Welcome to Lake Resources’ investor newsletter.
In this September 7, 2021 issue:
- Biden pledge delivers decade-long EV boost
- Battery metals go mainstream as megafactories surge
- Lithium prices jump as supply worries intensify
- New Lake research, media and events for investors
Biden pledge delivers decade-long EV boost
That’s how Barron’s described U.S. President Joe Biden’s historic pledge to make half of all new vehicles sold in 2030 zero-emission vehicles, including battery-electric, plug-in hybrid electric or fuel cell electric vehicles.
The president’s executive order also aims to tighten fuel efficiency and emissions standards, reducing gasoline demand and pollution, including lowering greenhouse gases.
The August 5 statement also vowed to ‘strengthen American leadership in clean cars and trucks by accelerating innovation and manufacturing in the auto sector, bolstering the auto sector domestic supply chain, and growing auto jobs.’
Noting that the U.S. market share for EVs is only a third of China’s, the president also announced plans to invest in a national network of EV charging stations, together with offering consumer incentives and financing investment in clean technologies.
The statement said U.S. automakers Ford, General Motors (GM) and Chrysler parent Stellantis had also pledged to reach a goal of 40 to 50 per cent U.S. EV sales by 2030.
‘The biggest thing that’s happening here is there’s a realisation, on the part of both labour and business now, that this is the future. We can’t sit by,’ Biden told reporters at the White House.
Other automakers have also backed the EV sales target, including South Korea’s Hyundai and Japan’s Nissan. Toyota Motor described the goal as ‘great for the environment’ and said it would ‘do our part.’
Biden has sought US$174 billion (A$237 billion) in government spending to stimulate EVs, including US$100 billion in consumer incentives, while a Senate infrastructure bill includes US$7.5 billion for EV charging stations.
The EV drive is expected to require billions of dollars in investment, from automakers to battery plants and also raw materials.
Currently there are an estimated 2 million EVs on U.S. roads and only 2 per cent of all cars sold last year were electric.
However, GM has already announced plans to invest US$35 billion in EV development between 2020 and 2025, while Ford has said it would spend more than US$30 billion on EVs by 2030. Stellantis, the world’s fourth-biggest automaker, plans to invest more than US$35 billion through 2025 on electrifying its line-up.
For the U.S. industry as a whole, producing 8 million EVs – about half of U.S. annual light vehicle sales – would require an estimated US$64 billion of investment, Barron’s estimates.
There are also extra costs in building automotive capacity, estimated by Barron’s at US$22 billion, together with another US$10 billion in charging stations.
‘That’s almost [US]$100 billion in spending over the next nine years – in the U.S. alone – to have the capacity to build enough cars and batteries to reach Biden’s goal and to keep the infrastructure to enable their adoption,’ the report said.
Another estimate by consultancy AlixPartners suggests investments in EVs will reach some US$330 billion by 2025, globally.
13-fold lithium demand rise
For emerging lithium suppliers such as Lake Resources, the new EV investments mean yet another boost to demand for battery-quality lithium.
‘If the U.S. 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,’ Barron’s noted.
‘That means demand growth as far as the eye can see,’ it added.
An estimated 40 billion lithium-ion battery cells are required for the United States by 2030 and potentially 225 billion globally, not including those required for power storage.
‘It’s a massive transition, one that has been enabled by falling battery costs and success from the likes of Tesla. But taking it mainstream will require hundreds of billions of dollars,’ the report concluded.
Automotive engineer and commentator Sandy Munro welcomed the announcement, saying he ‘thanked the president for stepping up to the plate to try and save the automotive companies here in the United States.’
Lake’s 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,’ Mr Promnitz 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 too, Lake offers an independent supply source amid growing competition for battery-quality product, giving potential buyers a new source of high grade lithium at a time when security of supply is paramount.’
Battery metals go mainstream as megafactories surge
Battery metals have gone mainstream. That much is obvious when two of the world’s biggest miners, BHP and Rio Tinto, both announce major investments in the sector in rapid succession.
