Daniela Desormeaux: Can Lithium Ride the Electric Vehicle
Source: George Mack of
Although lithium is not in short supply now, electric and
hybrid vehicles could soak up new production of the versatile
light metal for decades to come. In this exclusive interview with
The Energy Report,
Economist Daniela Desormeaux of Santiago, Chile-based signumBOX,
elaborates on small exploration plays that could move up.
: FMC Lithium Corporation Galaxy Resources Ltd. Li3 Energy
Lithium Americas Corp.
Lithium One Inc.
Nemaska Exploration Inc.
Orocobre Limited Rockwood Holdings, Inc. Sociedad Química y
Minera de Chile S.A.
Talison Lithium Ltd.
Western Lithium USA Corp.
The Energy Report:
Who are your clientele?
Our customers are very diverse. Investment banks are looking for
new investments in natural resources, including lithium, which
has become important for its use in batteries for electric
vehicles, and has therefore become very popular. In the last four
years, more than 80 new lithium projects have been announced. So
we have seen a lot of appetite for investment in lithium.
Our customers also include battery companies; they are
interested in understanding the future of lithium because they
have to buy it. We also have customers who are lithium producers
and involved in exploration activities. Lithium is strategic in
terms of its use, and that's why we have seen Toyota, Mitsubishi
and other automakers investing in the industry. They want to
secure their supply of lithium in the future. So, a percentage of
our customers are automakers.
Daniela, lithium trades on industrial supply and demand factors
in a negotiated market. Without a public market for the metal or
its salts, how do you value producers?
Lithium is not traded on a formal market like copper and gold. So
it is impossible to know, for example, how much lithium is traded
in one day and at what prices. The price is determined by
negotiations between producers and customers. So far, production
of lithium chemicals has been concentrated among three main
Sociedad Química y Minera de Chile S.A. (NYSE:SQM;
in Chile, Chemetall, a division of
Rockwood Holdings, Inc. (NYSE:ROC)
in Chile and in the U.S. and
FMC Lithium Corp. (
in Argentina. Meanwhile,
Talison Lithium Ltd. (TSX:TLH)
in Australia is the largest producer of lithium concentrates.
These are public companies that have to release information,
so we can value the lithium business to a certain degree, despite
the fact that lithium is not traded on an exchange. However, we
don't have a daily track of what is happening in this industry in
terms of volumes and prices. On a monthly basis, we track lithium
exports from major producer countries such as Chile, Argentina,
Australia and China.
Do large market-maker companies enjoy a pricing advantage over
smaller companies? Can they get more for lithium because they can
Absolutely, yes. SQM and Chemetall sell more than 50% of the
total use of chemical supply nowadays. They are the drivers of
lithium prices. The main advantage they have is that they are
both located in the Salar de Atacama in Chile, which has the
highest quality lithium resources in the world and is located
within the driest desert in the world.
I know that electric vehicles-cars, scooters and bikes-are a
major growth driver for lithium used to produce lithium-ion
batteries. If these lithium-ion batteries can be charged to five
times the capacity of the same sized nickel-metal hydride
battery, that obviously represents a tremendous efficiency. But
the power still has to be generated by nuclear, natural gas,
coal, hydro, solar, wind or geothermal means. These batteries
don't produce power; they only store it, so what is the value
Well, electric vehicles are an option, but lithium-ion batteries
also serve other technologies, such as hybrid-electric vehicles
and plug-in hybrid-electric vehicles. Pure electric vehicle
batteries can be plugged into a home's electricity for charging;
batteries for hybrid-electric vehicles can also be used while the
engine is running. So it is not just an external source of
electricity. We have also to consider that automakers are
researching other technologies as well, and they have made
important progress on the efficiency of internal combustion
engines, for example. I believe that in the future we will see a
mix of different technologies coexisting. You have to strike a
balance because there are tradeoffs. Yes, you have to generate
the electricity, but if you consider the impact of CO2 emissions,
you will conclude that electric vehicles are the best option
compared with other current-available technologies.
About two months ago, you gave a presentation at the Technology
and Rare Earth Metals Conference 2011. You concluded that there
was enough lithium in the world to meet future demand and that
the price of lithium would remain the same or drop. You also said
there was room for more new producers to come into the market.
Those were your three takeaways. From what you said, it doesn't
sound like a growth industry.
In the presentation, I said that the lithium industry is a growth
industry and it has a real potential because we haven't yet seen
a full implementation of its uses. We are in a transition period
and so we have to wait. It's like what happened in the 1990s:
Sony introduced the first lithium-ion battery, and it was very
successful. In less than five years, almost 90% of the batteries
were based on lithium. So we saw a very fast penetration break
for the lithium battery segment. We still don't know what will
happen in the auto industry, but the future is promising.
Years ago, some news articles questioned the ability of the
world lithium supply to meet future requirements. I think that
many people overestimated the growth in the demand of lithium and
underestimated the amount of lithium resources in the world.
That's why we saw predictions of near-term high price grow.
That's absolutely not going to happen. My perception is that the
future is promising and lithium demand will show interesting
growth rates because it has many applications in addition to
batteries. On the other hand, lithium is abundant as evidenced by
a total of 80 exploration projects that have been announced
globally in the last few years.
Can you address some players?
These companies are not producing lithium right now, but are
exploration mining companies working deposits and projects around
Galaxy Resources Ltd. (ASX:GXY)
is an Australian company that extracts lithium from Mount Cattlin
in Western Australia. The company is building a lithium chemicals
plant in China and has already shipped lithium concentrate
mineral to the site. SignumBOX ranks Galaxy as number one of all
of the lithium mineral projects.
