Lithium and other Rare Earth Elements are widely distributed throughout the Earth, but Lithium does not occur in its elemental form because of high reactivity. This makes Lithium a comparatively rare element, there are a fairly large number of both lithium mineral and brine deposits but only a few of them are of actual or potential commercial value. Many are very small, others are too low in grade. At 20 mg Lithium per kg of Earth's crust, Lithium is the 25th most abundant element, Nickel and Lead have approximately the same abundance.
Lithium is critical to the future of technological innovation. You may be asking yourself why has this become such a hot topic as of late. Let me tell you, Lithium is required to build batteries for electric and hybrid cars. To date the largest supplier is the Chinese, but things are about to change. The Chinese government recently announced they are planning on reducing the amount of Lithium they export, wait it gets better, demand is expected to rise 60%. One problem is there are not very many Lithium Mining plays on the market and the ones that are have risen drastically. Quest has gone from 5 cents a share to 3 dollars a share, missed that boat.
After some research I found three companies with three different levels of risk/reward. Let us start from the lowest risk to the highest risk: SQM (NYSE:SQM) and Rockwood Holdings (NYSE:ROC) are by far the least risky because they both have existing Lithium mines in Chile and USA. Rockwood also has lots of downstream sales through its specialty chemicals and advanced materials businesses. An Australian company, Galaxy Resources Limited (ASX:GXY) with big plans and support from the Chinese is my choice of a medium risk play. Galaxy is at an advanced stage of developing its Mt Cattlin Lithium Project in Ravensthorpe, Western Australia. Galaxy intends to add value to the Mt Cattlin Project by establishing its own downstream Lithium processing facilities in China. The Company is finalizing plans to establish a lithium carbonate chemical facility in Jiangsu Province, producing lithium carbonate. The last company with the most potential and highest risk is Lomiko Metals Inc. (CVE:LMR). On February 16th, 2010, Lomiko signed a deal with Japan Oil, Gas and Metals National Corporation (JOGMEC) to a $ 2.5 million USD MOA to earn 51% of Lomiko’s Alkali Lake Lithium Brine Property in Nevada (right by Rockwood's Mine). Now Lomiko is trying to sell an interest in their other property in Chile, right by SQM’s property, this spells an even greater opportunity!
*Full Disclosure: I do own shares in CVE:LMR and I will be adding to my position in the next few months.
Disclosure: Long CVE:LMR