Lithium is the next commodity to hold

My thoughts again regarding Lithium - buy. I guess the question many fellow readers are asking and wondering is how, where - since what, why, when - you have read from my writings.

Anyway to sum it all up: Lithium is used in your Nokia phone. The battery. It is also used in the battery of hybrid cars. Laptop computers and camera batteries all use lithium. To see the magnitude of potential demand let us examine the amount used for a mobile phone. Mobile phones are small, compact, lightweight and uses about 5 to 10 grams of Lithium. Now a hybrid car battery uses 6 kg. That is 1000 times more.

Here is a case study.
There are 100 000 new cars added to Singapore each year. Total cars on the road are about 500 000. If the government in the effort to go green, and create a gradual reduction in the reliance of petrol, it may want to support and promote hybrid and electric cars.

At the lowest estimate of 50% new cars being hybrid, that would use up = 50 000 cars x 6 kg Lithium = 300 tons of Lithium demand. Current worldwide production estimates are about 100 000 tons. That gives about 0.3% usage of worldwide production. Now supplant this demand for Lithium for hybrid cars into the passenger car markets of USA (12% from estimates of 40x population of Singapore). Then Europe who are normally environmentally conscious. Plus Japan itself the producers of hybrids - Toyota and Honda. Half of world supply will be used for just these economies. What about China, India, Brazil and Russia?

Soon, there would be an exponential growth for demand.

And this demand is definitely exponential or parabolic - have we forgotten oil prices in the middle of 2008? It sure drove many car people into taking public transport. It sure led to a frenzy to retrofit a CNG/LNG/LPG tank into passenger cars in Thailand, and Malaysia as far as I can remember. And that is even for net producers of petroleum. Today oil prices are hovering at $90 USD. Possibly will go upwards relative to the percentage the dollar is coming down with QE2 (Quantitative Easing 2).

Other factors that will fuel demand is innovation and technology. More consumer products require the storage of energy. Battery life. Electric bicycles. MP3 players. Movie players. Portable devices. Car ownership increases as economies around the world flourishes. Demand for electric public transport to reduce carbon footprint and pollution will boost an even higher demand for Lithium. If a small passenger car uses 1000 times Lithium than a mobile phone, what about a commuter bus?

Lithium stocks are listed mainly in NYSE and ASX (Australia). Australia apparently is not just a gold mine, coal mine and koala. It seems to be the lucky country to have other minerals and one of them in abundance is Lithium, plus also Rare Earth Elements (REE) which I will talk about in another posting.

Commodity Investing: Maximizing Returns Through Fundamental Analysis (Wiley Finance)

So here are the NYSE Lithium stocks:
Sociedad Quimica y Minera de Chile SA (SQM) capitalized at $13.4 billion is the world’s largest lithium producer. SQM produces 30,000 tonnes per year from massive Chilean brines located in the Atacama salt desert, where it has a number of other projects producing fertilizers and chemicals.
SQM is a Chilean producer of specialty plant nutrients and chemicals. The Company's activities are structured in four business units: Specialty Plant Nutrition (SPN), comprising the production of organic fertilizers and nutritional solutions under the Ultrasol, Qrop, Speedfol and Allganic brands; iodine extraction and the production of iodine derivates; lithium exploitation and production of lithium carbonate, lithium hydroxide and lithium metal, and Industrial Chemicals, including the production of such chemicals as sodium nitrate, potassium nitrate, boric acid and potassium chloride, among others. Through its subsidiaries and affiliates, the Company has operations established in South, Central and North America; Europe; North, Central and South America, Asia, the Middle East, Africa and Oceania. In addition, the Company's products are sold and distributed in more than 100 countries worldwide.
  Wright Quality Rating: BBA1

FMC - FMC Corporation (FMC) is a chemical company serving agricultural, consumer and industrial markets with solutions, applications and products. It operates in three business segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. Its Agricultural Products segment develops, markets and sells three classes of crop protection chemicals: insecticides, herbicides, and fungicides. Specialty Chemicals consists of BioPolymer and lithium businesses and focuses on food ingredients that are used to enhance texture, structure and physical stability, pharmaceutical additives for binding, encapsulation and disintegrant applications, ultrapure biopolymers for medical devices and lithium specialties for pharmaceutical synthesis, specialty polymers and energy storage. Its Industrial Chemicals segment manufactures a range of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens and phosphorus chemicals.
  Wright Quality Rating: ABA1

And listed in ASX:
Orocobre Limited is an Australia-based mineral exploration company. The Company focuses on lithium, potash and boron resources in Argentina. The Company's projects include Salar de Olaroz Project, Santo Domingo Project and South American Salars Project. The Salar de Olaroz Project is located in the Puna region of Jujuy, approximately 230 kilometers northwest of the capital city of Jujuy. The Salar de Olaroz Project consists of 118 square kilometers of tenements over a salar (salt lake). The Santo Domingo Project is located in the San Juan Province. The South American Salars Project has approximately 60,000 hectares of tenements on 10 salars in the provinces of Salta, Jujuy and Catamarca. During the fiscal year ended June 30, 2009 (fiscal 2009), the Company drilled 16 vertical cored holes (1136 meters) and six monitoring holes (360 meters).
  Wright Quality Rating: DBNN

