Talison Lithium (TSX – TLH) - the world’s only pure lithium producer
TLH on AOTH
Richard (Rick) Mills
Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information
Throughout our history, some elements, much more than others, have advanced technologies and driven our economic growth – from wood to coal and then to burning oil to produce steam stands out as a recent example.
Today we are witnessing a revolutionary change in the way our electrical storage needs are being met.
Leading the change is lithium, which until very recently, has been used primarily for the production of aluminum, tritium, ceramics, high temperature grease and glass.
But lithium makes an excellent battery for use in a wide range of applications - batteries using lithium have been found to have a high energy to weight ratio, can be molded into amazing shapes and have longer lives than conventional batteries.
And when used as a rechargeable battery there is no memory effect.
Talison Lithium Inc. TSX – TLH is the world's largest primary lithium producer - production from its Australian operation fills roughly a third of the world’s lithium demand and supplies 75% of Chinese demand.
Talison began trading on the Toronto Stock Exchange September 22nd 2010. The company’s initial public offering (IPO) raised $40 million. An additional bought deal financing of $80 million, including over allotment, was recently announced. This money is being used to nearly double production at their Greenbushes lithium mining operation in Australia, and exploration at their new Salares 7 project in Chile.
The Greenbushes Lithium Operation has been producing lithium for over 25 years. The mine is located 250 kilometers (km) south of Perth/Fremantle - a major container shipping port - and 90 km south east of the Port of Bunbury - a major bulk handling port - in Western Australia.
The Greenbushes ore body is a highly mineralized zoned pegmatite with a strike length of more than three km - Greenbushes mineral reserve is unique, it grades 50% spodumene. This makes Greenbushes the highest grade lithium mineral resource in the world at 3.9% Li2O mineral reserves and 3.5% Li2O mineral resources versus 1.0 – 2.0% Li2O for other known hard rock deposits.
Talison’s Greenbushes lithium mineral resource is open along strike and at depth so there is significant potential to increase lithium mineral reserves and mineral resources extending the life of mine (LOM) while at the same time increasing production rates.
Talison’s Greenbushes Lithium Operation produces two categories of lithium concentrates:
- Technical-grade lithium concentrates - low iron content for use in the manufacture of glass, ceramics and heat-proof cookware
- High yielding chemical-grade lithium concentrate - used to produce lithium chemicals which form the basis for manufacture lithium-ion batteries for laptop computers, mobile phones and electric cars
Talison does not produce lithium chemical products, instead the company sells lithium concentrate directly to customers for processing into lithium chemicals. Presently Talison is expanding its lithium production to supply the growing need in the battery market. Talison designed its initial Stage 1 expansion to increase total production capacity to approximately 62,000 tonnes of lithium carbonate equivalent.
Aggressive and continual demand caused Talison to plan for further expansion by nearly doubling the current run-rate production of 50,000t lithium carbonate equivalent to 100,000t - the Stage 2 expansion of the chemical-grade plant is being funded by the recent $80 million financing. Long lead time items for the expansion have already been ordered.
Most of the world's lithium comes from a small group of producers:
- Sociedad Quimica y Minera (SQM), the Chilean national mining and chemical company
- Chemetall, part of Rockwood Holdings
- FMC, part of FMC Corporation
Talison is the only primary pure lithium producer in the group and is the only one of the four not producing from brine operations in South America.
Talison’s IPO completed the merger between itself and Vancouver based Salares Lithium Inc. Talison bought Salares Lithium to get control of of their early stage Salares 7 lithium brine project in Chile.
This two pronged approach – combining hard rock and brine mining in one company - towards meeting increased global demand for lithium makes a lot of sense. Lithium production from brine is dependent on the weather, if the sun isn’t shining evaporation rates suffer - but brine mining lithium has the added benefit of potentially low cost production with margins as high as 50%. Meanwhile production of lithium from hard rock carries on 24/7/365.
The synergies of the two production methods, together in one company, means guaranteed delivery of lithium supplies to Talison’s customer base with potentially lower overall production costs.
Talison’s “Salares 7″ project is siutated in the Atacama Desert, Chile. Drilling is expected to start in early February 2011. The potential for potash credits may very well come along with this drill program.
