TORONTO (miningweekly.com) – Toronto-based Canada Lithium could increase production significantly at its Quebec lithium project, currently designed at an initial 19 300 t/y of battery-grade lithium carbonate, if future demand growth is strong enough, CEO Peter Secker said on Monday.

“We could easily do 25 000 t/y if the market could take it,” he said in an interview.

When it starts up in 2012, the Quebec project is already expected to be the third-largest lithium producer in the world, and the only significant mine in North America.

But if demand for lithium, which is used in rechargeable batteries including for hybrid vehicles, is strong enough, there is definitely potential for further expansion at the operation.

“What we'd like to do is get out project up and running, get the product to market and see how the electric vehicle market takes off in the next five to ten years,” Secker said.

A recent study suggests that there could be 10-million electric vehicles a year being sold by 2016.

“And if that's right, then the increased demand for lithium will require additional supply,” he added.

Canada Lithium announced the results of a prefeasibility on the Quebec project last week, and plans to have a definitive feasibility document completed by the first quarter of 2011.

From there, the road to production is a short one, with construction expected to begin in the second quarter of next year, and commissioning before the end of 2012.

An environmental study was launched last year, and should be completed by August, Secker said.

He does not expect any significant difficulties in permitting the operation.

This year, Canada Lithium will carry out a drilling programme aimed at increasing the resource base, and pilot plant metallurgical work, currently under way, is also scheduled for completion in July.

By August, Secker expects to send out marketing samples to potential customers in Asia and North America.

The company has a marketing agreement with Japanese trader Mitsui and Co, which has the right to market a portion of its product in China, Korea and Japan, and Secker said that talks are also under way with end users and consumers in North America.

“The numbers have just gone out for the prefeasibility study, so at least now people have auditable numbers to look at, and we will continue those discussions over the next three to six months.”

FUNDING

Canada Lithium announced on Monday it has appointed Endeavour Financial to advise on project financing for the Quebec mine.

The prefeasibility study pegged the project cost at $148-million, including contingencies, and Secker said his preference would be to finance construction at a split of around 80% debt and 20% equity.

The company expects to benefit from the project's location in Quebec, especially because the operation should create upwards of 160 jobs, he said.

“So we would see some debt coming out of Quebec, we would see some debt coming out of commercial banks, and then the equity from North American markets.”

The feasibility study will be funded from internal cash resources, which stand at $15-million.

Although it remains tough for junior companies to raise funds, the situation is improving, Secker said.

“We're finding that, as long as you can demonstrate that you have a good project, that we have, and as long as you can demonstrate a long life, again which we have, and a good management team, then its definitely a lot better than it was last year.

The sale of a stake in the project or company is not something that has been looked at, he said.

Shares in Canada Lithium rose 2% on Monday, to C$0,51 apiece by 13:55 in Toronto.

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