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Wednesday, August 25, 2010

Talison Lithium, the largest pure lithium producer in the world, is going public!

 In June I wrote about how the market for the electric metal (Lithium) was heating up and I highlighted five  junior lithium miners that stand to benefit from the coming "second leg" of the lithium Bull Market (Fall 2010)

Then in early July I told you about Salares Lithium and its Salares 7 project in the Atacama Desert of Chile, how vast their new holdings were, and how they might be a takeover target as this bull begins its second leg. It was my thought at the time that, because of an overstake of the Salares property by SQM (the largest brine producer in Chile) I believed that SQM might make some sort of offer for Salares.

However, within days of that article in which I made Salares my conviction stock pick, Talison Lithium, a private company from Australia, swooped in on Salares and a merger was announced combining the raw holdings of the Salares 7 project in Chile with the Two producing plants that Talison operates in Australia to mostly supply the burgeoning Chinese market with Lithium. Talison is the largest supplier of the commodity to China at this writing, supplying 66% of Chinese demand.

On Sept 17th, that merger should be completed and the stock of a new company (TalisonLithium Ltd is going public) will launch on the TSE. This will be the largest, pure lithium company in the world and thus the new lithium ETFs will have no choice but to place it near the top of their basket of stocks in the lithium sector.

Salares shareholders (as of the merger announcement) will benefit to the tune of approx 98.2% as their shares will increase from the .62 at time trading was stopped, to approx $1.25 when the new company begins trading on the TSE in Sept. (2.81 shares of Salares for each share of the new entity, striking price between $3.50 and $4 returns over 1.25 to Salares Share holders).
However, this writer will be holding on to his shares of the public version of Talison Lithium, as it will have to be listed in the new Global X ETF recently announced on the NYSE and Lithium indexes which are popping up on the radar screens this year.  Lets face it, in any market, indexes and ETFs cannot afford to ignore the world leader, and in this case, it will be the worlds largest pure lithium play.
Talison operates two producing lithium plants at their Greenbushes operation in Australia. It  has 25 years of production under its belt, supplies 300 companies with lithium and lithium carbonate, including many in China where it is the largest offshore supplier into that market. In its latest announcement of the merger with Salares, Talison management advise they are on track to ramp up production by 100% by 2011 and have many more potential customers knocking on the door at this writing.
That 100% increase does not even include the Salares 7 project in Chile which it acquires from Salares Lithium but it appears there are big plans for that area as well.
Yes, I doubled my money on this trade, but I believe it will double again well before Christmas, and double again before spring.  Maybe sometime in 2012 I might think about selling this stock, then again, when you are on a rocket ship, it is a bit hard to jump off.
Here's to your retirefund.
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