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"The bullish outlook for lithium
UPDATE: Robin Bromby May 11, 2009
Article from: The Australian
ANOTHER week. Another set of challenges, no doubt.
But the trend is once again, for the moment, our friend. While most eyes were on Wall Street and other equity markets, there were some astonishing moves in metals. And particularly for nickel and tin. Look at the action on the London Metal Exchange. On Wednesday, nickel added $US700/tonne to its price, and then on Thursday the price advanced a further $US595, but lost only a fraction of that on Friday to end the week at $US13,100/tonne. For tin, it was three days up in a row: on Wednesday, a 7.2 per cent gain (or $US905/tonne), then another $US495 on Thursday followed on Friday by a more modest $US100, ending at $US14,000/tonne. How is this working out in the equity markets? Firstly, traders are getting excited once again by promising news out of the junior end. But if there’s another rout - and you cannot rule out the possibility of another dreadful shoe yet to fall - then investors will drop the market like a stone. They came back after last year’s shock; it is doubtful if they will bounce back so quickly after a second. Shocking though the suggestion may be some of those with a speculative, buy-today-and-sell-tomorrow approach to the market, this may be the time for little long term thinking. What is going to be in short supply in the next few years? Well, some say lithium could be such a metal (although there are those who discount this). . The financing deal for that was released this morning. First, US-based Lithium Investors will take a $2.6 million placement, and shareholders will be offered a rights issue with a targeThe bullish theory is that lithium, which is so far used mainly in glass and in batteries for laptops and mobile phones, is going to be a supply deficit once the hybrid and electric car business really hits its straps. Just look at the battle royal going on over who gets to develop the Uyuni salt flat in Bolivia, which reputedly contains half the world’s known lithium reserves. The government in La Paz will decide between France’s Bollore Group, Mitsubishi or South Korea’s LG Group. There have been developments at two of the Australian-listed lithium plays. Orocobre has done a scoping study on its Argentinian project which shows the potential to produce 15,000 tonnes a year of lithium carbonate (along with 36,000 tonnes of potash). A bankable feasibility study (BFS) should be completed mid-2010t of another $2.8 million with Patersons Securities to be the underwriter. This means Orocobre has covered the cost of its BFS -- and further supports confidence in the lithium story. And Galaxy Resources has appointed a Shanghai-based company to do the study on building a lithium carbonate plant in China to process the output of the company’s planned lithium mine near Ravensthorpe, Western Australia. This morning Galaxy announced the site of the plant would be at Zhangjiagang, a deep water port on the Yangtze River and the location of a free trade zone. One last point: if you go back two years and re-read all the forecasts for demand for various metals (not to mention their prices), chances are that 90 per cent of them have been proved wrong. Keep that in mind when you read any projection into the future - even for lithium. The writer implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment (and medical - S.) advice."
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