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The Future is Bright for Majors and Upstarts in the Lithium Mining Business
By: AllPennyStocks.com News
January 31, 2012
Lithium supply and demand is relatively equal at this moment, but experts anticipate a rise in demand in the mid-term as lithium requirements for batteries increase, potentially leaving the supply side falling short. Lithium, a soft, silver-white metal in the alkali metal group of chemical elements, is presently used in a wide array of products, including glass and ceramics, high strength-to-weight alloys and rechargeable batteries. Although there are many other uses, such as lubricating greases, construction and photo applications, these few consume more than 50 percent of all lithium produced each year. Lithium ion batteries hold the highest percentage, approximately 30 percent of all demand annually. On the whole, the worldwide battery market tops $50 billion annually.
Even though lithium batteries already use nearly a third of all lithium produced each year, it is this area that is expected to continue to see the greatest growth rates as electrification of vehicles establishes a greater market presence. Economist Daniela Desormeaux of Santiago, Chile-based signumBOX, told The Energy Report recently that she expects over the next 10 to 15 years that batteries will swell to consume more than 50 percent of all demand. Because of the vast amount of uses for lithium and lithium-ion batteries that are seeing strong growth now (i.e. mobile phone, tablets, power tools, etc.), in addition to just the vehicle industry, Desormeaux said that her firm projects “lithium's average demand will grow around 10%/year, which is greater than the growth of the economy.” In 2009, Frost & Sullivan said that rechargeable batteries account for 76.4 percent of the global market for batteries and that it expects the number to increase to 82.6 percent in 2015. F&S also said that the “Lithium-ion is the battery of choice for consumer products, and no other systems threaten to interfere with its dominance at this time.
Modern adaptations could also fuel growth. Kyocera said on Monday that this summer it plans to start selling a system that pairs solar panels with lithium-ion batteries in Japan. The system, which will initially target the residential sector, will use Kyocera’s solar energy equipment with Samsung’s lithium-ion cells. The revolutionary system will be able to control supply and demand to feed solar electricity into a home or grid. The battery storage will weigh-in at a hefty 440 pounds.
With lithium’s solid growth projections, major and developmental miners alike are moving quickly to advance exploration and production to meet future needs. Frankfurt, Germany-based Chemetall GmbH, a subsidiary of Rockwood Holdings, Inc. (NYSE:ROC), who operates through approximately 40 subsidiaries and associated companies, has expanded operations in India, Italy and the United States in the last year and a half. Chemetall’s subsidiary, Chemetall Foote Corporation, operates the only domestic lithium resource in the United States with its project in Silver Peak, Nevada. A $28.4 million grant from the U.S. Department of Energy to bolster production of lithium for advanced transportation batteries has aided Chemetall in its efforts to expand production at Silver Peak as the company is drilling to double capacity at the operation.
Operations on the project are concentrated on extracting lithium salts by brine evaporation in which the salt is pumped from aquifers under the desert and then evaporated in ponds on the surface. The concentrated brine is then pumped to a plant for production and converted into lithium carbonate, the raw material for lithium compounds.
Standing alongside Rockwood Holdings as another major that mines, refines, and produces commercial-grade lithium and lithium-based compounds in the United States is FMC Lithium Corporation, a component of FMC Corporation (NYSE:FMC). While both companies are well-diversified, they control the majority of domestic lithium production in the States. In the third quarter of 2011, FMC Corporation reported revenue from their Specialty Chemicals division of $217.9 million, up 8 percent versus the year-earlier quarter, driven in part by higher selling prices in lithium specialties.
In November of 2011, FMC Lithium said that it is making a $50 million investment in its 900-acre Bessemer City plant in Gaston County, North Carolina. Additionally, FMC officially launched its new lithium metal purification process designed for high-technology energy storage applications.
Looking forward with its specialty chemicals division, Pierre Brondeau, FMC Corp. President, CEO and Chairman, said that the company expects “earnings growth in the mid-teens, as higher volumes and selling prices in all BioPolymer and lithium product lines are partially offset by higher raw material costs.”
Many investors tend to shy away from companies priced at $93 a share (FMC) and $50 a share (ROC), especially when both have appreciated approximately 50 percent in the last couple months.
The true growth possibilities can be found in smaller, developmental firms looking to take a piece of the lithium pie from the majors. AmeriLithium Corporation (OTCBB:AMEL) is a pure play headquartered and focused in the same area as Chemetall’s Silver Creek lithium project in Nevada. AmeriLithium controls one of the largest lithium portfolios in North America with holdings of roughly 700,000 acres, including four Nevada-based projects near Chemetall’s holdings.
In Alberta, Canada, the company has its Americana Property, an expansive 664,049-acre project potentially overlying extensions of the Leduc Formation and Beaverhill Lake Group strata/Swan Hills Formation. With its unique positioning, The Alberta Geological Survey has identified the property as containing underwater formations which could be similar to Chemetall’s lithium brine-rich waters in Nevada. Estimates place the potential lithium present at Americana to be approximately 70% of Silver Creek, which has 826,000 tons of lithium estimated. Additionally, AmeriLithium has more than 43,000 acres of highly-prospective land in Western Australia, a country where another industry leader, Talison Lithium Ltd. (TSX:TLH), is expanding its production capacities.
AmeriLithium is in early stages of developing its projects, which is what leaves the company – currently trading at a meager 8 cents – substantial headroom for growth. Given the close proximity of AmeriLithium’s projects, the Chemetall reserves and initiatives to boost production already bode very well for the future prospects of AmeriLithium and the potential is now getting validation through pre-drilling surveys. The company has completed 2 stages of exploration on all of its Nevada properties which include its Paymaster, Clayton Deep, Full Monty and Jackson Walsh lithium properties. Data collected from a gravity survey were used to conduct a controlled source audio magneto-telluric (CSMAT) survey which showed positive results indicating the presence of highly conductive layers that indicate lithium brine below the surface on the project. Through this exploration program, the company has identified 11 new drill targets. All this means plenty of work and prospective growth for this junior lithium miner over the next weeks and months.
The battery market and legacy applications for lithium are going to continue to fuel demand for the foreseeable future. If, as many experts anticipate, electric cars become much more common, the odds of lithium production not being able to keep pace with demand are greatly increased. In either case, lithium miners have a bright future ahead of them as, even at the current pace, higher revenues are being had quarter over quarter. While the majors make relatively safe plays to solidify portfolios, the juniors offer lofty possibilities to explode a portfolio by means of proving reserves, reaching production or as potential acquisition targets by larger peers looking to increase their own portfolios. Proper due diligence on the matter is always encouraged.
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