The world's largest lithium producer began trading on the Toronto Stock Exchange yesterday, raising $40-million to increase production of the mineral, a component of batteries commonly used in consumer electronics.

The initial public offering also completed the merger between Talison Lithium Ltd., an Australian pure-play lithium company, and Vancouverbased Salares Lithium Inc., which has exploration assets in Chile. The stock (TLH/TSX) closed 20¢ below its issuance price of $3.50.

Talison chief executive Peter Oliver said the issuance allows the combined entity to respond to burgeoning demand for lithium, particularly in China.

While demand contracted in the rest of the world last year, China's lithium market grew by about 10%, Mr. Oliver said.

"We see them accelerating quite dramatically," he said.

Talison sent most of its product to China last year, supplying 75% of the country's demand, and providing the Australian miner with a direct link to the battery market.

China is also leading the charge in what could prove to be a source of considerable demand for the light metal in the near future -- electric vehicles.

"They have a government that is pushing very heavily down the alternative energy vehicle route. They don't want to have oil dependence and they have environmental issues," Mr. Oliver said.

Currently, electric vehicles drive only a negligible portion of the lithium industry.

"If the electric vehicle does take off, and I think it's increasingly likely that it will sooner rather than later, there's going to be a very large surge in demand," he said.

The money raised will go toward nearly doubling production at Talison's Greenbushes mineral lithium mining operation in Australia.

Meanwhile, the company says it will step up exploration at the Salares 7 project in Chile, a series of salt-lake beds from which lithium might be extracted relatively cheaply.

Much of the world's supply of lithium comes from South American brine assets. "We will develop that project as fast as we can," Mr. Oliver said.

Talison is the world's first and only pure play lithium company and last year surpassed SociedadQuimicay Minera de Chile SA of Chile as the largest lithium producer globally by sales.

Current market size supports production of about 120,000 tonnes annually, selling for between $5,000 and $6,000 a tonne.