1. The lithium market:
2009 review and outlook
Robert Baylis
Manager – Industrial Minerals Research
Roskill Information Services Ltd.
Roskill
Approachable. Independent. Expert.
1
2. Disclaimer
The statements in this presentation represent the considered views of Roskill
Information Services Ltd. It includes certain statements that may be deemed
"forward-looking statements." All statements in this presentation, other than
statements of historical facts, that address future market developments, government
actions and events, are forward-looking statements. Although Roskill Information
Services Ltd. believes the outcomes expressed in such forward-looking statements
are based on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those in
forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include changes in battery
output and general economic, market or business conditions.
While Roskill Information Services Ltd has made every reasonable effort to ensure
the veracity of the information presented it cannot expressly guarantee the accuracy
and reliability of the estimates, forecasts and conclusions contained herein.
Accordingly, the statements in the presentation should be used for general guidance
only.
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3. Outline
• Demand
– The global economic downturn
– Impact on lithium markets
– Outlook
• Supply
– Trade indicators
– Production
– China update
• Project developments
– Advanced projects update
– 2009 – a good year for explorers
• Pricing movements
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5. Lithium is consumed in wide variety of forms and
end-uses
Lithium is consumed in a wide-range of end-uses
Lithium finds most use in carbonate and hydroxide form
(around 50% of demand)
Mineral forms of lithium account for 25% of consumption and
chemicals and metal/alloys the remainder
Batteries have been the main driver of demand growth and,
despite the 2008/09 downturn, this will continue in the 2010s
with new applications, e.g. electric vehicles
However, lower growth in mature, industrial markets for lithium
e.g. greases, aluminium, ceramics & glass will temper future
demand
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6. The global economic downturn caused a sharp drop in
industrial production between 2008 Q3 and 2009 Q1.
Signs of recovery in H2 2009
World: Quarterly change in GDP and Industrial Output, 2006-2009 (%)
10.0
5.0
0.0
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4e
-5.0
-10.0
-15.0
-20.0
-25.0
GDP Industrial Output
Source: IMF, World Bank, CIA World Factsheet, Roskill estimates
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7. Views from the market, demand seen significantly
down on 2008
“Lower end use demand and customer inventory destocking
drove revenue decline” (FMC Corp, Jul 2009)
“Revenues for the lithium and derivatives segment during
first nine months of 2009 decrease of 38.7%” (SQM Sep, 2009)
“Demand is off by 30% this year for the entire lithium industry”
(Jon Evans, FMC Lithium, Industrial Minerals, Dec 2009)
“Total lithium demand down 25% in 2009” (SQM, January 2009)
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8. Industrial output in the USA, Europe and Japan
(which account for 60% of lithium demand)
dropped by 15% between Q2 2008 and Q2 2009
Europe, Japan & USA: Quarterly change in industrial output,
2003-2009 (%)
115
110
Europe
105
100
USA
95
90
Japan
85
80
1
20 3
20 1
3
20 1
3
20 1
3
20 1
3
20 1
20 3
1
3
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
03
03
04
04
05
05
06
06
07
07
08
08
09
09
20
20
20
20
20
20
20
Source: IMF, World Bank, OECD, EuroStat
Note: Data re-based, 2005 Q3 = 100 Roskill
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9. Chinese industrial output remained positive in
2009 due to large fiscal stimulus package while
GDP grew by 8.7% year-on-year
China: Year-on-year change in industrial output, 2006-2009 (%)
20%
15%
10%
5%
0%
20 3
20 4
20 1
20 2
20 3
20 4
20 1
20 2
20 3
20 4
20 1
20 2
20 3
20 4
20 1
20 2
3
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
Q
05
05
06
06
06
06
07
07
07
07
08
08
08
08
09
09
09
20
Source: IMF, World Bank, OECD, EuroStat
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10. Consumption down 15% in 2009, compared to
average growth of 6%py between 2000 and 2008
World: Consumption of lithium by end-use, 2000-2009 (t LCE)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Ceramics and glass Batteries Greases
Aluminium Air treatment Continuous casting
Rubber and thermoplastics Pharmaceuticals Other
Source: Roskill data
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11. Why was 2009 so gloomy for lithium demand?
