| TORONTO, March 6
TORONTO, March 6 The crowded field of explorers
fighting for capital to produce lithium faces a painful
reckoning as supplies build and prices flatten, leaving those
with low costs and powerful partners still standing, industry
Prices of the critical component in rechargeable batteries
used in electric cars and mobile phones spiked last year and
demand is projected to soar 60 percent to 300,000 tonnes of
lithium carbonate equivalent (LCE) annually by 2020, National
Bank Financial said.
Even so, it said new players could flood the market.
"It's crowded, no doubt about it, and it will get culled,"
said Jon Hykawy, president of Stormcrow Capital, calling
lithium, the "latest bubble sector."
Explorers are gathering at the Prospectors & Developers
Association of Canada mining convention in Toronto through
To survive, suppliers must produce at low cost, enabling
them to withstand price corrections, Hykawy said.
Dozens of companies globally look to be "pump and dump"
schemes, unlikely to produce a single tonne, said consultant Joe
Lowry of Global Lithium. Investors who back them risk being
burned, he said.
Even potential new players are nervous.
"If there is one screw-up, one fly-by-night (company), it
affects every single one of us," said Carlos Vicens, chief
financial officer of early-stage explorer Neo Lithium Corp
Canada's TMX Group has 35 listings related to lithium,
compared with 20 three years ago, spokesman Shane Quinn said.
Prices have little upside, because demand growth has met
with aggressive supply build-up, similar to rare earths and
vanadium in past cycles, Paul Robinson, director at consultancy
CRU Group, said on the convention's sidelines.
Partnering with existing producers helps.
Lithium Americas Corp's $425-million first-phase
Argentina project is substantially funded by a partnership with
producer SQM, and investments by Jiangxi Ganfeng
Lithium Co and Bangchak Petroleum. It aims
to start construction by June.
Technical expertise is hard to find, said Lithium Americas
President John Kanellitsas. After new entrants' exuberance, the
complexity of lithium production sets in.
"It's niche and it wasn't strategically important until
recently," he said. "So there's a lack of experienced talent."
Nemaska Lithium Inc, armed with off-takes with FMC
Corp and Johnson Matthey Battery Materials, looks to
raise C$500 million in debt and equity over 18 months to build
its mine and plant. Nemaska's advantage is that operations are
vertically integrated, its CEO Guy Bourassa said.
Advantage Lithium Corp's Chief Executive David Sidoo
said, "where you're headed right now is (determining) who are
the pretenders and who are the real deal."
(Reporting by Rod Nickel in Toronto; Editing by Denny Thomas
and Grant McCool)