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Canada Lithium will produce hard-rock lithium in March 2013

Peter Secker has been vindicated. The President/CEO of Canada Lithium Corp T.CLQ has seen his once-shaky Quebec Lithium Project proved viable. And this has in turn proved the viability of an alternative to brine lithium. “Up until now,” he says, “they had always said that hard-rock lithium was not economic. So it’s very interesting to see Rockwood just paid $724 millionto buy a hard-rock producer in Australia. So that must mean it’s not as bad as everybody said it was.”

The Quebec Lithium Project, scheduled to begin production March 2013, comprises 405 hectares 60 kilometres north of Val d’Or. According to an October 11 feasibility study, it contains (at a 0.8% lithium oxide cutoff) 33.2 million tonnes grading 1.19% measured and indicated and 13.8 million tonnes grading 1.21% inferred.

The October study demonstrates the Project to be far more robust than forecast by the previous feasibility study in June 2011. Based on US$5,875 per tonne lithium carbonate, it has a pretax net present value (NPV) of $318 million (at an 8% discount), up from $190 million, and an internal rate of return (IRR) of 32%, up from 22%. These increases can be attributed largely to the inclusion of the economic benefits of coproduct production of lithium hydroxide and sodium sulphate beginning 3Q 2014.

Based on a forecast last month by Roskill Information Services of lithium prices for the years 2013 to 2020, the NPV rises to $456 million, and the IRR rises to 37%. Over a mine life of 14 years, annual production will be 20,000 tonnes of battery-grade lithium carbonate with potential annual production 2,000 tonnes of battery-grade lithium hydroxide and 30,000 tonnes of sodium sulphate. The initial CAPEX is $207 million for the lithium carbonate production and $20 million for coproducts production. Inclusive of coproduct credits, cost per tonne is $2,328, down from $3,164 in the previous study.

As we have seen, Canada Lithium will benefit greatly from these coproducts from its hard-rock mining. As it turns out, in tradition brine-lithium production, the lithium itself is the coproduct. Secker explains, “About 80% of their [brine producers’] revenue comes from potash; about 10% from salts; and 10% from lithium. Whereas our revenue is 100% lithium. And because the brines are salt products—predominantly sodium chloride plus potash, plus lithium—they tend to be a little more complex to separate out. Our feed stock is a lithium oxide with a silica, and it’s relatively easy to get that out through the floatation process.”

Hard-rock production is not only simpler, it’s also much faster. Secker explains, “The typical brine, because it uses an evaporative process, takes anything from 18 months to two years to go from a solution into lithium carbonate. A hard-rock mine takes five days.” Brine production uses the free energy provided by the sun, while hard-rock production needs electricity. Secker points out that this is only 4.5 cents per kilowatt hour (kWh) in Quebec, and that evaporation can be disrupted by above-average rainfall, which is precisely what has happened in Argentina this year.

Canada Lithium will be a major player from the start. Secker says, “There were four main suppliers before Rockwood bought Talison T.TLH, which cuts suppliers down to three. I’m assuming that the battery manufacturers urgently require another independent supply of lithium carbonate. When we come onstream, we’ll produce about 8% of world supply. Then in 2014, we’ll be at full production, 20,000 tonnes, and that will be about 12% of world supply. So we should have a nice little impact on the supply side, but the demand side seems to be growing almost as fast, as air supply comes onstream.”

Demand is driven by the escalating need for batteries, which in turn is driven by the escalating sales of smartphones, laptops and tablets but particularly by electric vehicles. “If you look at the quantum of usage,” Secker says, “a laptop uses probably around 30 grams of lithium carbonate, a cellphone maybe around 5 to 10 grams, but electric vehicles are now using anything from five kilos in a hybrid to 25 kilos for a full electric.”

The future of the electric car is not assured, but Secker is pleased by growth to date and believes sales will increase once prices fall. “There is a premium on it of anything from $3,000 to $7,000,” he reports. “But now you’re talking about over a million vehicles a year, and you’re starting to get some synergies between battery manufactures, plus you’re getting an economy-of-scale factor.

“It’s all about the cost of the battery. A lead-acid battery costs somewhere around $200 to $220 per kilowatt hour; whereas a lithium battery is somewhere around $500 per kilowatt hour. In the last five years, you’ve seen lithium battery costs fall from $1,500 a kilowatt hour to $500 a kilowatt hour. Over the next five years, you’ll see lithium-battery costs start to approach $250 to $200 per kilowatt hour. So there would be no reason why you wouldn’t get significant substitution for lead-acid batteries because lithium batteries are lighter, last longer and are more efficient.”

In the recent past, lithium batteries were inherently unstable. Better chemistry has resulted in better batteries, with obvious benefits to the electric-car industry. Secker points out, “With the new Tesla Model S, the extended battery can get about 500 kilometres from a single charge, compared to the Nissan Leaf which gets about 150 to 160 kilometres from a single charge.”


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