Market dominated by industrial applications
World: Consumption of lithium by end-use, 2009
Other
Pharmaceutical 15% Ceramics and
Rubber and
2% glass
thermoplastics
31%
4%
Continuous
casting
4%
Air treatment
6%
Aluminium
6% Greases Batteries
9% 23%
Source: Roskill data
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12. All of the key demand sectors for lithium have been
affected, however the outlook for 2010 looks more
positive
Sector 2009 observations & outlook
Ceramics & Glass •Construction sector to fall 3.7% in 2009, flat in 2010
Batteries •Li-ion battery production to register 3% growth in 2009, strong growth to return in 2010
Grease •Dip in industrial output hit 2009 demand, 2010 outlook brighter
Aluminium •Capacity shuttered in 2009. Potential for supply crunch in 2010 and plant re-opening
•Industrial and commercial property slump. Recovery in industrial production should
Air-treatment
boost demand in 2010
Continuous casting •Steel production down 8-9% in 2009, recovery in world output forecast for 2010
Rubber & •Rubber and plastics demand impacted by dip in industrial output, 2010 likely to show
thermoplastics improvement
Pharmaceuticals •Inelastic to recession, pharmaceuticals necessary items
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13. Consumption of lithium is forecast to increase to
147kt LCE in 2013
World: Forecast consumption of lithium, 2008-2013 (t LCE)
+7.9%
150,000 +7.4%
+13.4%
+2.4% +11.0%
120,000 -15.0%
90,000
60,000
30,000
-
2008 2009f 2010f 2011f 2012f 2013f
Ceramics & glass Batteries
Industrial end-uses (grease, aluminium ) Other (pharmaceuticals, Al-Li alloys )
Source: Roskill estimates
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14. But it might not be all plain sailing
Risk of hyper-inflation in developed countries, but more
importantly in China
This could increase interest rates and reduce liquidity in money
markets, therefore hitting consumer spending
Developed countries are also debt-laden, which could mean
reduced outlay on infrastructure/public works
Some analysts suspect there is a looming property bubble in
China
Recovery and growth in lithium demand in the short-term is not
100% certain
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15. Significant potential for increased lithium
demand from mid-2010s as EV roll-out gains
momentum
World: Electric vehicle production and lihtium demand for electric vehicle
batteries, 2008-2020
EV sales (Li-ion)
Lithium demand for electric vehicle
6 140,000
Battery vehicle sales (M units)
5 120,000 PHEV sales (Li-ion)
batteries (t LCE)
100,000
4
HEV sales (Li-ion)
80,000
3
60,000
HEV sales (NiMH)
2
40,000
1 20,000 Lithium demand from vehicles
(10% penetration scenario)
0 0
Lithium demand from vehicles
f
f
f
f
f
f
08
10
12
14
16
18
20
(5% penetration scenario)
20
20
20
20
20
20
20
Source: Roskill data
Note: Vehicle sales data assumes 5% electric vehicle penetration by 2020 Roskill
(i.e. 5% of total vehicles will have some form of battery power assist)
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2kg LCE in HEV, 15kg LCE in PHEV and 22kg LCE in EV
15
16. Production
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17. Trade in lithium compounds fell by 43% in 2009,
exports of lithium carbonate from Chile were down
almost 50%
Major producing countries: Exports of lithium compounds, 2000-2009 (t LCE)
90,000
80,000
70,000
60,000
Lithium chloride
50,000
Lithium hydroxide
40,000
Lithium carbonate
30,000
20,000
10,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e
Source: Global Trade Atlas
Notes: Lithium carbonate = Chile, Argentina, USA & China
Lithium hydroxide = Chile, USA, China & Russia Roskill
Lithium chloride = Chile, Argentina & China
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Data for 2009 is extrapolated from Jan-Oct/Nov trade data
17
