This is why two Australian lithium mining companies are merging

Sun Shuttle from the Beijing Institute of Technology between Alice Springs and Kulgera in the Northern Territory competing in the World Solar Challenge. Mark Kolbe/Getty Images

Two Australian lithium miners, Galaxy Resources Ltd and General Mining Corporation Ltd, have agreed to merge to capitalise on surging demand for the metal essential to building batteries for electric cars.

The combined group would become the second largest lithium player in Australia with a market capitalisation of almost $800 million.

Among the assets is the Mt Cattlin lithium project in Western Australia.

Here’s where the merged entity will sit on the ASX:

Source: Galaxy Resources

Today Galaxy Resources, the bigger company, held its annual general meeting where it outlined the future of lithium mining.

While the Tesla car in the US has captured the top end of the market, the big driver of demand is China which is becoming the global leader in the electrification of public transport and electric vehicles.

Source: Galaxy Resources

Galaxy Resources says strong growth in lithium battery demand over the next decade will be driven by:

  • Demand for battery powered consumer and portable electronics
  • More advanced lithium batteries with higher energy density
  • Hybrid and electric vehicles and mass energy storage systems

China is targeting 5 million electric vehicles by 2020 with 4.8 million charging stations, 200,000 electric buses and converting
200 million electric bikes from lead to lithium batteries.

And China is already the biggest producer, and consumer, of lithium, as this chart from Galaxy shows.

It currently consumes all that it produces:

Source: Galaxy Resources

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