Bolivia is not only a long way off from being capable of constructing an industrial-scale facility, but the property itself is plagued with inherent problems, including seasonal flooding and high magnesium levels.
Worsening matters is the fact that President Morales' blatantly nationalistic stance on his country's resources and industries is making business in Bolivia an extremely risky venture. Lee believes the Bolivian government will “have a difficult time attracting long-term investors in a jurisdiction that has a lot of political risk.”
Roughly 30-percent increase in mine supply by 2014
Three projects that will have a significant impact on the lithium industry, said Lee, are Galaxy Resources' (ASX:GXY) recommissioning of the Mount Cattlin spodumene project in Western Australia; Canada Lithium's (TSX:CLQ) Quebec project in Quebec, Canada; and Orocobre's (ASX:ORE,TSX:ORL) Olaroz project in Argentina's Puna region.
According to Lee, both Galaxy's Mount Cattlin project and Canada Lithium's Quebec project will lead to a 20-percent increase in lithium mine supply by the end of 2013. Orocobre's Olaroz project, now under construction, is expected to add another potential 10 percent to mine supply in 2014.
Increased supply to stabilize prices while demand remains robust
The substantial addition to global lithium mine supply represented by these three operations will have a stabilizing effect on lithium prices, said Lee. “Pricing has increased roughly 30 to 35 percent over the past two years. Production from marginal cost suppliers like Galaxy Resources and Canada Lithium will to some extent create a natural floor in the price of lithium,” he explained. Byron Capital expects to see lithium prices of $5,800 to $6,000 per ton lithium carbonate.
In terms of demand, Byron Capital remains bullish and expects the double-digit growth in lithium demand to continue into next year on increasing demand from the ceramics and glass sector (29 percent of total end use in 2011, according to the US Geological Survey); the batteries sector (27 percent); and robust demand in the lubricating greases sector (12 percent), where lithium greases are taking over a larger percentage of the market from sodium- and potassium-based greases.