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A Tesla battery-charging unit. Lithium is used in lithium-ion batteries in electric cars, such as those made by Tesla Motors.Ian Thomas Jansen-Lonnquist/Bloomberg

Fabrice Taylor, CFA, publishes the President's Club investment letter, for which The Globe and Mail provides marketing services and receives compensation.

Goldman Sachs calls it "the new gasoline," and while this quote has helped inflate something of a bubble in lithium stocks, it's not all hype. There's a lot of substance behind the enthusiasm for this commodity and conditions appear ripe for one of those rare commodity bull runs that create significant wealth. For those with an appetite for the higher risk, higher return ideas, I give you Lithium X Energy Corp., a junior explorer backed by proven people that's already off to an aggressive start.

Lithium is the new gasoline because it appears that Tesla and other electric-car makers will gradually take market share away from Earth-destroying combustion engines. Goldman expects that share to rise seven-fold, to about 22 per cent, over the next decade. (Lithium is used in lithium-ion batteries in electric cars, as well as many other kinds of batteries, such as those in smart phones.)

Annual lithium carbonate equivalent demand is currently 160,000 tonnes. Goldman estimates that a 1-per-cent increase in electric-battery car penetration will increase demand by a staggering 45 per cent. That supply, meanwhile, is temporarily constrained by a variety of issues, including recent temporary mine shutdowns and the fact big players are buying up future production. As a result, prices have skyrocketed, rising 50 per cent in the first quarter alone after a stiff increase last year. Prices for lithium carbonate in China have risen from about $8,000 (U.S.) a tonne near the end of 2015 to just below $20,000 a tonne now, according to Citi Research.

Elon Musk seems concerned. Tesla Motors Inc., which he founded and leads, has announced 400,000 orders of its new cheaper model, the Tesla 3. The company believes it will sell a total of 500,000 cars in 2018 and 1 million by 2020. The world clearly needs a lot of new lithium production, and fast. Mr. Musk said: "In order to produce half a million cars a year … we would basically need to absorb the entire world's lithium-ion production."

So that's the convincing case for lithium. Here's the argument for Lithium X: The company launched late last year and its stock has been one of the best stocks in Canada – if not the best – market performers over the past six months, being up more than tenfold since it's first financing and almost twenty-fold at its recent peak last month.

CEO Brian Paes-Braga started putting the company together last year after concluding, based on observations similar to those above, that there was an opportunity to build a dominant name in lithium.

He was fortunate to be acquainted with Canadian mining titan and philanthropist Frank Giustra, whom he convinced to join the company as a major investor.

"Frank has a Tesla and a lot of respect for Elon Musk, that gave me an opening to pitch him on lithium," Mr. Paes-Braga says. "He got it right away."

He also enlisted Paul Matysek, another highly successful Canadian mining veteran who has built up a number of junior mining companies in a variety of resources and sold them to majors. Mr. Matysek is a shareholder and executive chairman.

"A lot of guys have ridden [resources] waves up and down but Paul always had an exit. I want to build something and monetize it," Mr. Paes-Braga says, referring to the idea that mining wealth is created by financing, proving out, developing and then selling quality deposits to major producers, leaving them the difficult task of building and operating a mine.

So far Lithium X has two principal assets: one in Nevada, next to a producing mine, which is of middling size, and another in Argentina, where some of the best lithium brine deposits are located. Lithium X controls 80 per cent of the deposit and it appears to be of exceptional quality, according to industry observers.

The company has a simple plan: To become the go-to name for global institutional investors in lithium. As things stand, there are no pure play lithium producers with geographically diversified assets. And since investors like pure plays, Mr. Paes-Braga wants to make Lithium X it. Having a market cap of nearly $100-million and a share price of close to $2 (not to mention the big names behind the company) has made it a lot easier to get funding, which is critical to a junior mining player.

Although he plays his hand close to his chest, I have to assume Mr. Paes-Braga will attempt to acquire a producing mine at some point soon. But it will also continue to bulk up on deposits in diverse jurisdictions to make it an attractive takeover target to the big mining companies who are very good at extracting minerals but not so good at financing, finding and developing assets.

This is obviously a more speculative idea, given that exploration plays don't generate cash but rather consume it.

But lithium, now also referred to as "white petroleum," has all the signs of an emerging metals bull market, including tight supply and surging demand. If you're prepared to take on higher risk in small portion of your portfolio, I think Lithium X has the potential to pay you nicely for it.

Disclosure: The author personally owns shares of Lithium X Energy Corp. He bought half his shares near the end 2015 and the other half in the past month.