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John is a lawyer and accountant with over three decades of corporate finance, due diligence, M&A advisory and related legal services for manufacturers, innovators and investors in the energy storage and renewable energy sectors. Over the last eight years John has earned a global following for... More
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  • Toyota Takes Additional Steps To Secure Critical Metal Supplies 6 comments
    Jan 20, 2010 9:48 AM

    Many investors know that Toyota Tsusho, a minority owned subsidiary of Toyota Motors (NYSE:TM) has invested in a rare earth metals mine in Viet Nam to ensure a long term supply of lanthanum, the "M" in the NiMH batteries it uses in the Prius.

    Yesterday, the Wall Street Journal reported that Toyota Tsusho has agreed to invest between $100 and $120 million to buy a 25% stake in a new lithium mine in Argentina. Apparently the funding will be provided by a low-cost government subsidized loan from Japan Oils, Gas and Metals National Corp

    Today, Great Western Minerals Group (GWG.V) announced that it has extended the expiration date of a July 2009 letter of intent with Toyota Tsusho through the end of March.

    I view the extension of the letter of intent as a positive sign because Toyota would not have asked for the extension if it did not have significant interest in one or more of the GWG properties. Given the proximity of the GWG extension and the announcement a major subsidized mining investment by the same company, I'm inclined to think there may be more going on than simple conversation.

    With a total of 219.6 million shares issued and issuable upon exercise of warrants and options, GWG has an implied enterprise value of roughly $65.9 million (Cdn). Any significant transaction with a company like Toyota Tsusho would do nothing but good for the stock price. I suppose we'll know more within a couple of months.

    I continually harp on the fact that many companies in the energy storage sector are not proactive enough when it comes to assuring long-term adequacy of their supply chains for critical metals. It's almost as if they believe in a natural resource fairy to provide the metals they'll need 10 years down the road. So far, Toyota seems to stand alone as a company that has evaluated its long term needs and taken reasonable steps to insure the continuity of supply for its mission critical materials.

    There is a lesson here and companies that do not heed it do so at their peril.

    Disclosure: Long GWG.V

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  • Jack Lifton
    , contributor
    Comments (431) | Send Message


    I also think there's more going on here than meets the eye. Great Western is, I believe, going forward in South Africa with its Steenkampskraal project in Cape Province. This project, as I said late last year, may well become the first heavy rare earth commercial production level site-outside of China- before the end of 2011. Great Western's discoveries at both the Benjamin and Douglas Rivers sites in northern Saskatchewan, the ones that Toyota is interested in, are longer term developments but also involve strikingly rich deposits of rare earths with substantial heavy rare earth content. I wonder if Toyota isn't looking to take a broader position in GW than meets the eye? It wouldn't surprise me at all, although I have never discussed it with any employee of GW. GW would be a very good investment for Toyota, and Toyota is not known for passing by too many good deals.
    20 Jan 2010, 10:39 AM Reply Like
  • John Petersen
    , contributor
    Comments (30632) | Send Message
    Author’s reply » Thanks for jumping in with your thoughts on this one Jack. Since my experience in mining is both old and limited, I think you're in a far better position to discuss the business dynamics that seem to be at work here. Some speculations allow you to watch carefully, wait for the first news and then jump in for a longer run. A speculation like this one requires pre-positioning because news will result in a vertical spike rather than a multi-day run.
    20 Jan 2010, 10:54 AM Reply Like
  • Mayascribe
    , contributor
    Comments (11198) | Send Message
    John & Jack: Great news for us Great Western shareholders, though odd that (GWMGF) is snoring today. Down 4%, on low volume.
    20 Jan 2010, 10:50 AM Reply Like
  • renim
    , contributor
    Comments (1643) | Send Message
    For comparison I attached some links to Galaxy resources (the first link is 5mb though). I thought some costs would be appropriate for what is under construction currently with commission around end of year. Market Cap is approx. Aud 177m. targeted to produce 17,000 tpa of lithium carbonate starting year end


    go to page 45 to see costs for Galaxy Lithium project


    'Indicative' grade of end product is at the bottom of this page
    3 Feb 2010, 06:36 AM Reply Like
  • renim
    , contributor
    Comments (1643) | Send Message
    this is the type of reason i went REE instead of Lithium
    once POSCO achieves its goal, then Lithium will be like Magnesium, a resource with unconstrained reserves. (ie a low term price ceiling will be set)
    24 Feb 2010, 07:18 AM Reply Like
  • John Petersen
    , contributor
    Comments (30632) | Send Message
    Author’s reply » It will be interesting to see whether they can make the economics work. I heard somewhere that each cubic mile of seawater contains over metric ton of gold; but we don't see a lot of people pursuing that business because the processing costs are too high. I have no idea what the economics of lithium from seawater process might be, but I'm not ready to strike through the lithium supply chain risk on my tick list just yet.
    28 Feb 2010, 07:29 AM Reply Like
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