Prime Meridians: A Little-Known “Top Priority” Mineral

This week in Pierce Points: 

Asian mining firms eyed Iran investment. A group of firms from China, Indonesia and the Philippines may put down as much as $400 million. 

Private equity made an unexpected energy bet. Giant buyer Riverstone Holdings is ponying up $465 million–for oil in Canada

Indonesia seized mega copper mines. The government will take 10.6% of domestic operations away from Freeport-McMoRan this year

The U.S. scheduled oil drilling in the Atlantic. An Interior draft strategy calls for at least one licensing round in the previous no-go zone by 2022.   

The world’s best lithium deposits opened up. The Chilean government will consider private partnerships to develop its resources of the critical metal.

A Little-Known “Top Priority” Mineral for Asian Buyers

Further to the last item above, lithium in Chile may be setting up as the top opportunity in the minerals space this year.

We don’t hear a lot about this metal. But the lithium market has been surging the last few years. Just look at the chart below, showing average yearly lithium prices since 2010 (data from the just-released U.S. Geological Survey 2015 Mineral Commodities Summaries volume).

As is clear, the price has basically been rising. And the recent dip we’ve seen in almost all the metals barely put a dent in this market.

In fact, in research released this week, the U.S. Geological Survey calls lithium “a top priority for Asian technology companies” (owing to the metal’s use in batteries and other technical applications). It’s estimated that global demand jumped 10% in 2014 alone.

What’s really interesting is where lithium comes from. Which–as the chart below shows–isn’t too many places.

All told, 72% of global lithium production comes from two countries. And unlike most other specialty metals, China isn’t one of them–in this case, the mega-producers are Australia and Chile.

But these two spots aren’t created equal. The majority of Chilean lithium comes from brines–layers of residue left behind by evaporation on hot, dry plains. In Australia, almost all production comes from traditional hard-rock mining.

That’s a major advantage for Chile’s producers. With the U.S. Geological Survey noting that brines have “lower production costs compared with the mining and processing of hard-rock ores.”

The only countries globally that have significant lithium production from brines are Chile and Argentina. This is a very small–but very profitable–market.

The thing is, it’s been a market that’s been largely closed to private investment. But judging from the news this week, we could see that change in Chile during 2015.

If it does, that’s a massive opportunity.

Here’s to hot metals,

Dave Forest

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