Lithium miners hunt for capital as demand for metal climbs

TORONTO – Climbing demand for the metal lithium at a time of broader commodity weakness has Canada's Nemaska Lithium and Western Lithium USA confident they can soon obtain scarce capital even as other junior miners struggle.

A scramble to secure lithium has accelerated as prices have risen, driven by demand for smartphone, laptop and electric car batteries.

"Everyone can see the writing on the wall as we move toward 2020, and a need for new deposits to get into production," said Jon Hykawy, president of consultancy Stormcrow Capital. "Problem is, the capital really isn't there."

But Western, which aims to bring the world's next new lithium resource into production in 2018 in Argentina, is optimistic.

"What we're really seeing is the equivalent of another industrial revolution, the switch to electric power for automobiles," said CEO Tom Hodgson at the Prospectors & Developers Association of Canada (PDAC) convention in Toronto. "Given the fundamental shift in energy demand, nothing's easy, but (raising capital is) very doable."

Vancouver-based Western's $314-million project would pump brine to the surface for evaporation.

Western says one of its advantages is a commercial agreement it is negotiating with South Korean steelmaker Posco, a potential joint venture that would deliver Western's lithium to the doorstep of South Korean battery manufacturers LG Electronics and Samsung SDI .

Nemaska Lithium, developing a mine in the Canadian province of Quebec, expects to raise the C$521-million it needs within a year, said CEO Guy Bourassa, adding that the company has one of only three undeveloped projects in the world with full permits.

Since lithium does not trade publicly, many investors, burned by other faltering commodities, do not realise that prices have steadily climbed, said Bourassa.

Three large producers, SQM, Albemarle and FMC, and a new Argentina brine operation owned by Orocobre account for just over half of global production, according to advisory firm Global Lithium.

"End users we're talking with obviously don't like that situation because they're at the mercy of these four guys," said Bourassa. "It's another advantage for us."

Lithium carbonate prices are poised to keep rising in 2016 and demand will require a new large-scale plant every 18 months for the next decade, said Global Lithium president Joe Lowry.

Western Lithium's shares have gained about 11% this year, as of Friday, while Nemaska has climbed 9%.