Lithium Investment Opportunities

Cornering the Global Market for Lithium

By
Monday, November 21st, 2011

It's long been the ugly stepsister of the alternative energy world.

With its high capital costs, high development risk, and limited public visibility, geothermal can sometimes look like more trouble than it's worth.

Of course, looks can sometimes be deceiving.

Geothermal is actually one of only two forms of renewable energy that can provide base load power generation.

While solar and wind are both intermittent sources, geothermal can run 24 hours a day, seven days a week.

It even has a capacity factor that rivals coal and nuclear.

And, according to researchers at M.I.T., our accessible enhanced geothermal resources are large enough to provide 130,000 times our annual electricity consumption.

But there is a catch...

Building a geothermal power plant is a major chore. It entails enormous risk and enormous amounts of capital. And these things can sometimes take decades to develop.

Even as an alternative energy advocate, I can tell you that there's really only one geothermal company I'm bullish on these days. And that's U.S. Geothermal (AMEX: HTM).

Although, thanks to a surprising new development at a geothermal power plant in California, geothermal may soon get a fresh coat of sparkle and shine.

You see, it turns out geothermal power plants not only deliver base load power, but they could also soon become the premier source for domestic lithium and manganese production.

Cheaper, Faster, and Made in the U.S.A.

In 2010, demand for lithium chemicals was about 102,000 tons. That number is expected to reach 320,000 tons by 2020, mostly due to increased production of electric vehicles.

Yet, only about 5 percent of lithium carbonate is actually produced in the United States. Today Chile and Australia are dominating lithium production.

But that could soon change with the integration of a new technology that can actually extract lithium from the brine that geothermal power plants inject into the ground after steam is produced. And it can do it in a way that would allow domestic geothermal power plants to compete with the lowest cost Chilean producers, which currently produce the stuff for about $1,500 a ton.

The company that developed this new technology is called Simbol Materials, and it's currently operating a pilot plant that can filter 20 gallons per minute.

Simbol Materials' first commercial plant is expected to begin construction next year, boasting a production capacity of 16,000 tons of lithium carbonate per year.

This is high quality stuff, too. We're talking the world's highest-purity lithium carbonate for use in electrolytes for electric vehicle batteries and other energy storage applications.

USGS analysts have suggested battery-grade lithium goes for between $5,000 and $6,000 per ton!

And unlike traditional methods of materials extractions that tend to be highly energy-intensive, require massive amounts of water, and produce mountains of waste, Simbol's technology allows for a process that is virtually waste-free and requires minimal energy.

Of course, the big sell here is the speed at which Simbol can produce lithium. In what typically takes 18 months to extract lithium in evaporation ponds, this company can do in about 90 minutes.

This is huge!

And here's an added bonus: The company can also extract manganese and zinc using the same process at these geothermal power plants.

Of course, not until the new commercial plant is operational will we know just how effective this technology is.

But one thing is certain: If Simbol's process does prove successful, it could completely disrupt the entire lithium market as we now know it.

This is likely the reason Japanese behemoth Itochu Corporation took a 20 percent equity stake in the company last year.

Bottom line: This thing could either be huge or a complete flop.

If it's the former, today's primary lithium producers are going to get a serious run for their money.

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Jeff Siegel
Editor, Energy and Capital


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