Just how important is lithium to the world’s economy? Rockwood Holdings loudly voiced its opinion with the purchase of Talison Lithium (TSE: TLH), the world’s largest lithium mining company, for a breathtaking $732 million. The transaction will take the Canadian-listed company private at approximately $6.58 per share – a 50% premium to its pre-offer trading price.
The transaction underscores the importance of lithium in today’s global economy, while potentially boosting prospects for other lithium producers, including FMC Corporation (NYSE: FMC) and Sociedad Quimica y Minera (NYSE: SQM). But it’s the smaller players like AmeriLithium Corp (OTCQB: AMEL) that could benefit the most in the end.
Lithium’s Growing Demand, Consolidated Supply
Demand for lithium has been steadily on the rise, tripling in price since the year 2000. Driven largely by demand for smartphones and tablets, the industry is now worth approximately $1 billion per year in revenues. Moreover, analysts don’t see any slowdown down the road, projecting demand to double by 2020 as electronics grow in popularity.
Unfortunately, the lithium industry is dominated by Talison Lithium, FMC Corporation and Sociead Quimica y Minera, which control a combined 95% of the market, according to many sources. The result is a supply chain that’s carefully controlled and difficult to break into for larger players in different industries looking for access to lithium for production or resale.
While there is some supply coming online, such as Rio Tinto’s (NYSE: RIO) planned lithium mine in Serbia, there aren’t many promising prospects out there. Many experts don’t see that supply as sufficient enough to offset the growth in electronics or the potential for electric or hybrid vehicles to become more mainstream over the next decade.
Exploration Stage Companies Enter the Spotlight
Investors looking for exposure to lithium’s potential upside are increasingly looking towards exploration-stage companies. For instance, Evy Hambro, who manages $13 billion in mining stocks for BlackRock in London, recently noted in a Bloomberg interview that “we’ve got a small exposure [to lithium] today and we’re looking for some more.”
Companies are also starting to look at acquiring lithium plays. Rio Tinto CEO Tom Albanese believes that lithium is “going to be so critical to that future world of electric vehicles and hybrids,” adding that, “we’ve got a lot of interest from Japanese companies, from Korean companies that actually want to be in the forefront of hybrid and lithium technologies.”
Late-stage exploration companies offer investors near-term cash flows from the sale of lithium – perfect for capitalizing on rising prices projected through 2020. Meanwhile, large mining companies looking for lithium exposure are more likely to acquire late-stage exploration companies than pay a premium for one of the three producing giants.
AmeriLithium Offers a Great Opportunity
AmeriLithium Corp (OTCQB: AMEL) is an exploration company committed to progressively developing into one of the leading U.S. companies in the global lithium industry. With in excess of 700,000 acres of assets and holding properties near the only lithium producing plant in the U.S., the company is strategically positioned to benefit from the coming boom in prices and potential consolidation.
In late August, the company announced that it received approved permits from the U.S. Bureau of Land Management to drill up to ten holes per property on both its Jackson Wash and Clayton Deep lithium projects in Nevada. The company plans to begin drilling as soon as it’s in a practical position to do so after experiencing a modest delay to its projected start this year.
With near-term drilling prospects, AmeriLithium is in a unique position for investors. First, it’s holding some of the most promising lithium properties in the U.S., which could become extremely advantageous if countries like China impose restrictions on exports like they do with rare earth metals. And second, the firm also has a number of properties in Australia and Canada that could offer additional upside down the road.
For more information, please see the following resources:
Please read Full Disclaimer pertaining to this article.