On July 22, BHP hit the headlines when it announced the signing of a nickel supply agreement with Elon Musk’s Tesla Inc. The Australian miner said it would supply Tesla with nickel from Western Australia, with both companies also seeking to ‘collaborate on ways to make the battery supply chain more sustainable.’
BHP’s move followed Musk’s comment last year, when the Tesla founder said there was a ‘giant contract’ awaiting a company capable of mining nickel efficiently and in an environmentally sustainable manner.
Just five days after BHP’s announcement, Rio Tinto revealed plans to invest US$2.4 billion (A$3.2 billion) in its Jadar lithium-borates project in Serbia, one of the world’s largest greenfield lithium projects.
According to the miner, the project will ‘scale up Rio Tinto’s exposure to battery metals and demonstrate the company’s commitment to investing capital in a disciplined manner to further strengthen its portfolio for the global energy transition.’
Benchmark Mineral Intelligence (BMI) managing director, Simon Moores tweeted that ‘when Rio Tinto enters a new market it does so to be number one or number two. I can’t see lithium being any different. Expect M&A on top of this.’
Moores added: ‘It marks the first time big outside money from a single miner or chemical maker has entered lithium and invested in an entirely new source.
‘While expectation is that Rio Tinto will produce lithium carbonate at a run rate of 58,000 tonnes at full production, the strategy is usually more aggressive once proof of production is achieved and the product is accepted by battery makers.’
If the moves by the mining majors are not sufficient to get the world’s attention, then the expanding number of battery ‘megafactories’ should certainly help.
BMI’s Moores 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. This equates to 4,100 GWh of lithium-ion battery cell capacity by 2030, compared to just 70 GWh in 2015.
He pointed to Volkswagen Group’s plan to build six battery megafactories in Europe and moves by the Biden administration to support domestic EV and battery production.
Volkswagen’s Herbert Diess and U.S. President Joe Biden are only the ‘second and third people to appear on the cover of the Benchmark Quarterly magazine after Elon Musk,’ he wrote.
‘All three can both take some credit for making these battery megafactories or gigafactories mainstream and building the platform technology to the energy storage revolution.’
He concluded: ‘The battery arms race trend was set in motion in 2015, but we can now comfortably say: ‘the megafactories are mainstream.”
Moving mainstream: Benchmark’s Quarterly magazine covers chart the rise of the megafactories
The rise of the megafactories is showing no signs of slowing, with French automaker Renault announcing plans to develop a 9 GWh megafactory in France, while Japanese automaker Nissan and Envision AESC have outlined a 25 GWh battery megafactory in Sunderland, UK. Volvo Car and Northvolt have also unveiled plans to build a new megafactory on the continent, as the number of European plants continues to rise.
Not to be outdone, on August 5, Ganfeng Lithium, the world’s biggest lithium company by market value, said its subsidiary would invest 8.4 billion yuan (A$1.8 billion) in two projects to make ‘new-type’ lithium batteries. The Chinese company has spent some US$900 million on lithium assets at home and abroad in 2021, including plans to establish a battery plant in Argentina, Reuters noted.
Lake’s Managing Director, Steve Promnitz commented: ‘The moves by major miners and global automakers clearly demonstrate this trend is now unstoppable. EVs are here to stay and lithium and other battery metals are now highly prized assets, both geostrategically and economically.
‘For emerging producers such as Lake, the timing couldn’t be better as we work to develop our clean lithium projects to help satisfy the increasing demand for sustainably sourced, battery-quality lithium.’
Lithium prices jump as supply worries intensify
Diggers & Dealers returned to Kalgoorlie, but this year’s event had a somewhat different theme. Instead of copper and gold, lithium grabbed centre stage as Western Australian miners celebrated a surge in prices.
Among those benefitting, Pilbara Minerals reported that the first online auction of its spodumene concentrate delivered ‘outstanding success.’
Following 62 online bids, the winning bidder paid US$1,250 per dry metric tonne (dmt) (FOB) for 10,000 dmt of its 5.5% concentrate, around three times the amount it was receiving a year earlier, according to the company.
