Wednesday, March 16, 2016

South American Lithium going mainstream?


Far from the soy and cattle that dominate its vast fertile pampas, Argentina harbors another valuable commodity that is rocketing in price and demand and luring newly welcomed foreign investors.

Lithium, the so-called "white petroleum", drives much of the modern world. It forms a small but essentially irreplaceable component of rechargeable batteries, used in consumer devices like mobile phones and electric cars. It also has pharmaceutical and other applications.

Over half of the earth's identified resources of the mineral are found in South America's "lithium triangle", an otherworldly landscape of high-altitude lakes and bright white salt flats that straddles Chile, Argentina and Bolivia.

Until recently, that was not great news for investors. Argentina and Bolivia lacked predictability and a friendly business environment, while Chile kept strict control over lithium output.

But that may be all about to change.


Now U.S. specialty chemicals firm Albemarle Corp is muscling in on SQM's turf. Having spent $6 billion last year to buy Rockwood, it then signed a deal with Corfo in its drive to triple lithium output in Chile.

Chile's government said it sees public-private partnerships as the way forward and is planning to put more deposits up for tender.

I added Albemarle to my portfolio today. I will do a write up on the company in the upcoming days. While the majority of the commodity space continues to struggle with over capacity and lower prices lithium is in the exact opposite spot, high demand and tight supply. This should continue for several years as it takes years to permit, finance, and build any type of mine. 

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