Harness the Power to Store Power

Every time Apple finds its latest iPad offering oversubscribed with advance orders, it's music to this company's ears. Every time a hybrid or electric vehicle moves down an assembly line, it boosts this company's end-user market. But especially as wind farms and hydroelectric plants look for innovative ways to store the power they produce, this emerging world-class producer of the world's lightest metal is finding itself in the right place at the right time.

The common denominator here is lithium, which remains at the leading edge of high-tech battery solutions for everything from your laptop computer to your future energy grid. Now that Canada Lithium (OTC: CLQMF) has raised the capital needed to complete construction of the Quebec Lithium Mine near the Canadian province's city of Val d'Or -- with first production expected in early-2013 -- I encourage Fools to look at this small company with big looming capacity to plug into the market for the storage of power.

With much of my own attention focused on the likes of gold, silver, and copper, I must confess to having given lithium little consideration as a potential target for investment. But after a fascinating conversation with Canada Lithium CEO Peter Secker, and my deeper look into the lithium market that followed, I intend to follow this corner of the metals patch more closely going forward.

Lithium 101
Let's begin with a crash course to get everyone up to speed. Secker explained to me that roughly 35% to 40% of global lithium demand stems from the manufacture of glass and ceramics. That segment requires only a simple lithium concentrate called spodumene, which sells for roughly $400 per ton. Spodumene, (which sounds so much cooler spoken in Secker's Australian accent), also refers to the raw lithium-bearing ore that Canada Lithium will then process into higher-grade spodumene (concentrate) of roughly 6% to 6.5%.

Another 25% of demand relates to the manufacture of lithium batteries, ranging broadly in scale from the tiny units in your cell phone to large battery banks capable of storing immense electrical capacity. For this technology-driven segment of demand, which is expected to grow rapidly to satisfy 45% of worldwide demand by 2015, manufacturers primarily seek lithium carbonate, a chemical compound with a current market value of about $6,000 per ton.

Remaining end-user applications for lithium include high-temperature greases, antidepressant medication, strengthening of fiberglass used for wind-turbine blades, and light-weight aluminum alloys used primarily in the aerospace industry. But it's the emerging demand for powerful grid-storage solutions that clearly has Peter Secker most excited about the future of lithium demand, and the location of Canada Lithium's mine does appear to present a strong competitive advantage that we'll explore below. Before we do, however, we need to take a quick peak at the supply side of the lithium market.

On a volume basis, global lithium supply is dominated by a handful of large-scale producers -- known as "brine" producers in South America (predominantly Chile and Argentina). These are essentially salt flats that yield their lithium content through an evaporation process in sprawling brine pools. Sociedad Quimica y Minera de Chile (NYSE: SQM  ) is the world's largest producer, but it's worth noting that this lithium production is a byproduct of the company's primary target: fertilizer for the agriculture industry. Talison Energy in Australia is the leading hard-rock miner of spodumene.  When Canada Lithium achieves commercial production in Quebec during 2013, its mine will produce lithium concentrate at just-under half the current annualized volume of Talison, but Canada Lithium will convert the majority of that concentrate (about 88%) into lithium carbonate to earn the value-added sales price of about $6,000 per ton. At about 20,000 tons per year, Secker estimates Canada Lithium's initial market share of global lithium carbonate production at a respectable 10% to 12%.

Plentiful power for a journey down the supply chain
Longer-term, Secker aspires to guide Canada Lithium further down the value-added stream of the lithium supply chain. Between Quebec 's cheap and plentiful electrical power courtesy of Hydro Quebec, and the emerging green-technology hub taking shape in Montreal, Secker sees a competitive advantage  available through products like refined lithium metal (which commands an astronomical market price of roughly $60,000 per ton!).  

In this way, Secker views his company's future more in the manner of a company like FMC (NYSE: FMC  ) that offers a full array of value-added lithium products than he does as a conventional miner. Since refining lithium metal is energy-intensive, Secker views his access to low-cost power as a key competitive advantage, saying, "We don't want to be known as a mining company or a processing company. We want to be a fully integrated chemical company like FMC, and head downstream. And having hydro power here in Quebec is our biggest advantage."

