Canada Lithium shares jump 11% after first production run

Canada Lithium Corp (TSE:CLQ) jumped more than 10% on Wednesday on higher than usual trading volumes, after announcing that it has produced its initial run of 99.1% lithium carbonate from its processing plant near Val d'Or, Québec.

The Toronto-based company also said it has received ISO certification for its on-site plant and the material is now being upgraded to 99.5% battery-grade with the commissioning of the solvent extraction and bicarbonate circuits.

The first shipment from the open pit to Tewoo-ERDC, a Chinese commodities trader, under the five-year, minimum 12,000 tonnes, annual off-take agreement should happen this week according to Canada Lithium.

The company also recently signed a deal with Japan's Marubeni for up to 5,000 tonnes per year as it gears up to annual design capacity of 20,000 tonnes of lithium carbonate scheduled to for the first quarter next year. That would make Canada Lithium the fourth largest producer in the world.

By early afternoon the miner was trading up 11.3% at $0.54 on the Toronto big board, at its highest for the day.

Around 1.26 million shares in the $195 million company had changed hands by 1:45 pm EST on Wednesday compared to the daily average of 580,000. The counter is still showing losses for 2013 gains – it is down 18% year to date.

There are only a few rock lithium deposits worldwide with purity ratings above 99% which makes it suitable for lithium ion batteries.

The vast bulk of the global lithium supply is extracted from brine deposits often as a byproduct — primarily in South America. It usually end up being used in grease, ovenware or industrial desiccants and not in the electrical storage industry.

Lithium today is used in batteries for everything from cellphones to hybrid vehicles — the electric vehicle market is destined to grow by nearly 40% per annum for the rest of the decade.

The growing demand for lithium is being reflected in the price. The current spot price for battery-grade lithium carbonate is around $6,600 a tonne, that’s up from $5,500 a couple of years ago.

Battery-grade lithium hydroxide fetches roughly $1,000 per tonne more and Canada Lithium has the potential to producer some 2,000 tonnes a year.