Ever-increasing use of rechargeable batteries, whether for mobile devices or electric cars, are helping to drive demand for lithium. According to a Roskill Information Services report last year on the lithium market, global demand for the world's lightest metal reached 150,200t lithium carbonate equivalent worth an estimated $2.2 billion. Roskill says that lithium demand grew at an average compound annual growth rate of 6.8 percent since 2000 and that demand will rise to an annual base rate of almost 10% until 2017. Consumption is forecast to grow up to 15.7% annually, bolstered by increased consumption in the rechargeable battery market.
Predicting the timing of mass adoption of electric vehicles has been a moving target, but companies are trying to position themselves to meet expected demand, including RB Energy, Inc. (TSX:RBI) (OTCQX:RBEIF). The Vancouver-based company owns Aguas Blacas, a producing iodine mine in Chile, and Quebec Lithium, a lithium project north of Val-d'Or, Quebec.
RB Energy has seen the value of its stock crumble from around $2.90 in early 2013 to lose about 90% of its value in hitting 27.5 cents on July 21. The driver for the sharp drop in July was news of a delay in commercial production at the Quebec Lithium project and the company's need for additional capital only months after completing a $22-million financing. The company said that the delays in the ramp up to production accelerated the depletion of its treasury more than anticipated.
With the updates, the stock shed more than half its value last month. Analysts at Dundee Securities downgraded RB Energy from a "buy" rating to a "neutral" rating and reduced their price target from $1.70 to $0.80. The steep reduction in price target still represented a 135% potential upside from the price at the time of the downgrade on July 24.
Shares are getting a big lift on Tuesday with the company saying that it has now made its first commercial shipment of lithium carbonate from the project. The first container of technical grade lithium carbonate (98.8%) was shipped to RB Energy's takeoff partner Tewoo ERDC over the long weekend. Weekly shipments are now scheduled and the company expects volumes to increase in a bid to reach commercial production levels by the end of the year (originally forecast for this quarter). Name plate levels of 20,000 tonnes of lithium carbonate per annum are projected for the first quarter of 2015.
Minor tweaks are being made to the processing plant in Quebec to reach volume production of electric vehicle battery grade material – which exceed 99.9% - are expected late this year. This will allow the company to produce either type of lithium carbonate depending on demand and price.
"Although the commissioning of our lithium operation has taken longer than anticipated, we are very pleased to have at last achieved the important milestone of a first commercial shipment of lithium carbonate,” commented Richard Clark, chief executive at RB Energy, in a statement today.
Toronto-listed shares of RB Energy, which are traded much more heavily than shares in the U.S., closed trading Friday at 32 cents. The stock has jumped ahead in early Tuesday trading to 41 cents for a gain of 30.6 percent, with more than 3.2 million shares changing hands only an hour into the trading session.