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U.S. Lithium Mining

Written By Brian Hicks

Posted May 1, 2013

A huge deposit of lithium has been discovered by the University of Wyoming’s Carbon Management Institute research team, according to a recent report.

The deposit, located near Rock Springs in southwestern Wyoming, is physically located in brine—underground salty water. Researchers came upon this discovery in their quest to discover an environmentally friendly location to store carbon dioxide underground.

lithium-ion batteries sidebarThe size of this new discovery has the potential to completely change the U.S. lithium market. According to reports from EV World, the Rock Springs uplift could contain as much as 18 million tons of lithium. In terms of current market prices, this find could be worth up to $500 billion. In other words, these potential reserves are roughly equal to 720 years of global production.

The U.S. Lithium Market

The U.S. imports approximately 80 percent of its lithium right now, as Treehugger reports. While this substance is used in just about every type of high tech product from electric cars to cell phones and laptops, most of the major players in this industry are located in South America.

Presently, the U.S. has only one lithium mining operation at the present time. Western Lithium’s (TSX: WLC) mine is located in Nevada and has current reserves of around 118,000 tons. However, other players may be ready to increase their presence in the U.S. market with the news of this new find.

FMC Corporation (NYSE: FMC) is another world leader in lithium production. The company also mine soda ash (sodium carbonate), which is a key ingredient in extracting lithium from brine.

The problem with getting lithium out of the ground—or salt water deposits, in this case—is the expense of transporting the soda ash to the lithium mine or deposit. Fortunately, this find is located within 20 to 30 miles of the world’s largest industrial soda ash storage facility, as EV World reports.

Another large expense in the extraction and production of lithium from brine deposits is the removal of magnesium from the brine. Once again, the Rock Springs Uplift location appears to contain much less magnesium than other existing lithium mines.

It is clear that this is a huge discovery. Whichever company decides to move forward with this project will have a huge advantage in the U.S. lithium market. With a deposit that dwarfs the existing U.S. leader, there would be huge profits to exploit.

This single deposit, in fact, could potentially turn the U.S. from a lithium importing country imports—bringing in a whopping 80 percent from other countries—to a completely independent producer within just a few short years.

This increased lithium supply comes at a very fortuitous time. With the continued expansion of the electric car market, estimated U.S. demand for the element will likely continue to rise for quite some time. Of course, since lithium is also used in batteries and for a number of high tech items, this also signals a rising demand curve on several levels.

Profiting from Lithium

There are several ways that investors may look to profit from this new lithium discovery. Investors might be interested in trading the stock of individual lithium companies, such as Western Lithium (TSX: WLC) or FMC Corporation (NYSE: FMC), though this move is risky as no company has been associated with the find yet.

The real question is which company will actually begin pulling the lithium out of this new find, tremendously expanding their resources and reserves.

Another way to play lithium right now would be to focus on lithium ETFs. The biggest one is Global X Lithium (NYSE: LIT). This includes lithium miners, producers, and other companies from around the world. The fund holds all the top names in the industry such as FMC.

The price trend for the LIT fund (and most of the individual lithium players as well) has been trending down for a few years. Prices actually reached a peak back in late 2010 and early 2011. However, with demand increasing at a fairly steady rate and this new find offering the potential to make the U.S. an independent lithium producer, the market could be set to rebound.

Prices recently in the past month have hit near historic lows, and many analysts do see huge potential since demand has nowhere to go but up, and the current supply is becoming increasingly difficult for many producers to actually access.

Of course, getting involved right now may be predicated upon exactly what happens with the consumer in the future. While many groups are looking to push electric vehicles as a solution to any number of problems, the fact is that consumers have yet to sell out to the idea.

On the other hand, once these types of vehicles becomes more accepted, the early investors may do very well with lithium mining companies and producers.


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