Spyticker Picks for 2010
Lithium Demand to Grow between 7 and 10% Annually: Today, lithium demand is approximately 22,000 tonnes of which about 4,200 tonnes is used in battery production. The main uses continue to be as an additive to glass and ceramics production, greases andmetal production. Overall market demand is growing about 6% annually but the main driver of growth will continue to be increased use of Li-ion batteries as the need for higher energy density to extend the range for plug-in HEVS (PHEVs) and full batter electric vehicles (EVs) necessitates the switch away from NiMH batteries which are used almost exclusively in today’s hybrid electric vehicles (HEVs). Our total HEV/PHEV/EV vehicle forecast is for a total of 2.3MM vehicles by 2015, each containing between 0.5 kg and 7.5 kg of lithium. Since HEVs, which use less lithium, should continue to dominate in that timeframe, additional lithium demand from the auto industry should be 5,400 to 7,800 tonnes.
Supply Should Remain Tight: Lithium comes from two major sources; hard rock mineral deposits and lithium-rich brines. Brines are the main source of lithium carbonate, which is the main input used for Li-ion battery production, and mineral deposits, which provide lithium in the form of spodumene, which is used directly in the ceramics and glass industry. Since about 2005, lithium production from brine producers has not quite kept up with demand leading to lithium carbonate prices rising to $6000 per tonne. At this price, conversion of spodumene to lithium carbonate becomes viable. Given that there is a fair degree of uncertainty in the rate of uptake of lithium batteries in cars, we expect the big brine producers will err on the side of caution with their expansion plans, opting for stronger pricing over higher potential volumes. This should leave the window open for at least a small number of efficient conversion projects.
Investment Conclusions:
The market for basic lithium products, spodumene and lithium carbonate, is relatively small but should continue to grow at a rate between 7 and 11% per year. Supply, dominated by brine producers should continue to grow at the low end of this range, sustaining high prices and leaving room for additional producers. Since the bulk of lithium production comes from three large, diversified chemical producers, small cap mining names provide the greatest leverage. While new brine projects could ultimately yield more robust and resilient operations, the space is still at a very early stage and will take some time to mature. New spodumene may therefore offer the better opportunity particularly if the companies offer a combination of speed to market, a robust project and/or some type of off-take agreement or price-protection. We have compiled a “Watch List” of companies that have exposure to this theme and will monitor progress at these projects.
Watch Lists:
Altair Nanotechnologies - ALTI:NCMAltair Nonotchnologies As a leader in advanced energy storage systems for clean, efficient power and energy management, Altairnano’s suite of advanced lithium-ion energy storage systems is helping solve today’s toughest power and energy challenges. Azure Dynamics TSX:AZD Azure Dynamics specializes in proprietary electric and hybrid electric drive technology for light and heavy duty commercial vehicles. Galaxy Resources ASX: GXY Galazy Resources is an S&P/ASX300 emerging mining and chemical company focusing on lithium and tantalum production. Galaxy is at an advanced stage of developing its Mt Cattlin Lithium Project (hard rock spodumene) in Ravensthorpe, Western Australia. The Project encompasses a mine and minerals plant which will produce 137,000 tpa of 6% Li2O spodumene concentrate. Galaxy intends to add value to the Mt Cattlin Project by establishing its own downstream lithium processing facilities in China. Zongshen PEM Power Systems . TSX:ZPP Zongshen PEM Power Systems Inc. is a Toronto Stock Exchange listed (TSX: ZPP), China-based manufacturing company focused on the development and commercialization of environmentally friendly two and three wheel vehicles. ZPP plans to leverage the resources of its major shareholder, Zongshen Industrial Group ("Zongshen Group"), to become a leading provider of low emission and alternative power systems and products, including low emission and electric vehicles. The first products to be commercialized are small gas and electric bikes and motorcycles ("e-bike"). These low-cost, high quality, environmentally friendly low emission small gas bikes, electric motorcycles, electric bicycles and other e-vehicles are manufactured at ZPP facilities in China and sold in the growing domestic and international markets. ZPP plans to expand its offering of alternative power system products, including advanced battery technologies through research and development, licensing and acquisitions. |
Canada Lithium Corp. TSX:CLQ OTCQX:CLQMF Canada Lithium Corp. has completed a prefeasibility study and is now beginning a definitive Feasibility Study on its Quebec Lithium Project near Val d'Or, Quebec. If current environmental, engineering, metallurgical, and geological studies are positive, the project could provide a secure North American supply of battery-grade lithium carbonate to feed the growing demand for lithium in hybrids and electric vehicles. Mine construction is anticipated in 2011. The company trades under the symbol CLQ on the TSX-V and CLQMF on the OTCQX. Quebec Lithium Inc. is the operating company in Quebec and is wholly-owned by Canada Lithium Corp. Lithium One Inc. TSX:LI Lithium One Inc. (TSX: LI) is an explorer and developer of mineral properties with a specific focus on lithium. The company is managed by a team that includes a board of directors with an impressive history of wealth creation, and a superior technical group with a record of discovery. The Company has two major lithium projects: the brownfields Sal de Vida lithium brine project in Argentina and the James Bay bulk tonnage spodumene project in Quebec. Lithium One believes that lithium demand will grow as its value as a preferred battery material is fully realized and the Company seeks to position itself as a low cost producer of battery grade lithium. Electovaya Inc. TSX:EFL Electrovaya Inc (TSX:EFL) designs, develops and manufactures proprietary Lithium Ion SuperPolymer® batteries, battery systems, and battery-related products for the clean transportation, smart grid power, consumer and healthcare markets. The Company’s mission is to accelerate clean transportation as a commercial reality with its advanced power system for all classes of zero-emission electric vehicles and plug-in hybrid electric vehicles. Founded in 1996 and headquartered in Ontario, Canada, Electrovaya has production facilities in Canada as well as the United States, and customers around the globe. Western Lithium USA Corporation is developing its Nevada lithium deposit to support the new generation of hybrid/electric vehicles. With one of the world's largest known deposits of lithium, the company is ideally positioned to enter the market as a major long term supplier of high quality lithium carbonate.
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