The document discusses the current and projected supply and demand for lithium, highlighting a potential oversupply in the medium term due to new extraction technologies and expansions by major producers. It outlines aggregate demand forecasts and supply capacities, presenting a worrying supply-demand gap projected for 2015 and 2020. The implications of this imbalance raise questions about project viability, financing, and market responses.

1. RARE EARTHS, SPECIALITY
& STRATEGIC METALS
INVESTMENT SUMMIT
Lithium supply: how much can the market digest?
Gerry Clarke – International Lithium Alliance
IRONMONGERS’ HALL, CITY OF LONDON TUESDAY-WEDNESDAY, 13-14 MARCH 2012
www.ObjectiveCapitalConferences.com

2. Lithium Supply
How much will the market digest?
Over what period of time?
Gerry Clarke
Independent Consultant
Objective Capital
Rare Earths, Speciality & Strategic Metals Investment Summit
Ironmongers’ Hall, City of London
13-14 March 2012

3. Declaration & Disclaimer
Gerry Clarke is an independent industrial minerals consultant and
commentator . He has no investment or interest in any lithium
resources company.
Information presented here is sourced by personal communication
with individuals in the industry and from numerous published
sources. Every care has been taken to ensure historical information is
accurate and representative whilst forward looking views, opinions
and forecasts expressed are made in good faith at the time of
presentation and will necessarily change as time passes and the
industry evolves in response to changing conditions. No reliance may
be made on the content of this presentation whatsoever. Any
consequent liabilities to any person or organisation are expressly
denied. Any such persons or organisations must undertake their own
first hand due diligence and acquire appropriate professional advice
before undertaking any financial, corporate or administrative position
in the industry or liabilities thereto.

4. What’s going on?
You’ve heard from Rockwood’s Chemetall Lithium – one of the
four major expanding producers with lithium industry
pedigrees in the USA and Europe dating back to the 1920s.
And you’ve heard from Li3 Energy – one of the aspiring new
companies formed in late 2009 with a substantial new
project of merit in northern Chile, along with other
exploration stage projects, yet to catch up with near term
projects in Argentina, Australia and Canada. Will new
extraction technology and strategic partnership with POSCO
propel the company to join the front runners?
Given substantial expansion by the majors and the line up of
new project capacity announcements, compared with
forecast demand levels, it is easy to identify a truly alarming
potential oversupply in the medium term that is probably
untenable. I’ll take you through it and ask some pertinent
questions.

5. Aggregate Lithium Demand Forecast
Estimated 2011 demand: 138,000 tonnes LCE*
2015 2020
Low High Low High
Range: 138,500 265,000 174,800 500,000
Average: 191,472 279,945
Average annual growth: 2011-2015: 9.70%
2015-2020: 9.24%
Sources: Byron Capital, Chemetall Lithium, Dundee
Securities, FMC, General Motors, Metal Bulletin Research, Pike
Research, PW Harben Inc, Roskill Information
Services*, SignumBox, SQM, Talison Lithium, TRU Group, in various
publications from 2010. *Lithium carbonate equivalent

6. Forecast Lithium Supply Capacity
Lithium chemical supply capacity 2010: 137,800 tonnes LCE*
Up to 2015 Add to 2020 Total by 2020
Majors (Arg/Aus/Chile/US): 245,800 (4**) not expected 245,800
Mineral conversion (Chinese): 52,500 (10) more potential 52,500(?)
Brine expansion (China): 30,000 (4) 20,000e 50,000e
New brine (Arg/Bol): 31,000 (2) 80,000-110,000 (4) 111,000-141,000
New hard rock (Aus/Can): 61,500 (3) 45,000 (2) 106,500
Novel Geothermal (US): 16,000 (1) maybe more units 16,000
Novel Oilfield (US): 20,000 (1) 20,000
Novel Soft Rock (US/Serbia): 40,000 (2) 40,000e
Total 456,800 (25) 185,000-215,000 (33) 641,800-671,800
Growth in supply from 2010: +232% +134%-156% +366%-388%
NB: Accommodates sufficient slippage of time for projects to ramp up to announced capacity
levels post commissioning dates by 2015 and 2020. Excludes Korea’s seawater project
and minor but potentially larger future contributions from Brazil, Zimbabwe, & Portugal
(*SQM **No. of entities: Four majors accounted for approximately 80% supply in 2010)

