US president Joe Biden has delivered a shot in the arm for electric vehicles, as battery megafactories explode in Europe - all pointing to positive signs for lithium.
The world will need a lot more lithium in the near future if recent announcements from President Biden are anything to go by.
In an effort to “to grow good-paying, union jobs at home, lead on electric vehicles around the world, and save American consumers money”, Biden has signed an executive order to make half of all new vehicle sales by 2030 zero emissions vehicles.
That, according to American investment magazine Barron’s, “means billions in spending”.
It also means the US needs lithium, one of the most crucial metal in the battery metals dynamic, and lots of it.
Currently, China and Europe represent the two biggest markets for electric vehicles, with data from EV-Volumes showing that 1.14 million EVs were sold in China in the first half of 2021, while 1.06 million were sold in Europe, growth of 197% and 157% respectively.
The US has now set a clear plan to catch up.
US going all-in on lithium
“The global market is shifting to electric vehicles and tapping their potential to save families money, lower pollution, and make the air we breathe cleaner,” the president’s office said.
“Despite pioneering the technology, the US is behind in the race to manufacture these vehicles and the batteries that go in them; today, the US market share of electric vehicle sales is only one-third that of the Chinese electric vehicle market.”
But that will all change, with the US increasing its investment in cleaner and greener technologies by installing a national network of EV charging stations, instigating consumer incentives, expanding its supply chain and innovating the next generation of clean technology.
In an investor newsletter, ASX-listed Lake Resources NL (ASX:LKE, OTCQB:LLKKF) said the EV drive was expected to require billions of dollars in investment, from automakers to battery plants and also raw materials.
And it will require significantly greater volumes of lithium.
“Batteries need lithium, so the lithium mining industry has to ramp capacity too,” Barron’s said.
“In 2020, the world was mining about 400,000 tonnes of lithium a year, enough to power 2 million to 3 million EVs a year, although only about one-third of global output is destined for cars.
“If the US is making 8 million EVs and the rest of the world is doing similar things, then the world will need to mine an incremental 5 million tonnes of lithium a year. It’s a massive 13-fold increase for the industry.”
Thankfully, miners are taking notice. BHP Group Ltd and Rio Tinto Group Limited, both made major announcements of investments in the sector in rapid succession.
Five days later, Rio revealed plans to invest US$2.4 billion in its Jadar lithium-borates project in Serbia, one of the world’s largest greenfield lithium projects.
Mega megafactory increase
The number of battery megafactories - lithium-ion battery cell production factories capable of producing in excess of one gigawatt hour of battery cells per year - is exploding.
Benchmark Mineral Intelligence has noted that the number of lithium-ion battery megafactories (or gigafactories) has surged from just five in 2015 to 225 plants in the pipeline by 2025, with 155 expected to be operating by the end of 2021.
Its managing director Simon Moores said the battery megafactory trend had intensified in recent years.
“We can now comfortably say that the megafactories are mainstream,” he said.
“The world’s governments are listening. And with this political will adding to industry commitment, our lithium-ion battery megafactory assessment now reads 225 plants and rising.”
French automaker Renault has announced plans to develop a 9 GWh megafactory in France and Japanese automaker Nissan and Envision AESC have outlined a 25 GWh battery megafactory in Sunderland, UK.
Volvo and Northvolt have also unveiled plans to build a new megafactory on the continent, as the number of European plants continues to rise.
Ganfeng Lithium, the world’s biggest lithium company by market value, said its subsidiary would invest 8.4 billion yuan in two projects to make 'new-type' lithium batteries.
Lithium price keeps rising
Benchmark Mineral Intelligence had its lithium index showing a 115.7% increase year-on-year, while lithium carbonate has gained nearly 135% and hydroxide 89% amid a broad-based pricing recovery.
In early September, Fastmarkets was reporting battery-grade lithium carbonate prices of up to US$20,123 per tonne, while S&P Global Platts assessed battery-grade lithium carbonate at 135,000 yuan per metric tonne (US$20,910) and battery-grade lithium hydroxide at 135,500 yuan per metric tonne.
Deutsche Bank (NYSE:DB) analysts have projected a widening lithium supply deficit, driven by the surge in EV sales and supply risks such as increasing environmental and social governance (ESG) scrutiny.
The German bank raised its medium and long-term lithium demand forecast by around 9% to 1.1 million tonnes LCE by 2025 and 1.95 million tonnes by 2030, and it expects 2025 supply of 947,000 tonnes.
Similarly, Benchmark has spoken of a “great raw material disconnect” with expected lithium supply of 1.5 million tonnes (lithium carbonate equivalent, or LCE) by 2030 being far short of estimated demand of 2.4 million tonnes.
What it means for Lake Resources
With a market cap of $563 million, Lake Resources is one of Australia’s most prominent lithium players.
A clean lithium developer utilising ‘clean’ direct extraction technology for the production of sustainable, high purity lithium, it owns the Kachi Project within the Lithium Triangle in Argentina among other projects covering 200,000 hectares.
Lake managing director Steve Promnitz said the Biden administration’s EV plans would ensure a third leg of demand for the battery metals sector.
“China has led the charge into EVs and now Europe and the United States are racing to catch up. The outcome is clear: EVs are now the legislated vehicle of the 21st century and there’s no going back," he said.
“The entire battery metals sector, and particularly lithium miners, now have an enormous challenge to ensure the EV and battery storage industry gets the materials it needs to achieve this clean energy transformation.
“Lake’s sustainable, direct extraction process and its ability to scale up its projects to meet demand gives us enormous leverage as we work to accelerate our own plans for near-term production of battery-quality lithium.
“Importantly, Lake offers an independent supply source amid growing competition for battery-quality products, giving potential buyers a new source of high-grade lithium at a time when security of supply is paramount.”
The promise for Lake is real; both Roth Capital and Lodge Partners have upgraded their price targets for Lake, following the company’s success in securing funding for Kachi.
It received a strong Expression of Interest from the United Kingdom’s official Export Credit Agency (ECA), UK Export Finance (UKEF) to fund the project to approximately 70% of the total requirements.
“We see this as a significant positive for the company as it demonstrates countries and government agencies are supportive of developing the lithium supply chain,” Roth said in its accompanying note.
“Additionally, we believe it is encouraging that a government agency is willing to back a high percentage of project capital for Kachi despite recent lithium project issues for other companies.
“We are reiterating our Buy rating as we believe the company is poised to advance its flagship project to a construction decision over the next 12 months.”
It also currently has drilling underway to support a doubling of future planned production at Kachi.
The program aims to upgrade Kachi’s 4.4 million tonnes lithium carbonate total resource from measured and indicated resources to reserves for a definitive feasibility study and production expansion study.
- Daniel Paproth