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Quebec to meet jump in global lithium demand

Mineral used in batteries for electric vehicles

By PETER KOVEN, Financial Post July 29, 2010

Quebec is poised to become North America's leading producer of a metal that automakers are desperate to get their hands on.

As recently as a few years ago, no one gave much thought to lithium, a silver-white metal needed to produce lithium-ion batteries. While there are trace amounts of the metal in most cellphone batteries, supply was not an issue for many years.

Now it is.

Car companies are beginning to roll out electric vehicles, and millions of them are expected to hit the market in a few years. Some experts have suggested that there could be as many 10 million electric vehicles sold annually by 2016.

This is a challenge for the lithium market, because each car battery will require nearly 20 kilograms of lithium carbonate, compared with just a few grams in a cellphone. As a result, automakers have teamed up with lithium companies to try and secure supply.

The world currently relies on Chile and Argentina to supply most of its lithium. But if everything goes as planned, Canada Lithium Corp. will make Quebec the dominant North American producer as soon as 2012. Apart from a small producer in Nevada, there is nothing else to speak of right now.

"From our point of view, the timetable to production is critical," says Peter Secker, chief executive of Canada Lithium Corp.

"Demand for lithium is going to grow significantly over the next six years, and Quebec can be at the forefront of that growth."

Canada Lithium is reviving the Quebec Lithium project, located just 60 kilometres north of the mining centre of Val d'Or. It is an old producer that was shut down in the 1965 after the United States government took lithium off of its strategic stockpile list.

The project bounced from the Sullivan Mining Group to Cambior Inc., and eventually became the property of Iamgold Corp. when it bought Cambior in 2006.

The lithium asset was not a core one for Iamgold, and Canada Lithium saw an opportunity. It acquired the project from Iamgold in 2008 for a mere $350,000, a price that would prove to be a bargain a year later when the lithium market took off.

After conducting some drilling and test work, the company determined that the project could produce about 40 million pounds of lithium a year over a mine life of more than 30 years.

Of course, many other junior companies are talking about developing various lithium projects now that the metal is in the spotlight.

Mr. Secker says the reason this project will succeed and others will fail is purity: the Quebec Lithium project produces a 99.5% lithium carbonate. Other deposits have much higher levels of contamination, making the product less desirable for automakers.

Canada Lithium will require about $150 -million in capital to put the project back into production. Once it is operating, it is expected to create 175 full-time jobs and about 800 flow-on jobs throughout Quebec.

Additional lithium exploration is going on in the James Bay area in Northern Quebec, suggesting that other projects could potentially follow this one if the lithium market stays strong.

Like every other mining CEO working in Quebec, Mr. Secker has good things to say about operating in the province:

"In terms of community and government support, it's excellent," he says.

"They understand the industry, and they understand that lithium is a very environmentally acceptable commodity."

Additionally, he points out that there is a big focus in Quebec on green energy, and lithium fits well into that as a "building block" of electric vehicles. In fact, a company called Phostech Lithium Inc. recently announced it is building a new lithium battery plant near Montreal, and it could end up using the output from Canada Lithium's mine.

"There's an ability to have that full downstream integration of producing the lithium carbonate and then going into the batteries, all in Quebec," Mr. Secker says.

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