‘There is a genuine shortage, that I am certain about,’ Pilbara’s managing director Ken Brinsden told the conference.
‘The chemical conversion industry is now stuck, they’ve built a lot of capacity without reference to the underlying raw materials supply base. As a result, the miners are going to attract more margin.’
Industry analyst BMI’s latest prices evidence the trend, with its lithium index as at September 7 showing a 115.7% increase year-on-year (yoy). Lithium carbonate has gained nearly 135% and hydroxide 89% yoy amid a broad-based pricing recovery.
On September 3, 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.
‘Lithium prices have risen sharply since February and we do not believe it is temporary,’ Credit Suisse research analyst Matthew Hope told the Australian Financial Review.
‘The lithium supply glut has ended and the market is now tightening as the electric vehicle revolution accelerates, [meaning] supply will need to stretch to meet demand.’
Credit Suisse expects demand to triple from 2020 levels by 2025, requiring a 50 per cent increase in supply from new and unapproved projects.
‘The mines and salt lakes currently producing, together with those under construction, and idle operations that can be restarted, are insufficient to meet demand and will see growing deficits,’ Mr Hope said.
The demand is being driven by the accelerating growth of ‘new energy vehicles’ (NEVs), predominantly electric cars powered by lithium-ion batteries. The investment bank sees the global market share of NEVs reaching 34 per cent by 2025, up from 11 per cent this year, with much of the demand coming from Europe.
Europe’s NEV share is projected to reach 97% by 2030, followed by Japan at 79%, China at 67% and North America at 59%.
This has been aided by regulatory moves, with European countries announcing ambitious targets for the mass adoption of emission-free vehicles, together with the aforementioned moves by the Biden administration.
Source: Australian Financial Review, July 14, 2021
Analysts at Deutsche Bank have projected a widening lithium supply deficit, driven by the surge in EV sales and supply risks such as increasing 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 1.95Mt by 2030. It expects 2025 supply of 947,000t.
Similarly, BMI has flagged 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 2.4mt.
The sharemarket has responded accordingly, with recent price gains reflecting increasing confidence in Lake’s clean lithium development process based on sustainable direct extraction technology.
12-month share price performance of select lithium miners (source: Terra Studio, August 4)
Notably too, Fitch Solutions has projected the rise of a ‘green premium’ amid heightened demand for more environmentally friendly resources from downstream players, ‘as they aim to improve their supply chain transparency and sustainability.’
‘The most sustainable lithium supply will fetch higher prices amid the battery supply chain ESG race,’ the credit rating agency’s commodities analysts said in a June 17 presentation.
‘Put simply, there is going to be a pricing premium on ESG-friendly lithium supply, together with an increasing need for new projects. Companies such as Lake that combine both offerings are well placed to benefit,’ Lake’s Mr Promnitz said.
‘We look forward to advancing our talks with financiers and potential development partners to develop our scalable lithium resources, located in the proven operating environment of the ‘Lithium Triangle’.’
New Lake research, media and events for investors
Among recent events, Managing Director Steve Promnitz spoke at Red Cloud’s ‘Green Energy Conference: EVs are made of these‘ on July 13, putting Lake in the spotlight among North American investors. This was followed by presentations to Australian investors at the Noosa Mining & Exploration Investor Conference on July 16 and at Sharecafe’s ‘Hidden Gems‘ webinar on July 30.
Stay tuned for details of more upcoming presentations by Lake, including at the 121 Mining Investment, BMI and Noosa events scheduled for later in 2021.
New research has also been published on Lake, including by Roth Capital and Lodge Partners, with both upgrading their price targets following Lake’s success in securing funding for its Kachi Project.
‘With cleaner lithium, cleaner technology, a small environmental footprint and a clear pathway to production, Lake has all the right ingredients for success,’ Mr Promnitz said.
‘We look forward to delivering more milestones for investors as we progress towards the start of production in 2024, at a time when new lithium supply will be crucial to help decarbonise the world and power the EV revolution.’
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Lake Resources NL published this content on 07 September 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 September 2021 11:01:02 UTC.