"I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe." - Abraham Lincoln

Tuesday, December 21, 2010

Talison Lithium has a big ace in the hole, in the race for Lithium supremacy!

Talison Lithium (TSE-TLH) has been in the business for 25 years.  It supplies about 75% of the Chinese import market in lithium from its Greenbushes mining operation in Western Australia, and has 300 customers worldwide. Talison plans a 100% expansion of those resources in 2011, and the recent 110% run-up in its share price reflects these facts.

However it is Talisons resource in Chile which will propel it to the top of the lithium world, and solidify its position as the largest, pure lithium player on the planet.

If you have been reading this blog, then you already know how bullish I have been on Talison since it went public on the TSE in September at $3.30 share  (close today at $6.86) What you may not be aware of is that, I acquired our Talison shares by first investing in a Junior, Salares Lithium, which was swallowed by Talison in the summer of 2010. It was the properties owned by Salares that drew my investment dollars, and obviously drew the investment dollars of Talison Lithium as well.

You see, Talison is a hard rock miner.  They did not have brine properties, until they acquired Salares Lithium and its huge Salares 7 project in the Atacama desert of Chile, the heartland of lithium brine production today.

All of Talisons production to date is from its hard rock mines in Australia, but it is their newly acdquired Brine properties that hold the most promise.

The Salares 7 project encompasses 7 Salars or Brine lakes and over 117,000 hectares, on the Puna Plateau, of which 5 are 100% owned by Talison. It was this massive resource that I first invested in, and I speculated at that time that SQM of Chile might make a play for Salares Lithium. Of course I was wrong about that, but not about the value of the resource, as Talison swooped in and swallowed Salares Lithium, thereby acquiring this huge, rich, lithium (and potash) resource.

Brine properties, especially on the Puna Plateau,  are the least costly lithium resources in the world, as mother nature does most of your work for you. (This is the driest place on earth, and the sun dries out the brine as it is pumped to the surface, allowing producers to basically scoop up the lithium-potassium mix for processing.
(potassium of course being the raw material for potash which is also also in high demand worldwide)

As the lithium market marches onward and upward, Talison will develop this resource to help supply that booming market (of course after it boosts its hard rock production by 100% this year)

Utilizing only the the Greenbushes operation, Talison is currently the worlds largest pure lithium producer,
with a 25% market share.

It is eclipsed only by giant, SQM of Chile, which produces lithium as a by product of its massive potash operations there.

When I made Talison Lithium my conviction stock pick in September, predicting a double by Christmas and another double by spring 2011, (I am sticking with that prediction) I did so on the basis of its Greenbushes operation (left) in Western Australia, which feeds China.

When Talison finally taps into the Salares 7 project, and begins to produce lithium carbonate from its brine, I believe the sky is the limit, for this company that is still running under the radar of the big dogs. (In early December, Talison was finally added to the Global X lithium ETF (NYSE-LIT) as no ŒŦª can ignore a market leader, and Talison had been a private company until this September past.

If Talison decides at some point, to branch out from lithium into potash, it will truly be a shooting star, and will make a lot of people a lot of money.  I plan on being one of them!

Disclosure:  Long TLH

Analyst opinions:

Previous articles:
Lithium production worldwide
Lithium producers prospering as price, and demand, increases globally.
*TSX listing helps Lithium Giant increase output - Financial Post*
Rodina Lithium Sept 2010 drill results
Largest supplier of lithium into China, goes public
China charges into Electric Vehicle market
Rodinia could be next prize in Lithium boom
Lithium, gold and REEs in one penny stock
Juniors could be takeover targets
Lithium demand will increase four fold by 2017

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David said...

TLH was trading at a discount at $6.54 range. I loaded up on 6.7.

H. Pelham said...

Looks like you jumped the gun a bit early David, I bought more today at 6.14

Zentao said...

