Monday, June 7, 2010

Will SQM swallow nearby junior to increase it's Lithium reserves?

EnerDel/Argonne lithium-ion batteryImage by Argonne National Laboratory via Flickr
"The future of American motoring will be--at least in part--battery-powered. It's becoming increasingly clear that the lithium-ion pack is what will get us there. Almost every top-tier car maker has announced plans to use the technology"                Popular Mechanics

Sociedad Quimica y Minera S.A. (NYSE-SQM)

SQM is the largest producer of Lithium carbonate in the world today. It's operations are in the country of Chile and it's HQ is in Santiago, Chile.

The Lithium that SQM produces is really a by product of it's Potassium (Potash) production. However, as lithium gains more and more investor interest, and more to the point, more interest from auto manufacturers and wireless providers, SQM may be looking to expand this part of it's business.

Recently SQM over staked a claim on one of the Salars owned by Canadian Junior, Salares Lithium (LIT-V)

Salares responded by changing it's status from Exploration to Exploitation of the Salar (salt lake) in question.  Salares owns 7 Salars in the Atacama region of Chile not far from where SQM (and other majors) operate.

They own 5 of those Salars outright (they bought them instead of staking the claim, (thereby owning 100% of the resource). Their "Salares 7 project"  is arguably, one of the largest Lithium deposits in country, and although they are a junior (still trading under $1) their lithium foot print is very large.

Institutional investors have taken note (and positions) because of the tremendous interest in Lithium based battery technology for the wireless market, wind and solar markets, and in particular, for the Hybrid electric (PHEV) and pure Electric (EV) vehicle markets which are now the hot topic at every major auto manufacturer including Chev (volt) to Nissan (leaf) and BYD, Honda, Ford, Chrysler, Tesla, and others.

It is hard to tell exactly what SQM is up to. It may be that they did not know they were staking property belonging to LIT or, more likely, they did, and this is the first move by SQM to corner much of the future lithium market by soaking up a junior with a large lithium footprint of it's own.

No matter how you cut it, if SQM is that interested in property controlled by Salares Lithium, it may well be interested in acquiring LIT or some portion of it. Because of this new information, we bought more LIT today.

Disclosure: own Salares Lithium (LIT-V) currently trading at .60 per share.

 Happy investing!

See also:
Juniors sitting on huge lithium deposits.
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