Galaxy Resources Limited (Galaxy) is engaged in mineral exploration in Western Australia. The Company's principal activities consists of the development of the Mt Cattlin Spodumene Mine; development of the Jiangsu Lithium Carbonate Plant and exploration for minerals. Its subsidiaries include Galaxy Lithium Australia Limited and Galaxy Lithium International Limited.
  Wright Quality Rating: DBNN

Significance of ASX and SGX merger better faster investment options

The buzz surrounding the merger of ASX with SGX is on the news daily in Australia. Every TV news update will have touch-base with this scenario. And about the sovereignty of Australia, a sensitive issue in this patriotic nation. Seeing foreigners buying properties and buying stocks and now buying up their stock exchange. But is it that bad or merely a notion of ill informed citizens?

The case in point is a merger. Not a buyout. The case is a cooperation of resources and size. Not one swallowing up the other. Therefore the outcry is not suppose to resonate much in the longer run.

Now let us look at the significance of this deal. Possibly Singapore investors or those using SGX will be able to access Australian stocks in real time. Currently if your stock brokerage firm is allowing DMA (Direct Market Access) there is a delay time of 15 minutes on stock prices. Not real time. And thus vital changes and price sensitivity advantage is clouded in that delayed relay of pricing. 

Lower fees. Perhaps a lower fees to buy and no more custodian fees on the foreign Australian stock.

I find the whole deal a positive move for investors and for market liquidity as a whole. There is better access to the precious metal and mining companies based in Australia. Remember one of my articles highlighted there are over 200 Mining and Oil stocks in the ASX. And picking up these gems will be easier. Those who are unfamiliar with commodities trading can now buy into the shares of these commodities producers and miners. A better direct investment rather than by proxy. BHP Billiton, Rio Tinto, Orocobre will be easily accessible to investors. There are over 20 Gold companies in ASX alone. Investors have the option now to invest in gold mining companies rather than just Gold.

Comments and suggestions welcome. 

Late for Gold then buy Lithium

Almost everyone wants to get into Gold these days. Prices have been on the uptrend. Here I too share my oversight and it happened in 2000/01 when I was at a crossroad of investing a lump sum of my money into two investments - Gold Trust or Other Unit Trust.

Why these two? At that point of time, I had limited stock trading experience and time. What I knew from years of reading was when stocks go down, Gold will quite certainly go up because of factors like safety haven, scarcity and so on and so forth. I was at the the persuasion of the banks to "come and invest in unit trusts" - easy, and steady growth. Yes the key words were that. Growth with very nice upward trend "charts". Past 3 year charts! My mind was lingering on the Gold Trust which was at about $0.60.

So no regrets now.

Instead investment is always about looking forward. And forward looking value for some new research we would believe in. Thereby summarised in my Stock Trading Rules. (see http://denzukefinance.blogspot.com/p/my-trading-system-and-rules.html)

Therefore for the past 2-3 years I have been keeping a watch on this resource - Lithium. It started when the oil prices went out of "control" to over $150 USD a barrel. And when car companies were going crazy about been bigger and larger especially in USA. Inefficient and fuel-hungry machines. Manufacturers were thinking of alternative fuels, and fuel-cell. The downturn changed this too. Being efficient is in. Being green is in. Start to think now to change this. Some vehicle owners started with retro-fitting gas cylinders for CNG or NGV. For the longer term, hybrid cars and fuel cell cars will be more and more mainstream. And for these cars to function, the main product is lithium to store electricity inside the car.

My stock highlight for this sector is Orocobre Limited (ASX based stock).
Here is the chart. From 14 December 2007 till now, there has been a whopping 900% gain. (from about 0.30 to over $2.45) Look at the green "percentage change since" indicator.

Orocobre Limited is an Australia-based mineral exploration company. The Company focuses on lithium, potash and boron resources in Argentina. The Company’s projects include Salar de Olaroz Project, Santo Domingo Project and South American Salars Project. The Salar de Olaroz Project is located in the Puna region of Jujuy, approximately 230 kilometers northwest of the capital city of Jujuy. The Salar de Olaroz Project consists of 118 square kilometers of tenements over a salar (salt lake). The Santo Domingo Project is located in the San Juan Province. The South American Salars Project has approximately 60,000 hectares of tenements on 10 salars in the provinces of Salta, Jujuy and Catamarca. During the fiscal year ended June 30, 2009 (fiscal 2009), the Company drilled 16 vertical cored holes (1136 meters) and six monitoring holes (360 meters).