lithium shortage, page-5

'Electric cars are set to spark a lithium boom'

By: John Beveridge. Herald Sun June 20, 2012 9:39PM

"YOU don't have to look far to spot some lithium today.

Every smartphone, tablet, laptop, hybrid or electric car and bicycle is likely to have a chunk of lithium in its battery - helping to combine low weight with better electrical storage ability.

Which is one of the reasons why lithium prices have been rising strongly, tripling since 2000 so that sales now top $1 billion a year.

Prices and volumes are set to keep rising with the explosion in the numbers of electric cars said to be the pivotal event that will double or even triple demand again before 2020 and push existing suppliers to ramp up production.

Australia's best exposure to the lithium story is Galaxy Resources, which has succeeded in not only mining the stuff but chasing it a fair way down the value chain as well.

Pending an Ontario court decision next Tuesday, Galaxy now controls its Mt Cattlin mine near Ravensthorpe and merger partner Lithium One's lithium brine projects in Argentina and Canada.

That should give it a nice spread of hard rock and brine lithium to keep the supply up to its Jiangsu processing plant in China.

Galaxy is also planning a battery-grade lithium hydroxide plant next to the existing Jiangsu plant, which would take total high-grade production to 22,000 tonnes a year and make the output much more valuable.

The extra processing would differentiate Galaxy from lower-grade lithium producers and take it much closer to the millions of Chinese end users and exporters of lithium batteries.

Understandably, Galaxy was a little underwhelmed by its recent capital raising for the merger given current market conditions and its share price has not reflected the rising demand and prices for lithium or the lower risk as it ramps up production.

You can count on one hand the number of lithium companies that produce the bulk of world supply so Galaxy's arrival as a capable competitor should be welcomed, particularly with its Chinese processing plant.

Galaxy remains a speculative buy on the assumption chief executive Iggy Tan and his crew add international company integration to their already impressive list of achievements.

ANOTHER company that is looking to enter the lithium supply space in a big way is Rio Tinto.

Rio is sitting on an estimated 100 million tonne deposit of jadarite in Serbia's Jadare Valley, a mineral which can be processed to produce lithium carbonate and boron hydroxide.

While it is a good few years away from development, the size of the mine could add a sixth big producer capable of supplying up to 20 per cent of world demand.

Plus, the mine is nicely positioned to meet the lithium demands of intensely green but economically troubled Europe.

The problem is that to spot the future contribution of lithium to Rio's profits and share price, you are going to need binoculars.

That doesn't mean the Serbian mine won't successfully pass through the exhaustive return on equity and technical hurdles that Rio will put in front of it - just that the contribution will be dwarfed and swamped by Rio's massive exposure to iron ore.

Fortunately, I really like that exposure, given the chance for an improvement in Chinese demand in the second half of this year as that economy is stimulated and the massive pipeline of development projects keep ordering more steel.

Rio Tinto remains a buy on the rationale that highly profitable Chinese demand for seaborne iron ore is still on the rise when you measure it in tonnes, despite the negative talk."

The Herald Sun accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser.

Good read from the Herald Sun. You know if Rio is on the wave it is seen as a viable commodity. GXY looking the Adam Goodes. As said earlier, share price is ready to recover. DYOR.