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9/3/08

Bi-polar lithium investments

Why did this face come to Otto's mind? You be the judge!

I've watched with amusement the latest LatAm mini fashion craze play out in the junior mining world. A few months ago, somebody noted that Chile's SQM was doing very nicely thanks, then noted one of its main lines was selling lithium to people who then make snazzy new high powered batteries from it. They then noted that the techniques for "mining" lithium weren't that difficult (basically pumping the lithium brine found in some Andean lake areas and then refining it). They then noted there were still lakes of the stuff hanging around undeveloped up there.

Combine the above ingredients, add the shark-like attitude of the Canadian miners, bake in a few hapless saps who bought the idea and voilá, the latest pump'n'dump was created.

The fact is that lithium is not the battery fuel of the future. It does pack a voltage punch for sure, but the raw ingredients are unstable and the batteries have this nasty habit of exploding on you if they're even slightly mistreated. Also, technology looks like outpacing the all-aboard-the-latest-gravy-train juniors who actually paid money to get their hands on "assets" (I use the term loosely) that are not much more than oversized puddles 15,000 feet up in the mountains. (and you guys up there crack jokes about moose pasture....sheesh).

No, the brave new world of Hybrid transport and electric movement forces is likely to be supplied by good old Zinc/Nickel batteries, as the smart people in white coats have finally worked out how to get these safe metals combining more efficiently. Which just gives you another good reason to bet on the future of Zn the metal, I reckon (though this news is unlikely to move the spot market much in the next 24 hours, it has to be admitted).

So anyway, let the established lithium producers like SQM and FMC quietly and profitably supply the world market, and if you really like the sector, buy the producer. That's because the BS juniors jumping on the bandwagon like NW.v, LAT.v and a hatful of others are just trying to sell you so much snake oil, and a snake oil with a limited shelf life too, it seems.