Congratulations for such an interesting blog. Really good information about lithium.
The main problem I find of beeing long in Lithium is that a lot of universities/companies are investigating in alternatives to lithium batteries.
In XXI century technology is changing very fast and new technologies are appearing from time to time.
For example ultracapacitors:
Or Zinc/air batteries:
Or nickel zinc (NiZn) batteries:
I know that currently lithium is the best one by far, but companies with big resources are putting a big effort investigating in alternatives and there are some promising ones.
This is a big reason I usually prefer to invest in stuff not related with technology (like Mr Buffet says).
Do you think that these lithium alternatives could be a serious inconvenient to an investment in lithium?

H. Pelham said...

Zentao, Thanks for the comments. I agree that there are other, alternative investigations ongoing into the technologies you mention, however, the overwhelming majority of labs are either investigating, developing, or producing technology that revolves around Lithium and it's compounds.

The unique properties of lithium, especially its propensity for higher energy storage, its weight, density and availability, make it the hands down favorite to drive the electric economy of the 21st century, in my humble opinion.

My money stays in lithium.
Thanks for your vgaluable comments.

David said...

I had a very wonderful time today at the cambridge investment conference, i'd definitely go again when it comes to down again in June. talison wasn't there but i did get some good industry info.
I went to speak to the Austraila based Orocobre CEO Ron Seville himself when he booth was empty. It looks like they will not be in production till late 2012. He did mention that the brines his property owns does have an advantage over most typical brines, as it'll require 6-8 mths for natural solar production, as opposed to other competing brines which can take 12-16 months. (Even if this is the case, looks like talison will be the lone producing lithium supplier well even into 2013). He mentioned toyota owns 25% stake in the company to obtain a secured supply and future stockpile but orocobre will still maintain day to day leadership of its operations and pricing. Surprisingly, he did state that talison's salares 7 brines in his opinion arn't as good quality as he mentioned "they just pump water into the centre of those brines"? (not sure what he meant by that) meaning the quality of lithium grade from talion's salares 7 brine properties arnt as good (unconfirmed ofcourse as he given us a broad description without details). But overall, he did still highly look upon talison and is aware they're just starting to work on the salares property and just finished expansion of greenbushes. Ron did mention talison did have a good advantage it being to produce lithium in shorter timeframe and create a stockpile if demand increases. he does expect lithium carbonate per tonne to increase for 2011 and 2012. He only seems to see the big 3- fmc, sqm, and rockwood and talison to be the only suppliers for next 2 yrs and control market pricing.

I also asked him about an article out there about possible lithium oversupply, and he mentioned its not legitimate - especially as the TRU consulting group wasn't really an official consulting grp for the industry.

I also spoke to investment Analyst Mike Berry for 5 mins before his speech when the room was alone. He did have very high thoughts on talison as a "mature discovery" stock they he thinks it'll be a 10 bagger. He says he will expect it to be $30 per share some day. I did mention my plan to own 10k shares of talison and hope that sp will be $20 each to make 200K but he did think i got a realistic shot of it! Especially as the company creates its own plant in western australia to gain better margins from its supply chain.

I also spoke to western lithium which produces lithium out of clay. Didn't speak to them very long but looks like they wont be in production till 2014. they did speak highly of talison (it being the top dog play) and orocobre (being one of the better projects to eventually come online). they did mention how their production of clay production of lithium is something that is better than hardrock? (unconfirmed ofcourse) Though i'd be concerned with their late production date.

Also spoke to big picture energy analyst jim letourneau about talison and its lithium supply. he's usually an advocate of energy stocks and related and thinks oil per barrel will least goto 150/barrel this year and thinks suck green energy stocks who are already producing will only benefit with such increases in energy.

this is great info, it just makes me feel confirmed that i'm on the right track and will continue to focus on investing in a company like talison lithium, which is seen as a pioneer in the industry and will only get better and seems that lithium will still remain in the picture even if audi/mitsibishi launch a car with a lithium-vanadium battery in 2013 according to company officials from american lithium. thought i'd share with ya HP....hope you learned something, i definiitely feel good about investing in talison after today. any thoughts/reactions?

H. Pelham said...

Great information David, thanks for the updates.

When people involved in the industry, especially competitors and potentioal competitors, speak highly of Talison, it only confirms what we already know.

This is a stock with a solid future, and any pullback should be considered buying opportunities, such as last week.

Again, Thanks David for the update.