TORONTO (miningweekly.com) – Shareholders in TSX Venture Exchange-listed junior Salares Lithium will vote in September on a deal that could see the biggest pure-play lithium producer in the world listed in Toronto.

Australia's Talison Lithium announced earlier this month that the privately-owned company has agreed to buy Salares in an all-share transaction.

The deal will add the smaller firm's lithium brine exploration prospects to Talison's existing hard-rock mining operations, Talison chairperson Peter Robinson said in an interview last week.

Lithium has become a hot topic among investors, many of whom are betting that electric-powered automotive technology will continue to boost demand for the super-light silvery metal.

Last week, Global X Funds launched the world's first lithium exchange-traded fund, which tracks the shares of the biggest lithium miners, refiners and lithium battery producers.

Most of the world's lithium comes from a small group of producers. Besides Talison, the big names are Chile's Sociedad Quimica y Minera (SQM), Rockwood Holdings and FMC Corporation from the US. The latter three have their operations in South America, and produce lithium from brines.

But other than privately held Talison, the big players are not really primarily lithium firms at all: lithium accounted for just 10% of sales for SQM last year, overshadowed by products like crop nutrients and industrial chemicals.

Talison contributes just more than a quarter of total lithium production, according to Robinson, and is the primary supplier of the metal to Chinese battery producers.

The company has hard-rock lithium mining operations near the town of the town of Greenbushes, approximately 250 km south of Perth. It also operates two processing plants, producing technical-and chemical-grade lithium concentrates respectively, which it sells to China.

Salares, on the other hand, is exploring early-stage lithium brine prospects in Chile.

The deal is strategic, in that it creates not only the biggest pure play lithium producer, but also combines both mineral and brine assets and expertise in a single company, Robinson said.

“From Talison's point of view, we have recognised that the lithium market is growing strongly and we believe it will continue to grow as strongly, if not stronger .”

The company, which has been producing lithium for a quarter of a century already, is already planning expansions of its existing operations, to take advantage of growing demand.

“But if we do get the growth that we anticipate, then that internal growth from our Greenbushes mining operation probably won't be sufficient to supply what we think will happen in the marketplace.”

The company sees Salares as an important opportunity to build a longer-term growth pipeline, he said.

Assuming the proposed transaction is completed, existing Salares and Talison shareholders will own 20% and 80% respectively of the combined company.

The firm will be known as Talison Lithium, and will seek a listing on the TSX, Robinson said.

Talison had actually considered an initial public offering at the end of 2009 and was considering simultaneous listings on the TSX and ASX, but decided that the market timing was not right.

“The TSX seems to be the area where you get broker coverage and a better understanding of the lithium industry,” Robinson commented.

There are no plans for an ASX listing at this point, he said.

DEMAND OUTLOOK

Robinson said he expects that demand for lithium will at least double over the next ten years.

"It depends really on lithium batteries for electric vehicles, that is the big question mark at the moment," he commented.

"Not whether it will grow, but by how much it will grow and how fast it will grow."

A conservative outlook would be that demand growth continues at around the same levels of the last ten years, with overall demand growth of around a 6% compound annual growth rate over the next ten years.

“And that would take us from about 120 000 t currently, to about 220 000 t by 2010.”

A more optimistic view on electric vehicles could see lithium demand growth at something like 9% or 10% over the next decade, which could push consumption to 320 000 t or so.

“So it will either double or triple over the next ten years; we are not sure exactly what will happen,” Robinson said.

“But what we do know, is that there is a lot of focus from governments and industry into electric vehicles.”

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