Until the 1970s, there was limited demand for lithium, the lightest metal. It is used in industrial applications such as ceramics and glass and metallurgy. It is a treatment for mental conditions, such as bipolar disorder. It is a component of nuclear bombs.
Generally, though, in areas such as Cornwall, where lithium seeps out of the ground, it was overlooked for centuries, miners concentating on more valuable metals such as tin. All that changed with the development of the lithium-ion battery, first used in home electronics and now in demand for electric cars. As manufacturers such as Volvo look to phase out the internal combustion engine and Tesla, the Palo Alto carmaker, prepares to roll out its Model 3, the first car to be squarely aimed at the mass market, demand for lithium-ion batteries can only grow, presumably peaking at the time when the internal combustion engine is consigned to history and every vehicle is electric.
Some have wondered whether the planet can produce enough of the metal to keep up with that demand from the automotive industry and whether Tesla and the others are producing cars that eventually will contain no batteries — it plans to make half a million cars next year.
The miners, including four tiddlers quoted on the London Stock Exchange, are scrambling to find new sources and ramp up production. As SP Angel, the broker specialising in mining stocks, said in a note this week: “The race is on for miners to secure their place within the lithium supply chain while lithium processors appear fairly desperate for feedstock at the right quality and the right price.”
John Meyer, an analyst at the broker, plays down fears that we may run out of the metal. “There’s more than enough lithium in the world. It’s getting the whole supply chain up and running. It’s getting enough mines into production.”
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The global industry is dominated by an oligopoly of big players who will strive to keep their stranglehold intact. They include the New York-quoted Sociedad Química y Minera de Chile, operating in a country where plentiful supplies of lithium are produced, and another two NYSE companies, Albemarle and FMC. The three are reckoned to account for about half the whole market. For anyone who wants to invest in a lithium boom, the shares are easily traded and can be bought via the usual dealers here.
Two other big operators are Chinese. China is central to the lithium story, Mr Meyer says, because that is where the action is. Processors who refine the metal into the form used in batteries are desperately sourcing new supplies. One Singaporean business that supplies the Chinese chemicals industry and the lithium processors, in particular, is taking a 19.99 per cent stake in one of those four companies on London’s Alternative Investment Market, Kodal Minerals.
This is seeking to produce lithium in Mali, western Africa, with first production expected within a couple of years.
A second, Bacanora Minerals, is seeking to develop its Sonora project in Mexico. A feasibility study is expected by the end of the year. If the project gets the go-ahead, first production could start in 2019.
The third is Savannah Resources, which this month has raised £1.3 million and is developing newly acquired assets in Portugal. Last comes Cadence Minerals. This, the renamed Rare Earth Minerals, adopts a more portfolio approach, taking stakes in mainly lithium mining projects and companies in areas such as Australia, Mexico, Namibia and the Czech Republic, and has more than £40 million invested so far.
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“I think companies like Kodal and Savannah and Bacanora are the way forward,” Mr Meyer says, “but there’s risk associated with it.” And how. The fledgling lithium mining industry makes those wildcat oil and gas explorers that have made and lost investors’ fortunes over the years look like a sure thing. The upside is that if they become too successful, one of those big players will roll over and buy them.