Lithium’s intoxicating future
THE town of Bacanora in Mexico has lent its name to two products with intoxicating potential.
The first is moonshine made from wild agave plants. It was legalised in the ’90s and is now sold as mescal, a cousin to tequila. The second is AIM-quoted Bacanora Minerals, which has heady plans to supply enough lithium to meet a 10th of global demand.
Fans of the increasingly fashionable mescal say it leaves drinkers with a happy buzz and does not lead to hangovers.
Bacanora Minerals clearly hopes to do the same for its investors, unlike the other junior market explorers that have promised too much, too early, leaving shareholders with nothing but headaches.
Bacanora’s shares have fared better than many since floating on AIM two years ago, boosted by the resilience of the lithium price, which has tripled since 2000. Now the miner has persuaded blue-chip investment groups such as BlackRock it has a real chance of graduating from exploration to commercial production in three years.
Rare Earth Minerals, chaired until last year by the colourful David Lenigas of “Gatwick Gusher” fame, is still the miner’s biggest backer with about 15% of the shares and a claim on some of the mines.
Lithium is the mining industry’s current tipple of choice. The light, volatile, silver-white element is used in products ranging from ceramics to lubricants and drugs.
More important is its ability to store energy. Already, about 40% of the 180 000-plus tons of lithium consumed a year is used to power phones and laptops as well as electric cars. By 2025, when demand is expected to be nearer 350 000 tons a year, well more than half the lithium produced will go to the renewable-energy industry.
Tesla Motors, the US carmaker building a battery plant in Nevada, is expected to be turning out about half a million electric dodgems by 2018. That factory alone could absorb the world’s entire lithium ion production, according to some estimates. Who knows where demand will be in 2030, when soothsayers reckon the market in electric cars will have quintupled to $24-billion (about R336 billion)? Or in 30 years, when the likes of Germany hope to be reliant on renewable energy.
Almost all battery-grade lithium carbonate is mined in the remote salt flats of the Atacama Desert, South America. That is where three of the four companies that control close to 90% of the world’s output operate.
But extracting the mineral from salt pans by evaporation is painstakingly slow. That was the opportunity Colin Orr-Ewing, who founded and funded Bacanora until his unexpected death last month, spotted a decade or so ago when he alighted on Mexico’s lithium-bearing clay deposits. He reckoned Bacanora could extract lithium carbonate faster in a more politically stable area with access to Asia, where 95% of the world’s lithium batteries are produced.
Now, after years testing the process, Peter Secker, Bacanora’s Australian CEO, is confident Bacanora will start production in 2019 and be churning out 35 000 tons of the silver stuff by 2022. And it will do so at a cost of about $2 700 a ton. That is low for the industry and substantially below the $6 000-plus that a ton of lithium carbonate currently fetches.
Even if prices fall, the company can maintain those margins, says Secker.
As for mescal, its masters say the liquor is best sipped and savoured. That goes for Bacanora, mine or the moonshine. Whatever the myths, intemperate guzzling will lead to the mother of hangovers.