By Peter Kennedy
If I had a dollar for every lithium exploration junior that I have written about in recent months, I could almost afford a rental in the West End of Vancouver.
When a commodity is hot, like lithium is now, writers and investors go through a steep learning curve as they get their heads around what is driving the market and what the prospects are in the future.
Below is a roster of companies that include Pure Energy Minerals Ltd. (TSXV:PE), Lithium X Energy Corp. (TSXV:LIX), Lithium Americas Corp. (TSX:LAC), Alset Energy Corp. (TSXV:ION,OTCQX:LACDF), Bacanora Minerals Ltd. (TSXV:BCN,AIM:BCN), and Australian Securities Exchange-listed Galaxy Resources Ltd. (ASX:GXY).
Here are some things I have learned while writing about companies who have jumped into the lithium space:
- There is no ready market for lithium. Lithium prices are determined by the purity and chemistry of the material as well as the length of the contract between buyer and seller.
- Brines (in salt ponds) and spodumene (hard rock) represent the two main sources of commercial lithium production.
- Speculation in the sector is related to the increasing application of rechargeable lithium-ion batteries, particularly in the automotive sector, as well as the impact on demand of battery manufacturing plants that are being built by Tesla Motors Ltd. (NASDAQ:TSLA) and others.
- In a bid to secure feed for a Nevada “gigafactory’ that Tesla is building with partner Panasonic Corp., Tesla has recently signed offtake agreements with juniors Pure Energy Minerals (which controls the Clayton Valley Brine Project in Nevada) and Bacanora Minerals (which is developing the Sonora Lithium project in Northern Mexico).
- Lithium Hydroxide is currently selling at US$20,000 a tonne on the spot market, a level that was described this week as “ridiculously high,’’ by a mining executive. The commodity was trading at a third of that level two years ago.
- Demand for battery quality lithium is expected to grow by 100,000 tonnes between the end of 2015 and 2020.
- Most of that material will come from existing producers such as Albemarle Corp. (NYSE: ALB) and well as producers in China. But new supply could come from Argentina where Lithium Americas and partner Sociedad Quimica y Minera de Chile (SQM) are working to advance the Cauchari-Olaroz project with target production of 40,000 tonnes per annum.
- Australia’s Galaxy Resources could develop the Sal de Vida (Salt of Life) deposit, which it has described as one of the world’s largest and highest quality lithium brine deposits. The project is located in northwestern Argentina in the so-called “Lithium Triangle.
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