18. Lithium production estimated to have fallen by
25% to 100kt LCE in 2009
World: Production of lithium by country, 2000-2009e (t LCE)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e
Argentina Australia Chile China USA Others
Source: The Economics of Lithium, 11th Edition, 2009;
Roskill estimates for 2009
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19. Chinese brine producers continue to debug process
routes, progress seen slow & expensive, products often
below market specification
CITIC Guoan:
Calcined separation method: can separate high Mg:Li ratio brine
But, excess hydrochloric acid causing corrosion problems
Produced around 1,100t LCE in 2009
JV with Chemphys, LOI with Toyota Tsusho for battery-grade Li carbonate
Qinghai Lithium Co. (Western Mining):
Membrane separation method (Mg:Li ratio taken from 20:1 to 1:2)
Precipitation of salt & membrane plugging causing problems
Produced around 2,000t LCE in 2009
Qinghai Salt Lake (Qinghai Salt Lake Potash):
Resin absorption method, investigating nanofiltration
High fresh water (600l/1t LCE), resin & power consumption = high cost
Produced around 400t LCE in 2009
Tibet Mineral (Zabuye):
Freeze-thaw evaporation method
Poor fresh water resources & transport infrastructure = low capacity
Produced around 1,000t LCE in 2009
Source: Press reports
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20. Chinese lithium consumption reaches 30,000t LCE
in 2009, still reliant on Australian minerals
China: Balance of Chinese lithium market, 2009 (t LCE)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
conversion
production
production
Compound
consumption
consumption
Compound
Mineral
imports
Domestic
Compound
stocks
Mineral
Mineral
imports
exports
Brine
Mineral
Source: Roskill data, Global Trade Atlas
Note: Does not include lithium chemicals, metal and derivatives Roskill
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21. Existing world capacity sufficient to meet demand until
mid-2010s, new capacity required to meet EV battery
demand from 2014
World: Capacity for the production of lithium compounds, 2008-2013 (t LCE)
250,000
200,000
150,000
100,000
50,000
0
2008 2009e 2010f 2011f 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f
New capacity required
Chinese mineral conversion capacity (effective)
Chinese brine capacity (effective)
Existing Americas brine capacity
Compound consumption (5% EV penetration rate by 2020)
Source: Roskill estimates
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23. 2009: the lithium exploration “boom”
January 2009:
7 brine & 14 mineral producers
35+ projects in various stages of exploration & feasibility
January 2010:
7 brine & 13 mineral producers (TANCO stopped in 2009)
2 projects under construction
1 project in feasibility stage
4 projects in pre-feasibility stage
60+ projects undergoing exploration
POSCO, Magna, Toyota Tsusho announce investments in
lithium explorers
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24. Status of potential new lithium projects at end-
2009
Company Location Type Capacity Start-up Status
(t LCE) (estimated)
Galaxy Resources Mount Cattlin, Mineral 17,000 2010 (Mine) Construction
Australia conversion 2011 (Plant) Feasibility-stage
& Jiangxi, China
Sentient Group Rincon, Argentina Brine 1,2001 2010 Construction
Orocobre Olaroz, Argentina Brine 15,000 2012 Feasibility-stage
Canada Lithium Quebec, Canada Mineral 10,000+ 2012 Pre-feasibility
conversion stage
Keliber (Nordic Mining) Lantta, Finland Mineral 3,300 2013 Pre-feasibility
conversion stage
Simbol Mining California, USA Brine 2013 Pre-feasibility
stage
Western Lithium Nevada, USA Mineral 27,700 2014 Pre-feasibility
conversion stage
Source: Company data; Roskill estimates
Note: 1 – Initial capacity of pre-production ponds Roskill
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