Friday, March 12, 2010

The Lithium Boom, Electric Cars and the Mobile Web!

EnerDel/Argonne lithium-ion battery
Lithium (Li), the first of the alkali group of metals, was discovered (1817, Sweden) by Johan August Arfvedson and named for the Greek lithos, “stone.” A soft, silvery metal, it has many uses, including the production of glass, lithium batteries, and a strong, light alloy with aluminum for airplanes. Lithium carbonate is used in the treatment of mental illness, and an unknown amount is used as lithium hydride in the production of nuclear weapons.
— from "The New York Times Guide to Essential Knowledge"

As Jim Cramer likes to point out, "There's always a bull market somewhere"!

Besides being used in most mobile web smart phones, laptops and ipads etc, Lithium Ion Batteries are the best technology for electric, plug in cars according to industry insiders and mining companies are now rushing to fill a void in an industry that is still in it's infancy, but is about to explode. That is the electric car industry.

As Warren Buffet points out, "In 20 years all cars will be electric"! Obviously that is one of the reasons Warren invested last year in Chinese car maker BYD.

However, the story here is Lithium mining, where it is mined, and And how it is mined. The Nickel Hydride battery, currently used in many hybrid vehicles, is grossly insufficient to power electric plug in vehicles (EVs) and, until now, this has been a major road block in developing EVs that can compete with the gasoline engine or Hybrid technology. If you review all of the battery blogs, and science and energy sites, it becomes clear that thousands of scientists and technicians around the world are working on Lithium batteries. Whether it is lithium vanadium phosphate that BYD Company Ltd. (BYDDF.PK) in China is researching, Lithium Ion, Lithium cadmium, Lithium Manganese, Lithium polymer or Lithium iron phosphate, the keyword in new battery technology is overwhelmingly, "Lithium"!

Lithium is also currently used in a number of applications including as a power source for mobile web devices (smart phone batteries - which are expected to triple by 2012), heat resistant glass and ceramics, Health care (Lithium based mood stabilizing drugs), and Lithium batteries for EVs, which may outdistance their closest competitor, Nickel Hydride batteries, in pure power, by a factor of 10. Lithium is also used nuclear energy and lithium hypochlorite is used extensively in cleaning swimming pools. There are truly many, varied uses for this valuable commodity.

Lithium is soft enough to be cut with a knife, and it is the lightest of the metals of the periodic table. It also has a low density (approximately 0.534 g/cm3) and thus will float on water, with which it reacts easily. It is most easily mined from Salar or salt lakes, mostly found in Bolivia and Chile.Lithium salts are extracted from the water of mineral springs, brine pools and brine deposits. It can also be mined from rock but that is more difficult and more expensive. Canadian and American companies are currently ramping up their exploration for this products which sells for between $4,000 and $5,000 per ton. That price is "today's price" before the electric car boom has even started!

Major car manufacturers including Toyota and Magna International have already invested in Lithium plays so as to secure future supply. Panasonic, which is Toyota's supplier of Nickel hydride batteries for it's successful Prius, recently bought Sanyo, the worlds foremost developer of Li-ion batteries. That should have huge implications for the industry.

The Chevrolet Volt, due out next year, will run on lithium manganese oxide batteries. These developments, however are just the beginning of what looks to be one of the great bull markets of this decade, and beyond. Lithium Ion Batteries, and eventually, Lithium Air batteries will require the world to seek out as many Lithium deposits as can be developed, and the quicker, the better.

Honda is now developing a Lithium Ion Civic. (Cars that use, or will use Lithium batteries in the next year include: Chevrolet Volt, Honda Insight, Toyota Prius, Buick hybrid SUV, Ford Fusion hybrid, Nissan Leaf and the Chrysler/Fiat 500 EV)

The oil boom of the early 20th century is about to be replaced by a Lithium boom and if you are a Canadian investor you may be able to get in on the ground floor of some of these Junior miners currently busting their buts to stake claims in Lithium from Northern Canada to Bolivia, (which, incidentally, has about 50% of the worlds known deposits, but is one of the more hostile political environments in which to invest.)

