of Lithium
Global resources and reserves of Li at 30,120,000 tonnes (160,000,000 tonnes Li carbonate equivalent)
CIERRO PRIETO GEOTHERMAL POWER PLANT BRINE PROJECT:
Why do I believe this company is superior to all other Lithium peers? Simply put massive CAPEX savings! There are zero requirements of drilling or exploration! The brine containing the Lithium is pumped directing from the well head! This company offers the opportunity to be first to market and with a lower cost product allowing a completive advantage.
• Located 30 km south of Mexicali in Baja California, Mexico
• Plants are powered by brines drawn from 170 geothermal wells tapping rocks that were the feeder system for a volcano
• On average, 40% steam is channelled to the generating plants and 60% brine waste product is sent to evaporation ponds
• The average static brine flow from well fields is approx. 660 gallons per second.
• Fresh brines funnel through 6 square miles of existing sequential evaporation ponds, concentrating metals values to roughly 11.7 times original salt content.
• Existing evaporation ponds separate in sequence halite (table salt) and mixed halite-kainite (KCl or potash) and lithium salts
CHILIAN SALARS:
Laguna Verde Project—Chile Region III—Surface Brine Lake
• Located 390 km from Copiapoon serviceable roads at 4,230 m elevation
• Existing shallow brine lake which contains estimated (non-NI-43-101 compliant) resource of 100,000 tons of lithium carbonate, at 204 ppm lithium
• High potential for significant tonnage of deep brines, pending exploration drilling
Other Surface Water Brine Projects
• Lagunas Bravas–Existing shallow brine lake which contains estimated (non-NI-43-101 compliant) resource of 50,000 tons of lithium carbonate, at 231 ppm lithium, 1732 ppm Magnesium and 2310 ppm Potassium, with high potential for deep brines
• Rio Salado—rights to surface flow and runoff from Pedernales salar at lower elevations ; estimated >300 ppm lithium and potential (non-NI-43-101 compliant) for 5000 tpy of lithium carbonate production
• Additional Brine Projects with High Lithium Potential (all in Region III)
• Lagunas del Jilguero—small existing lake with deep brines undrilled
• La Laguna–small existing lake with deep brines undrilled
• Salarde Piedra Parada—significant work done in 1990’s on precious metals
• Laguna Escondida
• Salar Ignorado
COMPANY 3 POINT HIGH LIGHTS
My investment strategy for any mining stock involves basic considerations (Structure, Commodities/Grades, Resources/Reserves, Location).
1. Structure: Currently 31.6 Million shares issued and outstanding.
2. Grades/Commodities: halite, potash, lithium carbonate, calcium chloride, boric acid, precious metals and fresh water.
3. Location: Baja. Mexico’s Cierro Pierto Geothermal Power Plant with existing infrastructure. Secondary projects in Chile ; world’s largest producer
If you plan on holding any lithium junior in 2010, I believe Etna, soon to be Pan American Lithium, is the one to have.
References:
http://www.bullriderletter.com
http://www.etnaresources.com
http://trugroup.com/metals.html
http://en.wikipedia.org/wiki/Lithium
DISCLAIMER:
The Bull Rider Letter and its related businesses makes no representation and gives no warranty as to the accuracy of the information in this document and accepts no liability for any errors, misprints or omission herein (whether negligent or otherwise). The Bull Rider Letter shall not be liable for any loss or damage whatsoever arising as a result of any person acting or refraining from acting in reliance on any information contained therein. The Bull Rider Letter is NOT a licensed investment advisor or planner; a licensed real estate agent; a licensed financial planner or advisor; a qualified or practicing accountant; a qualified or practicing finance professional All information in this newsletter been obtained by the author solely from his own experiences as an investor and is provided as general information only. No reader should rely solely on the information contained in this publication as it does not purport to be comprehensive or to render specific advice. As such it is not intended for use as a source of investment advice. All readers are advised to retain competent counsel from legal, accounting and investment advisers to determine their own specific investment needs. Companies are chosen on the basis of a speculative potential for significant upside gains resulting from asset-base expansion. These are generally high-risk securities, and opinions contained herein are time and market sensitive. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer, solicitation or recommendation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, we in no way represent or guarantee the accuracy there of, nor of the statements made herein. We do not receive or request compensation in any form in order to feature companies in this publication. The Bull Rider may, or may not, own securities and/or options to acquire securities of the companies mentioned in this publication.
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