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Lithium May Power Third Industrial Revolution

US Automotive Industry to Become Electric Vehicle Pioneers by 2022Last week, Lithium Investing News took a stab at debunking the peak lithium myth, presenting various statistics and studies that show that the lithium market will be well supplied for at least the next 100 years. While that’s good news for battery companies and electric vehicle (EV) manufacturers, where does that leave resource investors looking to capitalize on rising lithium demand?

The lithium resource market is dominated by four (soon to be three) major players: Rockwood Holdings (NYSE:ROC), FMC (NYSE:FMC), Sociedad Quimica y Minera (NYSE:SQM) and Talison Lithium (TSX:TLH). Rockwood made a bid for Talison in August, but Talison will remain in existence until shareholders and regulators approve Rockwood’s $724 million acquisition bid. For investors interested in junior mining stocks, the key is finding up-and-comers with a strong, seasoned management team and economical projects. Bonus points go to those with strategic off-take agreements.

Any junior lithium company looking to break into the space “must possess some extraordinary competitive advantages through either low-cost production or end user off-take agreements,” Chris Berry, founder of House Mountain Partners, told Lithium Investing News. Most importantly, “whether or not a company can join the ranks of producers is really a question of management experience in the lithium or industrial metals space,” said Berry, who has been following the lithium market for a number of years.

With the market overcrowded and oversupplied, at least in the short term, lithium juniors may be better off positioning themselves as M&A targets rather than focusing on breaking into the ranks of the world’s major producers. That doesn’t mean companies shouldn’t invest effort and money into readying their projects for production. “A great deal of shareholder value can be created in the discovery process as a junior mining company makes a discovery and then advances the project through feasibility to a production decision,” explained Berry. “If the economics are strong enough, you can be sure that this will attract the attention of major producers.”
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