Crowded herd of lithium explorers faces culling as supplies rise

By Rod Nickel | TORONTO, MARCH 6

The crowded field of explorers fighting for capital to produce lithium faces a painful reckoning as supplies build and prices flatten, leaving those with low costs and powerful partners still standing, industry consultants say.

Prices of the critical component in rechargeable batteries used in electric cars and mobile phones spiked last year and demand is projected to soar 60 percent to 300,000 tonnes of lithium carbonate equivalent (LCE) annually by 2020, National Bank Financial said.

Even so, it said new players could flood the market.

"It's crowded, no doubt about it, and it will get culled," said Jon Hykawy, president of Stormcrow Capital, calling lithium, the "latest bubble sector."

Explorers are gathering at the Prospectors & Developers Association of Canada mining convention in Toronto through Wednesday.

To survive, suppliers must produce at low cost, enabling them to withstand price corrections, Hykawy said.

Dozens of companies globally look to be "pump and dump" schemes, unlikely to produce a single tonne, said consultant Joe Lowry of Global Lithium. Investors who back them risk being burned, he said.

Even potential new players are nervous.

"If there is one screw-up, one fly-by-night (company), it affects every single one of us," said Carlos Vicens, chief financial officer of early-stage explorer Neo Lithium Corp .

Canada's TMX Group has 35 listings related to lithium, compared with 20 three years ago, spokesman Shane Quinn said.

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