RARE EARTHS, SPECIALITY& STRATEGIC METALSINVESTMENT SUMMIT

IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY-WEDNESDAY, 13-14 MARCH 2012

www.ObjectiveCapitalConferences.com

Lithium supply: how much can the market digest?Gerry Clarke – International Lithium Alliance

Lithium SupplyHow much will the market digest?

Over what period of time?

Gerry Clarke

Independent Consultant

Objective CapitalRare Earths, Speciality & Strategic Metals Investment Summit

Ironmongers’ Hall, City of London13-14 March 2012

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.

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.

Aggregate Lithium Demand ForecastEstimated 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

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 245,800Mineral conversion (Chinese): 52,500 (10) more potential 52,500(?)Brine expansion (China): 30,000 (4) 20,000e 50,000eNew 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 16,000Novel Oilfield (US): 20,000 (1) 20,000Novel Soft Rock (US/Serbia): 40,000 (2) 40,000e

Total 456,800 (25) 185,000-215,000 (33) 641,800-671,800Growth 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)

Forecast Lithium Demand 2011 estimated demand: 138,000 tonnes LCE*

2015 2020 Low High Low High

Range: 138,500 265,000 174,800 500,000Average: 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.

Galaxy: “World’s largest battery grade lithium carbonate at 17,000 tpa”Jiangsu, China using spodumene concentrate imported from Mount Catlin, Western Australia. Battery manufacturing plant under construction adjacent to lithium carbonate plant.

Potential Supply Demand Gap to 2020Tonnes LCE units

2015 2020Average forecast demand: 191,472 279,945Average 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.

Recognised World Lithium ResourcesTonnes 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 MichiganForecast demand to 2100: 20,000,000 tonnes elemental lithium*

requires 40,000,000 in situ resource assumes 50% mining & conversion lossesPost 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

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

Lithium Availability Wall Map 2011

Quotes & QuestionsFMC: “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?

Thank you for your attention

Gerry Clarke