The “Salares 7” lithium project consists of 117,904 hectares with over 39,400 hectares of exploration potential solely within actual salares/brine lakes. Historic sampling (non NI43-101 compliant) has returned lithium and potassium in all seven salares with grades up to 1,080 ppm lithium and 10,800 ppm potassium.
Talison controls 100% of five of the salares.
Surveys have presently been conducted on two salars:
Salar de la Isla - Encompasses a total of 16,500 hectares and is approximately 22 kilometers long and 6 km wide on average. The northern area surveyed and studied comprises approximately 65% (10,750 hectares) of the areal extent of the salar.
Using the results obtained from the 38.5 line km survey, Geodatos SAIC ("Geodatos") of Santiago, Chile constructed a three dimensional model of the distribution of the interpreted brine bearing horizon.
Using a resistivity cut-off of 1 ohm/meter (interpreted by Geodatos as definite brine), Geodatos than calculated the brine bearing horizon within the northern portion of the salar to have a volume of 2.459 billion kilolitres (a kilolitre is equal to a cubic meter). Using a resistivity cut-off of 2 ohm/meters (interpreted by Geodatos as possible brines) the calculated volume of this horizon increases to 5.393 billion kilolitres.
Salar de las Parinas – This salar is situated approximately 6.5 kilometres southeast of the Company's Salar de la Isla and encompasses a total areal extent of 5,400 hectares. The TEM survey lines for Las Parinas were extended beyond the boundaries of the salar onto areas covered by alluvial and/or volcanic material. The survey identified a continuous brine bearing horizon that extends up to 2.5 km from the salar’s edge and underneath the adjacent rocks.
Using the results obtained from the 26.5 line km survey Geodatos constructed a three dimensional model of the distribution of the interpreted brine bearing horizon. This horizon extends from surface to a depth of 170 meters.
Using a resistivity cut-off of 1 ohm/meter (probable brine) Geodatos has calculated the brine bearing horizon within the surveyed portion of the las Parinas salar to have a volume of 1.177 billion cubic meters. Using a resistivity cut-off of 2 ohm/meters (possible brines) the calculated volume of this horizon increases to 4.009 billion cubic metres.
Shares Issued: 93,529,157
Fully Diluted: 102,701,988
Cash: $38,000,000 (As of December 31st.) Pre-Financing
Talison, as the only pure producing lithium play, offers potential investors many attributes:
- Unique exposure to both mineral (hard rock) and brine sources of lithium
- Talison is the primary lithium supplier to China – China is the largest and fastest growing consumer worldwide
- Growing demand for lithium from traditional uses and new applications
- Proven and experienced leadership
- Highest grade lithium mineral resource in the world at its 100% owned Greenbushes operations
- 25 years of lithium production and sales history
- Well established and diversified global customer network
- Low cost, rapid plant expansion currently in progress
- Salares 7: prospective brine exploration project in Chile
- Potential lithium carbonate plant in Western Australia
- Talison is the largest lithium producer globally by sales since 2009
Talison has been included in the Solactive Global Lithium Index. Global X Lithium is the world's first lithium based Exchange Traded Fund (ETF) and uses the Solactive Global Lithium Index to track the performance of lithium mining, refining and battery producing companies.
Talison increased sales in the three months ended December - the company's second quarter - to 97,559 tonnes of lithium concentrate, 54% higher year over year (yoy). Both production and sales rose to company records in the December quarter.
Talison is producing at capacity and sells 100% of its production. The companies output will continue to rise from the recently completed Stage 1 expansion and the recently initiated Stage 2 expansion will add to production levels in the future.
Global lithium carbonate demand is only going to increase further as the push towards ‘green’ transport solutions, such as the electrification of America’s transportation system, continues. There are forecasted to be one million electric vehicles (EV) on the road, just in the US, by 2015 – there is a trend (reducing our carbon footprint and weaning ourselves off fossil fuels) in place and its momentum is accelerating.
The world’s first Exchange Traded Fund (EFT), focused solely on lithium, has highlighted the mineral’s growing appeal to investors.
Is Talison Lithium (TSX – TLH) the world’s only pure lithium producer on your radar screen?
If not maybe it should be.
Richard (Rick) Mills
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This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
Richard Mills does not own shares of any company mentioned in this report.
Talison Lithium TSX - TLH is an advertiser on his website aheadoftheherd.com.