Lithium is a very light metallic element. It is mainly used as lithium compounds that act as fluxes in the ceramics and glass industries, and in lubricants. The metal is an important alloying agent in primary aluminium. Lithium is increasingly being used in rechargeable batteries used in all aspects of the mobile web, from laptops to cell smart phones. Now lithium is the primary resource used in batteries for the hybrid and electric vehicle markets.
Image by gmeurope via FlickrLithium is mined from spodomen (hard rock) , clay deposits and more promisingly, from salars or brine lakes. Mining from Salars, (salt lakes) is much less expensive and less labour intensive. The Puna plateau in South America which spans Chile, Argentina and Bolivia holds much of the worlds salars. Junior miners have flocked to the region over the past two years to stake claims to what is, without argument, the worlds richest lithium deposits.
In July, Talison Lithium announced a merger with publicly traded, junior miner, Salares Lithium which owns the Salares 7 project in the Atacama Desert on the Puna Plateau of Chile which is, we believe, one of the largest, pure lithium deposits in the world, encompassing over 116 hectares in 7 Salars or salt lakes, of which Salares owned 100% of five of those salars.
In doing so, Talison kills two very big birds with one stone. Firstly, they now own one of the largest pure brine properties on the market today. As Talison has, up until now, been a spodomen or hard rock miner, the jump into brine production will enhance significantly, their lithium footprint in todays market, especially in the cheaper to produce (and more lucrative) brine deposits.
Also, as a result of the merger, Talison will become a publicly traded company, TLH. Its strike price should be between $3.50 and $4 per Talison share, which will return a premium to current Salares Lithium shareholders of 98.6% as the merger of shares is 2.81 Salares shares for one Talison share.
Image via WikipediaThis year, the electric vehicles market is ramping up from California to Tokyo (see the Tesla roadster and other EVs parked at a charging station - right) Every major auto company on the planet has an EV in some stage of production at this writing.
With the advent of the Global X Lithium EŦF and lithium indexes popping up around the market, I believe that the strike price mentioned is very low as these ETFs and indexes will have to include Talison at or near the top of their lists (you cannot ignore a world leader in any market).
As Talison goes public I am making it my conviction stock pick. Look for Talison Lithium Ltd to double the above price by Christmas (if not the first day of trading-Circa Sept 23rd 2010) and double again by Spring 2011.
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UPDATE: Sept 17thSalares shareholders have approved the merger with Talison by a 99.9% vote.
The hearing for the final court order to approve the Arrangement is scheduled to take place on September 21, 2010, with the completion of the Arrangement expected to occur on or about September 22, 2010. The TSX has conditionally approved the listing of the Talison ordinary shares under the symbol "TLH", and trading is expected to commence on the TSX at the market open on September 23, 2010.
Update: Sept 23rd 2010
Talison (TSX-TLH) began trading today in Toronto on the TSX.
TLH up in early trading this morning.
Editors Note: We doubled our investment on our Salares call as those shares morphed into Talison shares. This morning we bought more TLH. Lithium ETFs and indexes cannot afford to ignore a market leader. We have made Talison our conviction stock pick. Look for this stock to double again by Christmas.