Electric cars powered by lithium batteries may still be at the early stage of development, but the projected demand for lithium, the cars’ primary source of power, is sufficient to fuel the interest of mineral exploration companies eager to tap this potentially huge market.
Recently listed International Lithium Corp. (TSXV:ILC) is one such company. The Vancouver-based mineral exploration outfit remains in its infancy, describing itself as a pre-resource company. But it has set out a highly focused agenda over the next four years in which it plans to move towards mine commissioning at its flagship lithium brine project in Argentina and advance its eight remaining projects.
Company President Mike Sieb says ILC was conceived several years ago by mineral exploration company TNR Gold Corp. (TSXV:TNR) in response to the burgeoning awareness of the lithium sector as a green energy alternative and therefore an investment opportunity. TNR compiled its lithium and rare metals assets and spun them off to create ILC, which was listed on the TSX Venture Exchange in May this year.
The parent company, now ILC’s largest single shareholder with 28%, decided the timing was right given the advent of electric vehicles and the fact that ILC could secure a competitive advantage as an early-stage participant in the growing lithium market.
“This recognition of opportunity was prior to everybody else deciding to jump two feet into the brine,” Sieb quips, referring to the salar brines, or salt lakes, in the renowned lithium belt of South America, which is the primary source area for the soft, silver-white metal.
Like its parent, ILC’s business strategy is to take on the role of lead project generator, with the acquisition of several early-stage projects. It is now focused on adding value to those projects both internally and via joint-venture development, in which costs and risks are diversified.
ILC has a market capitalization of $7.7 million and at the time of publication, its shares were trading at $0.11.
ILC currently has nine active rare metals projects, balanced between lithium brines in Argentina and Nevada, and rare metals hard-rock pegmatites in Canada and Ireland.
Mariana Lithium Brine Project
Located in the province of Salta, in the Puna region of the Andes, ILC’s flagship Mariana lithium brine project consists of several contiguous claims over 160 square kilometers strategically encompassing the entire salar.
The company is looking to advance the Mariana project through feasibility towards a production decision within four years, which is about half the rate of any other mining operations, Sieb says. Still, the rapid timeframe will be challenging. Among ILC’s main obstacles are having the finances in place to achieve its goals in a timely way, and having a team in place with the competency to be able to develop a project so quickly, he explains.
But Sieb remains positive about ILC’s ability to adhere to an aggressive timetable through the infrastructure and resources built up over the last 18 years by TNR, which has a long-standing presence in gold and copper exploration in Argentina.
Having resident personnel definitely does facilitate the process as ILC commences its initial drill program at Mariana mid to late November, Sieb says.
Sieb adds the Mariana project is expected to require approximately $30 million over the next three to four years to advance it through the feasibility stage.
Mavis Lake and Fairservice
More locally, ILC has recently completed drilling on the rare metals pegmatite at its Mavis Lake and Fairservice project, located 15 kilometres northeast of Dryden, Ontario. Pegmatite or hard rock projects involve a more familiar form of exploration through to development, Sieb explains, indicating that the timeframe for production is therefore longer than a lithium brine project.
“From start to finish on average, you’re looking at an eight-year timeframe.”
The property is easily accessed via the Trans-Canada Highway and a series of logging roads. And the claim blocks comprise a total of 2,624 hectares and cover several known rare metal pegmatites, a coarse-grained, igneous rock that is similar to granite in composition.
ILC collected 394 samples at Mavis Lake and Fairservice from 20 drill holes totaling 1,753 metres and is awaiting results, due by December this year.
“Work to date has revealed significant potential, which will need to be quantified in subsequent programs,” Sieb says. “In response, the company plans continued drill programs at Mavis Lake/Fairservice to provide an indication of rare metals grade and tonnage,” Sieb says.
ILC also manages a rare-metals pegmatite project in Ireland, where TNR holds eight exploration licenses to explore the Leinster pegmatite belt in the country’s southeast region totaling 292 square kilometres.
ILC remains, at this early stage, confident about the potential of each pegmatite project. Each of these share some key characteristics including being underexplored, having excellent accessibility and an under-analyzed rare metals’ history, ILC states on its web site.
Driving ILC’s focus is the ardent belief that the demand for lithium will grow significantly over the next few years, particularly with the advent of electric vehicles, including hybrids.
The first commercial lithium battery was released by Sony in 1991, a development that revolutionized consumer electronics. Lithium now powers most cell phones, as well as iPods, BlackBerrys and handheld computers.
Early versions of electric vehicles were powered by nickel-metal hydride batteries, but the cars’ performance was limited. With its unique properties, lithium will allow the next generation of electric cars to go further, Sieb notes.
Among the car companies jumping on the lithium-power bandwagon are Ford, Honda and Mitsubishi. The Ford Focus Electric, Honda Fit EV and Mitsubishi i-MiEV are electric vehicles that will roll out later this year or in 2012.
A study by the University of Michigan and Ford Motor Co. published in the Journal of Industrial Ecology in July this year concluded that the world has sufficient lithium resources to power electric vehicles for the rest of the century.
The study estimates that the global lithium resource is estimated around 39 million tons and that at least 19 million tons of that can actually be recovered, taking into account economics and processing issues.
Sieb cites the current global consumption of lithium in terms of lithium carbonate equivalent, as 120,000 tons a year. But he sees this demand growing around 8-12% compounded annually, concluding that consumption will double every seven years.
In an interview with The Energy Report, David Talbot, a senior mining analyst with Dundee Securities in Toronto, says that by 2020, lithium carbonate demand might reach as high as 240,000-270,000 tons per annum. “If electric vehicle penetration picks up as expected, primarily in Asia and China, we could see a true renaissance that might help keep up with the potential production coming online,” Talbot says.
Crucially, overall demand for lithium by electric car makers in particular could be tempered by how well the vehicle is adopted by the masses. “We do think it will be adopted, but to what extent? We’re not quite sure,” Talbot told The Energy Report. “Outside of Asia, a lot of hype is going on in Europe and North America. No one knows how quickly people in those countries will adopt new electric vehicles.
Currently, lithium is used primarily for industrial purposes such as glass, ceramics and grease. But Sieb estimates that 30% of the lithium produced annually is now used for batteries. “That is the growth sector,” he adds.
Beyond electric car applications, Talbot says we could start seeing some lithium batteries being used for large-scale electrical storage. “Single batteries storing dozens of megawatts might power a small town or factory. That application could potentially drive demand further.”
Demand for lithium stems mainly from Asia — primarily China, Japan and Korea — but the United States is also attempting to weigh into the market.
“It is purported that there are greater than 20 different companies worldwide that are in the process of engineering electric vehicles as we speak,” Sieb says. “So the situation is turning more into an international demand centre than has historically been in place,” he adds.
Management & Shareholders
Crucially, Sieb notes that ILC management is highly incentivized, holding approximately 60% of the company.
ILC’s one strategic partner for now is China-based lithium products manufacturer Ganfeng Lithium, which holds 10% of the company. Sieb describes the coupling as vital both in terms of financial backing to advance projects to the production phase, and at the end of the exploration and development cycle when it comes time to sell the mine product. A reliable source of lithium is critical to an end product user’s business plan and growth, Sieb says.
Given the scale of work ahead of it at its nine existing projects, the company is always open to additional partnerships.
On the road ahead, Sieb says: “We are just on the first step right now. …I’m planning to take those steps over the next few years and move up that value realization curve and to see International Lithium to its goals.”