Canada Lithium (TSX:CLQ, OTCQX:CLQMF) has issued 174 million shares and options for a fully diluted market capitalization of $142 million and holds cash of $10 million.
The company is fast tracking the completion of feasibility studies and permitting at its Quebec Lithium Project located near Val d’Or in Quebec, and expects to commence production in the second half of 2012 to sell into a fast growing market for battery-grade lithium, known as lithium carbonate / Li203.
Lithium carbonate consumption for cell phones and batteries runs 5 to 10 grams per appliance, hybrid cars consume 6 kilograms, plug in electric vehicles use 12 kilograms and bulk storage batteries can utilize up to 800 kilograms for a 1 megawatt capacity.
Current consumption has been concentrated in cell phones, computers, cameras, Ipods and power tools but has been moving into heavier tools such as lawn mowers, chainsaws, wheelchairs, scooters and motor boats and the latest generation of 2012 cars boasts 25 models with lithium-powered batteries. Extra demand will also come from warehouse sized batteries for grid stabilization and back up batteries for home and business.
The big jump in lithium consumption will be driven by the Asian electric car market, where most of the world’s lithium batteries are manufactured. China is currently 2 to 3 years ahead of America and Europe, has 120 million electric scooters on its roads and is now the world’s largest car market.
Chinese car manufacturer BYD (HKG:1211) has started field testing its E6 hybrid car which claims 330 kilometers on one charge. China currently has 47 cars per 1,000 population, and is aiming to reach the same penetration as Brazil with 140 cars per 1,000 population by 2020. This will require 250 million new cars, or 25 million cars per year, with a significant quantity of them being electric vehicles.
Another very significant market will be India with 38 cars per 1,000 population. Roskill projects demand for lithium batteries to grow from 24% to 40% of total market demand for lithium by 2015, and estimates that that production of 6 million electric vehicles per year will consume an additional 160,000 tonnes of lithium carbonate.
According to Ernst & Young, the Chinese are six times more likely to purchase an electric vehicle than an American or Japanese. Nissan says that 10 million electric cars per year will be sold by 2016, and most car manufacturers are scrambling to find guaranteed sources of lithium carbonate supply.
Many developers of lithium resources have established strategic relationships with car companies or battery manufacturers. Canada Lithium has an agreement with Mitsui (NASDAQ: MITSY, TSE: 8031), a major worldwide corporate conglomerate, to market some of Canada Lithium’s product in China, Japan and Korea.
Canada Lithium’s Lithium Project is located close to Val d’Or, Quebec, which has a population of 31,000 and is near to paved roads, rail, cheap electric power, skilled labor and infrastructure needs. Quebec also has a number of technology companies involved in the development of lithium battery technology including Phostech Lithium, Bathium/Ballore developer of lithium metal polymer battery, and Hydro Quebec, which is an electric utility that is involved with new technologies that use electricity.
The Quebec Lithium Project was a former producer of lithium carbonate, lithium hydroxide and spodumene from 1955 to 1965. The company recently completed a NI 43-101 compliant study for a Measured and Indicated Mineral Resource of 46.7 million tonnes of Li2O at a grade of 1.19% and an Inferred Resource of 57.6 million tonnes at a grade of 1.18%.
A prefeasibility study indicated that pegmatite dyke extensions can be economically extracted by bulk mining from an open pit with a mine life of 30 years, and with pegmatite extensions open and plunging at depth below the final pit floor.
The process rate was calculated at 3,000 tonnes per day for an annualized 1 million tonnes of ore at a grade of 1.12% of Li2O. All of the ore will be crushed, ground and run through a floatation circuit to produce 185,000 tonnes per year of spodumene at grade of 6.5% Li2O, with 20,000 tonnes sold into the ceramics and glass market. The balance of the ore will be run through a two phase kiln, leached and then run through a lithium carbonate precipitation circuit, to produce 19,300 tonnes of battery grade Li2O3 at a grade of 99.5%.
The capital costs to construct a mine, process plant, infrastructure and contingency costs are estimated at more than US$150 million. Operating costs to produce lithium carbonate are estimated at US$1.27 per pound / US$2,800 per tonne, to produce revenue of $2.70 per pound / $5,850 per tonne.
Pre-tax Net Present Value is calculated at a very positive US$325 million, with an Internal Rate of Return of 33% and payback of 3.1 years. Prefeasibility studies indicate a total EBITDA of US$872 million at US$2.70 per pound.
Additional potential revenues may come from production of lithium hydroxide, sodium sulfate, silica quartz and K and Na feldspars. Canada Lithium expects to complete feasibility studies, mine planning, permitting and construction by the second half of 2012.
Current worldwide production of lithium is 90,000 tonnes per year and is expected to rise to 191,000 tonnes per year in 2015. The bulk of current production comes from brines located in Chile and Argentina.
Canada Lithium will produce at a rate of 19,000 tonnes per year from “hard rock” pegmatite and estimates that it will become the world’s fourth largest producer of lithium.
The Chemical & Mining Company of Chile Inc. (NYSE:SQM) capitalized at $13.4 billion is the world’s largest lithium producer. SQM produces 30,000 tonnes per year from massive Chilean brines located in the Atacama salt desert, where it has a number of other projects producing fertilizers and chemicals.
Unlisted Chemetall is the second largest producer of lithium and operates from Chilean brines, producing 25,000 tonnes per year.
FMC Corp (NYSE:FMC) capitalized at $5.36 billion is a diversified chemical company, with two brine deposits producing 19,000 tonnes of lithium per year. FMC recently announced price increases of up to 10% on a variety of lithium products, which will indirectly help Canada Lithium to fund its project.
Galaxy Resources (ASX:GXY) is capitalized at A$313 million and will produce 17,000 tonnes per year of lithium from pegmatite at its Mount Cattlin Mine, in Western Australia. The company is also selling $30 million in convertible securities and planning to list on the Hong Kong Exchange, and its current valuation is indicative of pricing for a pegmatite miner such as Canada Lithium, where the planned production rate will be greater.
Disclosure: no position