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John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in... More
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  • There Could Be a Big Play in Lithium 1 comment
    Nov 20, 2009 11:31 AM | about stocks: SQM
    It’s 1910, and I’m trying to get you to buy a company that refines gasoline, just before the number of cars in the world explodes from 1.3 million to 250 million. That’s what I’m trying to accomplish when I pile investors into Sociedad Quimica Y Minera (SQM), the Chilean company that is the purest play on lithium production (click here for their website). Early believers have booked a 60% gain so far, and there is a lot more to go (click here for my call).  The Electrification Coalition, an industry trade group, says that the number of electric cars on the road is about to go ballistic, with a dozen companies planning all-electric model launches in the next two years.  The first 120 million vehicles will shrink our oil imports by 8 million barrels a day to nearly zero, cutting our bill by $250 billion annually, and no doubt putting a major dent in the price of oil. Fire departments are even training first responders on how to deal with huge lithium batteries in car accidents with “hazmat” teams. A battery charge is 75% cheaper than filling up a tank with gas, meaning our transportation costs are about to fall dramatically. SQM has to increase its production by a factor of ten, or face a takeover by a much larger company looking to move into the alternative energy space, possibly from an American oil major. Is anyone at Exxon (XOM) or Chevron (CVX) listening?
    Stocks: SQM
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  • How about junior companies? There's a lithium index that's tracked the last year and it has done far better than SQM and the FMC.

     

    Lithium market overall is a very interesting oligopoly as it stands where SQM produces Lithium as a byproduct of their fertilizer. Despite their claims of dominance and no need of additional entrants into the market, end users are showing us with their investment dollars that it's not the case.

     

    Magna struck a deal with a private lithium junior in Argentina. Toyota just signed a deal with a project developer touting production by 2012 in Argentina. Mitsubishi has a deal fetching from China, producing lithium from hard rocks.

     

    Some of the companies I'm up on so far include:
    - International Lithium (TNR Gold on TSX)
    - Western Lithium (WLC on TSX)
    - Canada Lithium (CLQ on TSX)

     

    There are plenty of promotional plays, especially in Nevada where the frighteningly unregulated OTCBB. I'd steer away from American Lithium, for example. Calling Nevada Saudi Arabia of lithium is both ignorant and foolish.
    25 Feb 2010, 12:29 PM Reply Like
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