7. Galaxy: “World’s largest battery grade lithium carbonate at 17,000 tpa”
Jiangsu, China using spodumene concentrate imported from Mount
Forecast Lithium Demand
Catlin, Western Australia. Battery manufacturing plant under
construction adjacent to lithium carbonate plant.
2011 estimated demand: 138,000 tonnes LCE*
2015 2020
Low High Low High
Range: 138,500 265,000 174,800 500,000
Average: 191,472 279,945
Average growth: 2011 to 2015: 9.69% per annum
2015 to 2020: 9.24%
Sources: Byron Capital, Chemetall Lithium, Metal Bulletin Research, Pike
Research, PW Harben Inc, Roskill Information Services*, Signumbox, TRU
Group, Talison Lithium, FMC, SQM, General Motors, Dundee Securities in
various publications from 2009 onwards. Averages take into account some
analysts’ low, medium and high scenarios.

9. Potential Supply Demand Gap to 2020
Tonnes LCE units
2015 2020
Average forecast demand: 191,472 279,945
Average forecast capacity: 456,800 656,800
Potential oversupply (gap): 265,328 376,855
+138.6% +134.6%
Capacity: An alarming 2.4/2.3 times average forecast demand!
An implied average industry operating level of 42%
Is such a gap feasible? If not, how will it be averted?
Assuming technical success for the advancing projects; in the
absence of unforeseen, substantial and sustained increased
demand in the medium term; project slippages, minimum
occupacity levels, and delays are likely with attendant financial
and corporate restructuring risks for some.

10. Recognised World Lithium Resources
Tonnes contained elemental lithium
39,372,000: Clarke (2009)
39,000,000: Ford/University of Michigan (2011)
39,890,000: Evans (2012)
34,000,000: USGS (2012) 13,000,000 Reserves
NB: In aggregate the recognised resource figure will be higher
Ford Motor Co/University of Michigan
Forecast demand to 2100: 20,000,000 tonnes elemental lithium*
requires 40,000,000 in situ resource assumes 50% mining & conversion losses
Post 2020 all today’s recognised resources will be required!
SUPPLY DEMAND GAP THROUGH 2020 APPEARS A MEDIUM TERM PROBLEM
*20,000,000 tonnes lithium = 106,460,000 tonnes LCE (Li = 5.323 Li2CO3)
Equivalent to 380 years demand at the 2020 forecast average demand of 279,945
tonnes LCE

11. Plus others 2015 to 2020 and beyond?
ARGENTINA: International Lithium, Dajin Resources
BRAZIL: CIF Mineracao, CBL
CANADA: Critical Elements, Glen Eagle Resources, Rock
Tech Lithium, Perilya Canada, Avalon
CHILE: Li3 Energy, NX Uno, Salares Lithium,
Pan American Lithium
EUROPE: East Coast Minerals, Ultra Lithium, Keliber
KOREA: POSCO/KIGAM/Govt seawater joint venture
RUSSIA: ???????????????????????????
USA: Amerilithium, Lithium Corp, etc
AND MORE!!!!!!!!!!!!!!!!
Some with multiple projects and some further out....................
extending recognised global reserves and resources for lithium

12. Lithium Availability Wall Map 2011

13. Quotes & Questions
FMC: “New players limited by unfavourable economics and
development challenges”
GALAXY: “The industry should stop complaining and start
promoting the use of lithium and stimulate new markets”
 New projects: which might slip and/or fail?
 At what occupacity levels can new projects be sustained?
 How will project financing be affected by the medium term
supply demand forecast imbalance ?
 How will strategic partners react to market forecasts?
 What will happen to prices?
 Will Chile’s mining law revision be game changing?
 How immune is lithium to competing technology: e.g. fuel
cells?
 How certain is vehicle electrification anyway?

14. Thank you for your attention
Gerry Clarke