Toward the end of our conversation, I asked Secker what he thought might take observers of the lithium market by surprise over the coming years. His reply provides both a fitting conclusion to our introductory gaze into the lithium market, and also a concise argument for why the location of Canada Lithium's forthcoming mine could play a substantial role in the company's long-term growth:

Up until now lithium batteries have been for laptops, cell phones, and more recently hybrid and electric vehicles. But I think the grid storage industry is going to take the world by surprise. A123 Systems (Nasdaq: AONE  ) supplied a 32-megawatt battery that's running off a wind farm in West Virginia. BYD has just commissioned a 36-MW battery in China. AES (NYSE: AES  ) is just designing a 400-MW battery that they want to put in Long Island, New York. And this is all about storage of energy and energy modulation. 

One of the reasons Quebec is so interested is because of Hydro Quebec, which has about 37 GW of installed power. They don't consume anywhere near that, so at night they sell it down to the U.S. at somewhere between $0.005 and $0.01 per KWh. What they would like to do instead is store the night-energy somewhere near the U.S. border in massive batteries and then sell it for $0.02 per KWh during the day. 

And if you look at Hydro Quebec and its patents, they either have the largest number or second-largest number of lithium battery patents in the world. They are doing huge amounts of research into how you store massive amounts of energy for subsequent use. Subsequent use can be 12 hours, or 36 hours, or 50 hours later. I think grid storage is going to be huge.

The more I learn about the emerging demand for grid storage solutions, I too get amped up by the prospect of alternative energy sources striking a more efficient link with existing grids; and all of this has this Fool looking with enhanced investment interest at the potentially powerful world of lithium.


Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He Tweets. He owns no shares in the companies mentioned.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Chemical & Mining of Chile and Apple; and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 20, 2012, at 11:16 PM, seattle1115 wrote:

    I'm certainly no expert, but I've been led to believe that current lithium battery technology is less than ideal for large-scale grid storage because of a narrow optimal operating temperature range and relatively short lifespans. While these issues may well be solvable, I've been impressed by the potential presented by vanadium redox flow battery technology - nearly perfect for grid storage.

  • Report this Comment On March 21, 2012, at 12:55 AM, XMFSinchiruna wrote:

    Seattle1115,

    Thanks for the comment. I think the number of lithium grid batteries recently deployed suggests the technology is presently favored, but I will conduct some further research into competing battery technology platforms.

  • Report this Comment On March 21, 2012, at 6:55 AM, skypilot2005 wrote:

    Sinchi,

    As we discussed, when I recently washed your car, I have been looking at Lithium as well.

    A good starting point may be a look at:

    http://www.globalxfunds.com/commodities/lit/index.html

    http://globalxfunds.com/LIT

    Alternative Energy

    As energy demands increase and the environmental impacts of traditional energy sources become more apparent, the need for alternative energy sources will continue to grow. A key component in the advancement of alternate energy is lithium, a metal that has unparalleled energy storage capabilities. Lithium batteries are directly responsible for powering the technology of the future, from laptops and mobile phones to electric vehicles.

    Full Lithium Cycle

    The Global X Lithium ETF is a diversified way to invest in the "full lithium cycle," from mining and refining the metal through to battery production. This gives investors more direct exposure to lithium prices – which may benefit as the world demands more devices powered by lithium batteries – with additional diversification across lithium miners and battery producers.

    http://globalxfunds.com/Investment_Case/InvestmentCase_Globa...

    http://globalxfunds.com/Fact_Sheet/Fund120.pdf

    Sociedad Quimica Y Minera De

    Chile, 19.94%

    FMC Corporation, 18.23%

    Rockwood Holdings, Inc., 8.27%

    Saft Groupe SA, 4.99%

    GS Yuasa Corporation, 4.90%

    Exide Technologies, 4.90%

    A123 Systems, Inc., 4.69%

    Canada Lithium Corporation, 4.55%

    Galaxy Resources Ltd, 3.71%

    Orocobre Ltd, 3.70%

    Other, 22.12%

    Sky Pilot

    Your Official Lithium Web Link Assistant

  • Report this Comment On March 21, 2012, at 7:04 AM, skypilot2005 wrote:

    http://www.foxbusiness.com/news/2012/02/07/chile-government-...

