Canadian take on lithium
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Barry Critchley, Financial Post
Wednesday, Jan. 12, 2011
Argentina and Chile may be home to some of the largest developments in the lithium industry, but a Canadian company that operates in Quebec is set to get a jump start on some of its better known competitors. Canada Lithium Corp. is rasing $110-million via a bought deal -- one of the largest financings by a company in the lithium industry. The proceeds from the financing, co-led by Scotia Capital and Macquarie Capital Markets, will be used to partially fund the construction of an open-pit mine and processing plant near Val d'Or. The plant is expected to cost about US$202-million.
The issuer sold 73.35 million shares at $1.50 a share. At $1.50 a share, the new shares were being sold at a very healthy 16.66% discount to the closing price Monday. The shares closed Tuesday at $1.63.
But Canada Lithium isn't involved with greenfield developments. The deposit was mined between 1955 and 1965, producing spodumene and lithium carbonate products for sale to the North American market. The operation was mothballed when the U.S. government decided to wind down its strategic reserve of lithium.
The financing comes a few weeks after Canada Lithium completed a so-called 43-101 feasibility study for the development of a mine and lithium carbonate processing facility. Plans call for construction to start by the middle of this year with the plant being commissioned by the end of next year. Plans call for 20,000 tonnes of lithium to be produced a year. The plant will produce battery-grade lithium. (Part of that output will be marketed by the Japanese trading firm, Mitsui and Co. Ltd., to clients in China, Korea and Japan. That agreement was signed in April 2009.) As well, the project has the potential to produce another material that could be saleable to the North American and European glass, foundry and ceramics markets.
Two weeks before that announcement, Canada Lithium garnered $10-million from Blackrock Inc., a large global asset-management firm. That investment was the largest in the company to date.
So given Canada Lithium has raised about half the capital required to fund the construction cost of the open-pit mine and processing plant, attention now turns to where it will find the balance. There are two possible sources: Mitsui, which has a marketing agreement with the company, may step up, as may several private-sector or provincially run funds based in Quebec.
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Lithium has emerged as a growth sector of late because of the need to produce efficient batteries for electric/hybrid cars. And Canada and Australia have been at the forefront in some of the latest developments. For instance:
- June 2010. Orocbre Ltd., an Australian-based company that six months earlier secured an investment from Toyota Motor to develop a lithium mine in Argentina, applies to list its shares on the TSX in hopes of raising $20-million from local investors.
- August 2010. Privately owned Talison Lithium Ltd. and publicly held Canadian-listed Salares Lithium merged and raised $40-million through a private placement. The proceeds were to be used to expand Talison's operations in Australia and accelerate the exploration of Salares' properties in Quebec.
In general the lithium projects in South America are different from those in other parts of the world given that the raw material is found is salty marshes and reservoirs. As well for some of them lithium is not the core business given that they are mainly chemical and fertilizer companies.
bcritchley@nationalpost.com