Nemaska Exploration Inc. (TSX.V:NMX;
has a good deposit in Canada. The company also has an important
investor in China (Chengdu Tianqi), which holds 10% of the stock.
Nemaska's Whabouchi Lithium Project is ranked number three at
Companies with projects based on less expensive salar-bearing
brines production include
Orocobre Ltd. (TSX:ORL; ASX:ORE)
Lithium One Inc. (TSX.V:LI)
Lithium Americas Corp. (TSX:LAC)
. All of these companies have projects in Argentina with
strategic partner offtake agreements-Orocobre with Toyota;
Lithium Americas with Mitsubishi and Magna, and Lithium One with
LG International, Kores and GS Galtex.
Li3 Energy (
is considering extracting lithium from a deposit in the northern
Salar de Maricunga area. However, current mining regulation
(which was established after SQM and Chemetall started to produce
in the region) lists lithium as a strategic mineral that cannot
be exported. I strongly believe that this situation is going to
change in the near future since it could cost the government its
global lithium industry leadership position.
Western Lithium USA Corp. (TSX:WLC;
plans to produce lithium in the U.S. from a
deposit located within the McDermitt Caldera Complex. The company
claims that it would be competitive in terms of lithium
carbonate's cash cost; nevertheless, they may not be as
competitive as producers from brines.
Do you believe that Li3 is closer to production than the hard
rock mineral companies we just talked about?
It's difficult to say because Li3 doesn't have the permit to
extract lithium. The company has the mining rights and a
strategic partner, but it needs a permit from the government. As
I said earlier, I think the government will eventually allow new
companies to extract lithium. If Li3 gets the permit, it could
succeed, but it is very difficult to say when this will
You mentioned Nemaska Explorations. I understand that the company
is spinning out its non-lithium properties into a new company,
Monarques Resources. I'm wondering if you believe this will make
it easier for the company to move its Whabouchi Project into
production by 2013.
At this stage, it is difficult to say. As I said before, the
Whabouchi Project is very well ranked by signumBOX because of the
geological characteristics of the deposit and the presence of
China as a strategic investor. But this is a relative ranking,
which gives an idea about which project is more likely to
eventually become part of the lithium supply. It doesn't indicate
when it will occur. It is also important to note that the
survival of many of the projects that are under evaluation will
depend on the price strategy that current lithium producers
decide to deploy.
2013 sounds near term compared to some others. Is that something
investors can hang their hat on?
Well, 2013 is short term and I believe that the biggest potential
for lithium demand will be after 2015 when electric cars become
more commonplace. So, I don't see much room for the entry of
these projects in the short term.
Nemaska has formed a strategic partnership with China's Tianqi
Group, which could purchase as much as 50% of the company's
lithium production. It sounds like a big advantage.
Tianqi is an important Chinese operation that produces lithium
chemicals from lithium concentrates, so they have the experience
and the knowledge of the Chinese market. China is the largest
consumer of lithium concentrates, which are mainly used as raw
materials for lithium chemicals but they are also used in several
industrial applications. In this context, it is crucial for a
lithium concentrate producer to have a strategic partner or
investor in China.
Daniela, I've enjoyed meeting you very much.
is an economist and an expert in industrial chemicals and
natural resources. Prior to starting with
, she was strategic marketing manager at SQM, where she was
responsible for market intelligence on lithium, iodine and
other industrial chemicals. Before joining SQM, she was an
economic analyst at Cámara Chilena de la Construcción, a
Chilean trade association focused on the housing and
Want to read more exclusive
interviews like this?
for our free e-newsletter, and you'll learn when new articles
have been published. To see a list of recent interviews with
industry analysts and commentators, visit our
1) George Mack of
The Energy Report
conducted this interview. He personally and/or his family own
shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are
The Energy Report:
Talison Lithium Ltd., Nemaska Exploration Inc., Western Lithium
3) Daniela Desormeaux: I personally and/or my family own shares
of the following companies mentioned in this interview: None.
From time to time, Streetwise Reports LLC and its directors,
officers, employees or members of their families, as well as
persons interviewed for articles on the site, may have a long or
short position in securities mentioned and may make purchases
and/or sales of those securities in the open market or otherwise.
Interviewees may also receive compensation for investment banking
and related services.
is Copyright © 2011 by Streetwise Reports LLC. All rights are
reserved. Streetwise Reports LLC hereby grants an unrestricted
license to use or disseminate this copyrighted material (i) only
in whole (and always including this disclaimer), but (ii) never
The Energy Report does not render general or specific
investment advice and does not endorse or recommend the business,
products, services or securities of any industry or company
mentioned in this report.
From time to time, Streetwise Reports LLC and its
directors, officers, employees or members of their families, as
well as persons interviewed for articles on the site, may have a
long or short position in securities mentioned and may make
purchases and/or sales of those securities in the open market or
Streetwise Reports LLC does not guarantee the accuracy or
thoroughness of the information reported.
Streetwise Reports LLC receives a fee from companies that are
listed on the home page in the In This Issue section. Their
sponsor pages may be considered advertising for the purposes of
18 U.S.C. 1734.
Participating companies provide the logos used in The Energy
Report. These logos are trademarks and are the property of the
Streetwise Reports LLC
P.O. Box 1099
Kenwood, CA 95452
Tel.: (707) 282-5593
Fax: (707) 282-5592