eBusiness Weekly
Panashe Sachikonye
Since 2016 the price of Lithium has more than doubled as you can (see from the diagram right). One of the major reasons is that the demand for Lithium, also known as “white gold” has increased. Tesla and other electric vehicles require the metal for its use in lithium-ion batteries that power electric cars.
Now Contemporary Amperex Technology (CATL), China’s largest automotive battery maker, is aiming to become the world’s biggest car battery maker with a new factory financed by an Initial Public Offering (IPO) valued at $2 billion.
Goldman Sachs is reportedly helping the company with the IPO, which is likely to close by the end of year. CATL plan to use the money to finance their second battery factory next to their headquarters in Ningde, Fujian Province.
China, struggling with alarming pollution levels in major cities, is aggressively pushing plug-in vehicles and has poured in tens of billions of yuan in investment, research funding and subsidies, drawing many new automakers to launch projects.
Strict quotas for electric and hybrid cars are set to come into effect next year in China, home to the world’s biggest auto market. This is in line with Beijing’s efforts to make the country a world leader in new energy vehicles and related technologies.
China has become the world’s leading market for battery-powered cars with policies favouring those models over gasoline or diesel cars. Lithium is a key component in lithium-ion batteries used to power electric vehicles.
Zimbabwe is the fifth largest producer worldwide with a production of 1 000 tonnes in 2017. The country’s privately owned Bikita Minerals produces the most. Australia is the world’s largest producer at 18 700 tonnes a year.
In the last two years, Lithium production has not been enough to meet demand. By 2030, demand is expected to hit 250 000 tonnes a year, up from less than 50 000 tonnes in 2017 according to James Frith, an energy storage analyst at Bloomberg New Energy Finance. So the industry will need to keep ramping up production.
Sanford C. Bernstein & Co. estimates companies will have to spend between $350 billion and $750 billion to find and develop new Lithium mines to support this rising demand.
Tesla, General Motors, Nissan Motor Co. and Chinese automakers are the primary companies producing fully electric vehicles, but in the last year, Volvo Cars to Ford Motor Co. to Mercedes Benz have pledged to beef up their electric vehicle offerings in the next five years.
The price of white gold has increased steadily as products powered by rechargeable batteries have gained popularity and moved up to $290,19 per tonne in January 2018 from $134,16 per tonne in January 2016, according to data from Benchmark.
As a result automakers are starting to stake claims in long term agreements, even taking equity positions in new projects. Last year, Chinese automaker Great Wall Motors took a 3,5 percent stake in Australian Lithium producer Pilbara Minerals and in January, Toyota Motor Corp invested in the Argentinian mining company Orocobre.
This metal is irreplaceable for making batteries. Mining companies can’t just extract more tonnes. Unlike the oil market, where producers can usually bring a drilled well to completion within 4-9 months, Lithium is much slower to react and the demand surge is pretty much guaranteed by the Chinese government. This year US President Donald Trump signed an Executive Order adding
Lithium to the “US Critical Mineral Directory’’, which lists certain mineral commodities that are vital to the Nation’s security and economic prosperity. White gold is used to create batteries for the US military. It powers essential equipment like night vision, radio and GPS. The Federal Register states that currently the US is importing 50 percent from abroad.
Other countries want to ban gas and diesel cars in the future like India, Germany, France and Britain. We are in the start of a huge change in how we get energy, from oil to a new set of energy minerals.
China’s shift is proof the world is beginning to tap into the power of new energy minerals for reduced global emissions and pollution. Lithium prices will remain strong over the coming years, leading to good equity investment opportunities in mining and exploration businesses. Energy metals and Technologies focused investors should have good exposure to advanced stage explorers and early stage production companies, as these will greatly benefit from increasing prices.
Zimbabwe has 30 known Lithium claims but the mineral has not been taken seriously for years. Significant discoveries of the mineral in the past few years have been made and substantial investment needs to be made locally.
Lithium miners in Zimbabwe are Zulu Lithium situated in Bulawayo, which is owned by London listed Premier Africa Minerals, Australian listed Prospect Resources which recently set up a plant in Kwekwe, Zimbabwe Lithium which entered into a joint venture with Zimbabwe Mining Development Corporation at Kamativi and Bikita Minerals which is one of the oldest. Bikita Minerals requires close to $75 million to setup a fully-fledged Petalite processing plant with almost $10 million being already invested.
Petalite is an ore that contains about 4,5 percent of Lithium. Unfortunately it is exported in its raw form as Zimbabwe does not have the capacity to beneficiate Petalite into Lithium. This means the country misses out on cashing in on the rising prices.
