Pan American Lithium Corp, (TSX.V:PL) is a brand new opportunity for investors interested in participating in the expected boom in lithium demand. But contrary to many of the junior companies rushing to throw their hats into the ring, Pan American Lithium is both well advanced and diversified in terms of locations and source types for lithium stocks.
“We’re going to be, without question, the best lithium story out there,” said Andrew Brodkey, Pan American’s CEO.
Quite an ambitious statement, coming from a company that has only just listed on the TSX Venture exchange. But then the developments within the company to date suggest that this might not be pure hubris.
“The reason why we’re the best story is really simple,” he continued. “We’ve got the best properties, and we’re going to be one of the fastest into production. The timeline is relatively short, and the market is failry well understood y the people who are starting to develop the industry. The whole worldwide consumption is still under 100,000 tonnes per year of lithium carbonate, which is the standard commodity form in which lithium is sold.
85,000 tonnes of that annually is through a couple of big operators, and 70% of the production comes from South America.”
The largest supplier of lithium in the world is Chile-based SQM, who last year boosted lithium production from 30,000 to 40,000 metric tonnes annually. SQM has 30% market share of the global lithium market.
Financing Not a Problem
Pan American Lithium has already attracted a major industrial investor – testimony to the viability of their assets. The company announce earlier this week that POSCO, a privately held Korean conglomerate, had entered into a non-binding letter of Intent with Pan American, whereby an amount of up to CDN$5 million may be invested by POSCO.
POSCO will make an initial payment of CDN$1 million on signing of the subscription agreement– POSCO will make the remaining payment of CDN$4 million at closing of the subscription agreement. POSCO will receive Pan American Lithium stock shares at a price of CDN$.50 per share, or such greater price if required by the policies of the TSX Venture Exchange– for each share purchased, POSCO will receive a 1/2 warrant to purchase Pan American Lithium shares at a price of CDN$1.00 per share for 2 years; the warrants.
POSCO is a privately held Korean conglomerate, first established in 1967, with a focus on the production and sale of steel and steel products, both domestically in Korea and internationally. POSCO is the fourth largest steel producer in the world. In 2008, POSCO produced over 33 million tons of crude steel, had revenues of over CDN$28 billion and net profits of over $CDN4 billion.
Pan American Lithium controls interests in nine “salars” with the potential to produce lithium and other metals from surface lakes and subsurface brines, all located in the mineral-rich Atacama Region III of Chile. The rights in these nine lithium salars cover a cumulative area in excess of 11,500 hectares, all accessible via serviceable roads. Pan American Lithium has submitted a NI43-101 compliant report on these projects and is currently reviewing its portfolio to determine a priority amongst these properties and a process to move forward on the technical assessment of these sites.
Mexican Geothermal Plant Brines
As announced on December 21, 2009, Pan American Lithium the option to acquire 76% of the shares of Escondidas by Pan American Lithium, which will result in Pan American Lithium receiving indirect interests in a joint venture whereby Escondidas and another party will jointly develop lithium and precious metals through concessions in the geothermal brines currently being produced at the Cierro Prieto geothermal power plant located in Baja California, Mexico, roughly 30 km south of the city of Mexicali.
The beauty about geothermal brines is there is absolutely ZERO cost or exploration risk.
Uses for Lithium Lithium is a metal from the alkaline family whose main properties are:
- Lightest solid element at room temperature;
- Low coefficient of thermal expansion;
- High electrochemical potential.
Given their versatility, lithium chemicals have a wide variety of applications. Because lithium is the lightest solid element at room temperature and it has a high electrochemical potential, lithium is the ideal cathode material for rechargeable batteries (lithium-ion) and anode material in primary, or non-rechargeable, batteries.
Around 27% of lithium is produced for batteries used in devices such as cellular phones, portable computers, digital cameras, handheld electronics (PDAs) and MP3s, among others.
In a solid state, lithium is the element with the greatest caloric capacity and therefore is utilized in applications that involve heat transfer, such as ceramic glass, an important component in kitchen stovetops. One of the main advantages of using lithium to manufacture this type of glass is that it improves its appearance, and lithium’s high caloric capacity makes glass harder. Having a low coefficient of thermal expansion makes lithium-containing glass and ceramic coatings (glazes) more resistant to high temperatures and sudden changes in temperature. In addition, adding lithium to glass gives the glass certain physical and mechanical properties such as hardness, shine and increased resistance to chemical agents, among others.
In the last few years, lithium use has experienced significant growth in the steel industry, particularly in continuous casting powder processes where lithium carbonate affords greater speed and fluidity in the molding process. Despite the fact that lithium demand for this application is strongly linked to economic cycles,this application grew between 4 and 5% in 2008.
Demand for lithium hydroxide grew by between 1 and 2% in 2008, resulting primarily from its use in batteries since the principal use for lithium hydroxide –in lubricating grease– showed no growth during the year asa result of the deceleration in the automotive industry that began during the second half of the year.
Lubricating grease represents approximately 75% of the total market for lithium hydroxide. In fact, estimates indicate that more than 70% of the lubricating greases produced in the world contain lithium.
A wide variety of organic and inorganic derivatives are produced from lithium carbonate, lithium hydroxide and lithium chloride. These derivatives have various applications, mainly in the chemical and pharmaceutical industries. Over time, lithium derivatives have shown fairly stable growth rates which are expected to continue in the medium to long term, since these applications in general are very specific and not sensitive to economic cycles.
The company is led by Andrew Brodkey, CEO, President and Director – who has 25 years in the mining industry as a mining engineer, lawyer and senior executive with a focus on corporate legal and business development activities at major mining companies with an emphasis on Latin America, including Magma Copper Company and BHP Copper Inc. Mr. Brodkey also created the International Mining & Metals Group of CB Richard Ellis, Inc (“CBRE”).
Conclusion
Lithium is on the verge of a major explosion in demand thanks to the anticipated transformation of the world’s automotive fleet from hydrocarbon power to battery power. Most major auto manufacturers have announced their intention to produce some kind of lithium battery powered automobile, and personal electronics are increasingly powered by these highly efficient and energy-dense power sources.
Pan American Lithium, with its diverse project portfolio, is probably one of the best ways to capture the opportunity afforded by this emerging market.
