Share By Dave Brown – Exclusive to LithiumInvestingNews.com

Investors are always looking for a competitive advantage.  This is often a little known critical success factor or an economic moat that will be a catalyst in driving stock price movement.  Lithium investors will be familiar with the marketing phrase ‘Life begins with Li’, however very keen wordsmiths can fully appreciate that an anagram for salt basin is ‘bias slant’.  Endeavoring to identify a hidden gem in the lithium investment world for investors will involve eliminating potential bias slant while identifying the real competitive advantages.

Processing Optimization

Subsurface brines have become the dominant raw material for lithium production worldwide because of lower production costs compared with the mining and processing costs for hard-rock ores. As a result of these superior operational considerations 60% of the world’s lithium is produced from brine deposits.  The efficiency and simplicity of a brine process correlates with the production for these facilities in a relatively inexpensive context and with little lead time and almost no environmental impact, as evaporation is the main component in the processing.

Geographical Advantages

The world’s largest reserves lie in the remote southern Andean plane of Bolivia, totaling 9 million tonnes.  From a logistics perspective, the brine resources in Bolivia need to overcome a number of impediments: lower evaporation levels, relatively higher Magnesium-Lithium ratios and the lack of free access to a port city.  Currently, the Corporación Minera de Bolivia (COMIBOL) is in control of industrializing the lithium in the country, and Bolivia has generally not been recognized as friendly to foreign industry.  Earlier this month, the Bolivian government established the “Empresa Nacional de Evaporíticos,” a national entity responsible for the development of the lithium, boron, phosphates and potash.

The United States Geological Society estimates Argentina’s reserves at about 2.5 million tonnes. Chile is the world’s largest producer — partially because Chile has a legacy of highly developed mining, processing and transportation infrastructure, and also as the geography and climate are favorable for the optimal solar evaporation that is fundamental to producing lithium.  Chile produces approximately 60% of the global brine lithium production with estimated reserves of 7.5 million tonnes.

Exclusive Ownership

Another lesser known factor in valuing a lithium investment opportunity is the exclusivity of the ownership claim.  Many of the players have secured only partial ownership or mining rights in their brine lakes. Owning part of a mineral deposit such as a salt-pan is more transparent since the material to be excavated is solid. However, in a salares or brine lake the first mover benefits from being able to take out the most valuable material before the second tier producer can do anything about it. Depending upon the depth of the extraction, the brines have different densities resulting in different grades and a range of economic values. The challenge is similar to the oil industry as draining the best densities is not a task that respects ownership of theoretical lines on the surface of a liquid body.  The race will go to the swift; and to the victor will go the spoils.

On the Horizon

Orocobre Limited (ASX: ORE) is an Australian listed lithium and potash developer in the prolific Puna Region of Argentina. In late January, the company released an announcement of a joint venture with Toyota Tsusho Corporation.  The significance of this recent press release for Orecobre is the strategic allegiance with a principal client who will not be interested in pushing prices lower and squeezing operating margins, as long as a symbiotic relationship coexists.  The project specific location has relatively good infrastructure with nearby high voltage electricity, gas pipelines, rail and accessibility via sealed road. Orocobre has secured exclusive mineral rights to the properties by way of a purchase contract.

Salares Lithium (TSX-V: LIT) is an exceptionally rare opportunity for a pure play exposure within the Chilean lithium exploration arena.  The company represents one of the largest land and pure salar concession packages in the lithium exploration sector and has historic sampling returning lithium and potassium in all seven of its salares with grades up to 1,080 ppm lithium and 10,800 ppm potassium.  A unique value proposition for this company is that it controls 100% of five salares clustered within 155 km’s, resulting in no severed ownership, as is quite common in the Argentine lakes.

Lithium Americas Corp. (TSX-V: LAT) is an exploration company focused on the development of lithium, potash, borax, precious metals and other industrial minerals in both Argentina and Paraguay.  The company’s claims now cover 93,000 ha, in close proximity to Orocobre. It wholly owns 83,424 ha, including four sizable brine assets and has the right to purchase 100% interest in a second property located on the Cauchari salt lake covering 9,033 ha.  As a result of the company’s diversified mineral interests spanning both Argentina and Paraguay, it is not a pure play in the lithium field.  It has also attracted a number of “strategic investors” in the last six months with a net dilution effect for long term investors and less visibility on the company’s immediate and longer term objectives.

The Future is Green

The quest for greener solutions from environmental pressures has recently created tremendous opportunities for leading edge technology companies.  The million dollar question today is where are the greener pastures likely to emerge and how can an investor best gain exposure?  For many, the answer may be uncovered in the universe of lithium investment opportunities.

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