However it is the country of Chile which actually produces the most Lithium currently and Juniors are crawling all over the Chilean Salar flats and staking their Lithium Mine claims at this writing. The majority of the world's lithium production comes from salars, or salt lakes, where prospective lithium mineralization is generally hosted in brine horizons. One of the Lithium pure plays in Chile is actually a Canadian Junior. Salares Lithium, (TSX-V LIT) The company has a large land package in the most prolific lithium brine reserve region globally - controlling 119,227 hectares in the Puna Plateau.
The area has extensive regional infrastructure. The main access to the Cauchari-Olaroz properties from San Salvador de Jujuy is via paved national highways. These highways carry significant truck traffic, transporting borate products from various salars in northern Argentina. Access to the interior of the Cauchari-Olaroz properties is possible through a gravel road, which skirts the west side of the salars and is used by borate producers.

This excerpt is from the Lithium investing news.

"Salares Lithium is an exceptionally rare opportunity for a pure play exposure within the Chilean lithium exploration arena. The company represents one of the largest land and pure salar concession packages in the lithium exploration sector and has historic sampling returning lithium and potassium in all seven of its salares with grades up to 1,080 ppm lithium and 10,800 ppm potassium. A unique value proposition for this company is that it controls 100% of five salares clustered within 155 km’s, resulting in no severed ownership, as is quite common in the Argentine lakes."

This from the Energy Report:

Although the lithium space, in general, got a little bit too excited, there are a few gems. Salares Lithium is a great story.
- The Energy Report with Marin Katusa (03/04/10)
"Salares Lithium Inc. is currently on our watch list as it has one of the largest brine lake concession packages in Chile, which is the world's largest lithium producer. They have five brine lakes clustered within 155 kilometers, of which they control 100% of the interest with their Chilean partner."
- The Energy Report Interview with Siddarth Rajeev (02/25/10)
This from Byron Capital Markets report:
. . .This is one of the most promising land packages we have seen; the claims were obtained for what we believe to be reasonable consideration, and, most importantly, Salares Lithium holds 100% of the land on the most promising lake beds."

Salares recently appointed Dr. Ian Hutcheon, PHD, to their advisory board. He is a professor Emeritus in Geology and Geo physics at the University of Calgary and retains an active research program.

According to the Salares website,
"His research has focused on water--rock reactions, geochemistry, monitoring field recovery processes, and diagenesis of clastic and carbonate rocks. Past research has included the study of the effect of diagenesis on reservoir properties. On-going research integrates chemical and isotopic data for shallow ground water to understand the controls on the distribution of elements and minerals in near-surface environments."

Salares is only one of the companies in the chase, but for me, it has the most interesting story. It's claim encompasses 7 Salars or salt lakes covering 120,000 hectares. The first of these, Isla de la Isla, encompasses over 16,000 Hectares. On March 8th the company reported that Geodata completed a transient electromagnetic survey ("TEM") on the northern portion of the Salar de la Isla, the results of which are posted at Marketwire. It is only one of the 7 Salars owned by Salares. As a side note, I am told that some heavy hitters in the Vancouver investment community are backing Salares Lithium.

In other Lithium news, Lithium Americas Corp is planning an IPO on the TSX in the coming months. It received private investments from auto companies Magna International Inc. and Mitsubishi Corp., which are looking to secure lithium supply because of its use in hybrid car batteries. (Disclosure: no position)
The Lithium chase is becoming a serious bull run as companies are pulling out all the stops to ensure a piece of this growing, 21st century pie. The pie is still hot, and hasn't been cut yet. That will come when some of the front runners begin producing and get swallowed up by larger players.

In the interests of disclosure, I wanted a small piece of that pie so I bought some LIT yesterday and again today. It is speculative, but the upside potential is staggering!!

More Lithium Stocks
The Energy Report
CBS Report on Lithium in chile
Financial Times-Battery Boom
Lithium-the next Uranium
Ford uses electric drive train with Lithium Batteries.

March 18th 2010 at Marketwatch
Four great Lithium Stocks to consider

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