    Chile Government Plans Tender To Attract New Lithium Producers - Paper

    Read more: http://www.foxbusiness.com/news/2012/02/07/chile-government-...

    2/7/12

    Sky

  • Report this Comment On March 21, 2012, at 10:50 AM, XMFSinchiruna wrote:

    Thanks Sky,

    As is often the case, it's difficult to find a sector ETF that offers clean exposure to the desired investment thesis. For example, since SQM is primarily an agriculture play, that's a high rating for company whose fate is principally driven by the dynamics of another sector entirely.

  • Report this Comment On March 24, 2012, at 3:45 PM, raylevesque wrote:

    Agree, Canada Lithium is way under-valued, but even more under-valued than that is Glen Eagle Resources-They have a property next door to Canada Lithium's and can sell them the $1.5 Billion of High quality Lithium they are sitting on without the expense of building the plant, even better, they are sitting on one of the largest Phopshate mines right next door to D'Arriane's phosphate mine. D'arriane is way under-valued as well since they have just proven to have the highest quality and one of the largest phosphate deposits in the world and I am sure a big boy will buy it out soon. So I say Glen Eagle is a win-win at $10m market cap sitting next door to Canada Lithium and sitting next door to D'Arriane resources projects. Glen Eagle's lithium is basically sitting on the ground and a few feet under ground so mining it will be basically putting it in a truck and delivering it to Canada Lithium!!!

  • Report this Comment On March 25, 2012, at 7:31 AM, skypilot2005 wrote:

    Some info. on Canada Lithium:

    Canada Lithium (OTC: CLQMF)

    CLQ: TSX

    52wk Range: 0.41 - 1.01

    http://www.canadalithium.com/s/Home.asp

    Canada Lithium Corp., a "clean-tech" mine developer is constructing an open-pit lithium carbonate mine and processing plant near Val d'Or, Quebec to meet the growing needs of the emerging global market for electric and hybrid electric vehicles, as well as grid-storage solutions. It is anticipated that commissioning of the mine and plant will occur in late 2012 and full production of an annualized 20,000 tonnes of lithium carbonate to commence in Q3 2013. Metallurgical tests have produced battery-grade lithium carbonate from deposit samples and the Company plans to market its products in North America, Europe and Asia. The Company trades under the symbol CLQ on the TSX and on the U.S. OTCQX under the symbol CLQMF.

    http://www.canadalithium.com/s/NewsReleases.asp?ReportID=502...

    January 19, 2012

    Canada Lithium Files National Instrument 43-101 Report

    Toronto, January 19, 2012 -- Canada Lithium Corp. (TSX: CLQ) (OTCQX: CLQMF) announced today it has filed a Technical Report compliant with National Instrument 43-101 in respect of the updated Mineral Resource estimate reported by press release December 6, 2011. The report, prepared by AMC Mining Consultants, will be posted on SEDAR and will also be available on the Company's website.

    About Canada Lithium Corp.

    The Company holds a 100% interest in the Québec Lithium Project near Val d'Or, the geographical heart of the Québec mining industry. The Company is in the midst of building an open-pit mine and processing plant on-site with capacity to produce approximately 20,000 tonnes of battery-grade lithium carbonate per annum. Metallurgical tests have produced battery-grade lithium carbonate samples. The Company trades under the symbol CLQ on the TSX and on the U.S. OTCQX under the symbol CLQMF.

    **

    Company background:

    http://www.canadalithium.com/i/pdf/2011-09_CMJ.pdf

    **

    http://www.canadalithium.com/i/pdf/CLQ-Presentation.pdf

    Feburary 2012 Coporate Presentation

    Note: Very solid management and directors, I. M. O.

    **

    Fact Sheet:

    http://www.canadalithium.com/i/pdf/February-2012-FactSheet.p...

    **

    December 2011 Technical report

    http://www.canadalithium.com/i/pdf/2011-Dec-Technical_Report...

    Sky

    Official Lithium Web Link Assistant to Sinchi

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1831400, ~/Articles/ArticleHandler.aspx, 10/21/2014 8:05:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement