Lithium, the world’s lightest metal has been dubbed ‘white petroleum’ since its use in state-of-the-art lithium-ion batteries, which are lighter and more efficient than competing technologies. They are also the preferred energy source for electric and hybrid vehicles, cell phones, laptop computers, power tools, likely for future large-capacity storage of electrical power from the grid, and to store domestic power generated from wind, solar and off-peak grid power. In 2014, 30% of lithium production was used in batteries, 35% in glass and ceramics and the remaining 35% for a broad range of uses, including lubricants, casting moulds and air treatment. By 2015, research house CRU says battery use had increased to 44%. By 2020, CRU expects this sector will grow to ~55% of total demand, except in the unlikely scenario that a better technology emerges. Tesla Motors, the electric car manufacturer, is building the largest battery plant in the world in Nevada, capable of producing up to 500,000 lithium-ion vehicle batteries per year by 2020. Tesla will use about 27,000 tonnes of lithium carbonate equivalent annually – 16% of 2015 global consumption, according to Macquarie estimates. Tesla is not alone: Toyota has begun offering lithium-ion batteries in its Prius hybrid and Volkswagen has recently announced a shift to electric vehicles following its debacle with diesel engines emissions. China also aims to have five million electric vehicles on its roads by 2020, under President Xi Jinping’s strategic initiative to upgrade the nation’s auto industry. Based on monthly sales this year, China is expected to be home to more than 50% of global electric vehicle sales in 2016. Mining of the world’s 40 million tonnes of estimated lithium resources is currently either by extracting minerals like spodumene and petalite (Lithium/Aluminium Silicate Oxides) from hard rock, or from lithium-rich brines, generally regarded as lower cost mining. Some lithium tonnage is also recycled. Bolivia, Chile and Argentina are likely to become key players in the lithium industry, with the ‘lithium triangle’ of brine or salt flats, or ‘salars’, of Uyuni in Bolivia, Atacama in Chile, and Hombre Muerto in Argentina, accounting for more than 70% of the world’s known resources. All three countries clearly intend to invest in and develop their lithium deposits, offering a mix of different opportunities and obstacles for investors. Increasingly, investors are scrutinising South American countries, especially for lithium brine production opportunities, as well as brine and hard rock opportunities elsewhere, as many junior mining companies struggle to secure exploration lands. Global Lithium president Joe Lowry expects lithium carbonate demand to rise to as much as 285,000 tonnes by 2020, up from about 163 000 tonnes in 2015, while others are predicting demand will reach between 410,000 and 570,000 tonnes by 2025. Elsa Wang, senior analyst at consultancy Asian Metal Inc. in Beijing, says if all current lithium projects proceed as planned, they would deliver about 330,000 tonnes of lithium carbonate-equivalent by 2020, creating “a bit of an oversupplied market,” according to Citigroup analyst Matthew Schembri. Lithium compounds are all priced as lithium carbonate. There is no exchange trading, no terminal storage market and only an extremely limited spot market, making pricing extraordinarily opaque. Lithium carbonate prices are, however, estimated to have risen 47% in Q1 2016 compared with the 2015 average, according to Benchmark Mineral Intelligence. A 2012 Citi Research estimate of production costs shows a median of US$3,000/t of lithium carbonate equivalent, providing substantial margins against sales prices and opening major opportunities for producers and investors. (Written by Peter Jones, Executive Vice President, Century Global Commodities Corporation)