Investors Pile into Lithium Producers

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"The real inflection point is that an automobile needs about 3,000 times as much lithium as a cell phone."

Little-known lithium has emerged as the hot commodity of the moment as investors look for a way to cash in on the anticipated flood of electric cars to the market.

The lithium mania yesterday swept up a number of Bay Street institutions, which were buying anything for clients that happened to have the magic L-word in its name.

By the end of the day, explorers and developers of lithium propertiesóCanada Lithium Corp., Western Lithium Corp. and First Lithium Resources Inc.ówere up 41%, 28% and 67%, respectively, on massive volumes.

"I just think people are realizing there are going to be an awful lot of lithium batteries used in electric vehicles over the next while," said Jon Hykawy, an analyst at Byron Capital Markets.

He said if a couple of million electric cars are sold in the next five years, that alone would equate to about 10% to 15% of current lithium demand.

The market for lithium has grown steadily over the past decade from rising demand for batteries in such consumer electronics as cell phones and laptop computers.

Some auto companies are already speculating that pure-electric cars could make up 10% of vehicle purchases by 2020, which could put major strain on lithium supplies if it happens.

"The real inflection point is that an automobile needs about 3,000 times as much lithium as a cell phone. This is where we've got a very large potential supply requirement," said Jay Chmelauskas, president of Western Lithium.

The fact that the electric car build-out is getting billions of dollars of subsidies and strong political support, particularly in the United States and China, only adds to the excitement for lithium. In the U.S., the support comes as no surprise given the government controls GM. But China has also emerged as a leader in electrification. It is the world's largest car market, and experts said that almost every company producing lithium-ion batteries for cars has a plant in China.

Mr. Hykawy said the price of lithium reached ~US$6,600 a ton this month compared to ~US$2,500 a ton at the beginning of the decade.

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