Welcome to Lake Resources’ investor newsletter.
In this December 13, 2021 issue:
- ’20 new Greenbushes’: COP26 highlights supply challenge
- Automakers ramp up investments in solid-state batteries
- Bidding war erupts for ‘Lithium Triangle’ assets
- New Lake investor research, events and media
’20 new Greenbushes’: COP26 highlights supply challenges
“We see mined commodities as being critical to a successful transition, but supply will have little chance of meeting supercharged demand without concerted efforts to invest in new resources,” said Wood Mackenzie vice chair Julian Kettle.
“The tone of the COP26 conference reinforced our view that world leaders have little understanding of the supply chain challenges that an accelerated transition could bring.”
With the power and transport sectors contributing over 55% of global energy-related emissions, the pressure is on replace hydrocarbons with “green electrons” from renewable power and “green molecules” such as hydrogen.
The electrification of transport requires the “complete transformation of demand for battery raw materials such as nickel, cobalt, lithium and graphite.”
Wood Mackenzie sees demand for lithium tripling by 2030, and cobalt demand doubling, among other key battery metals necessary for electrification.
“The lithium market would require 20 new mines the size of Greenbushes – currently the largest in the world – in operation by 2030 [to meet the demand],” it said in an October 13 report. [In lithium brine terms, this would equate to 30 Atacama brine projects (SQM & Albemarle)].
Pointing to the challenge for miners, the consultancy said “for most mined commodities the biggest challenge will be ensuring sufficient supply such that the energy transition does not stall just as it gets started.”
However, Wood Mackenzie noted that COP26 agreements concerning deforestation, methane and other ESG goals “will act to slow supply.”
Demand growing ‘3 times’ speed of supply
Consultancy Benchmark Mineral Intelligence (BMI) has forecast battery demand from the auto sector alone will rise by 40 times between 2020 and 2040, as electric vehicles (EVs) become mainstream.
Signatories to COP26’s Glasgow declaration, which included automakers Ford, General Motors, Mercedes-Benz and Volvo, said they would “work towards” all sales of new cars and vans being zero emission globally by 2040, and no later than 2035 in “leading markets,” BMI noted in a November 10 report.
BMI has estimated that if all cars and vans sold in 2040 were electric, it would represent almost 8,400 gigawatt hours (GWh) of lithium-ion battery demand.
“In reality, this target will be difficult to meet, with Benchmark already forecasting 6,200 GWh of battery demand from the entire electric vehicle market in 2040,” it said.
COP26 climate goals necessitate production of over 7 million tonnes of lithium (LCE) annually, 17 times more than this year’s estimated production.
Yet there is currently insufficient investment in raw material supply to meet battery demand in 2030, let alone 2040, BMI CEO Simon Moores said.
“Right now lithium demand is growing at three times the speed of lithium supply,” he said. “That’s a big problem that needs to be solved.”
Although building a battery cell production facility can take two years, it can take from five to 10 years to get a new lithium mine online.
Can lithium miners deliver the required supply to meet the world’s electrification targets? And importantly, can they deliver on ESG requirements?
Steve Promnitz, managing director of clean lithium company Lake Resources, says unified action across the entire industry will be crucial.
“Lithium companies will need to work closely with governments, investors, communities, employees and all other key stakeholders to facilitate the necessary supply boost,” he said.
“Importantly, battery-grade supply will be key, yet it also must be delivered in a manner that is environmentally sustainable to ensure the supply chain fulfills its ESG requirements.
“This is an enormous challenge, however at Lake we working to help deliver a solution through our environmentally sustainable, direct lithium extraction (DLE) process that can quickly produce high-quality battery-grade lithium while minimising our impact on the environment.”
Automakers ramp up investments in solid-state batteries
Nissan is the latest automaker to invest in solid-state battery production, with the company announcing the establishment of a pilot plant in Yokohama to produce its own batteries by 2024.
The Japanese automaker aims to have its own solid-state battery in EVs by 2028 as part of 2 trillion yen (US$18 billion) of EV investments through to fiscal 2026.
By 2030, Nissan aims to extend its vehicle line-up with 23 new models including 15 new 100% EVs, aiming for more than 50% of its production to be comprised of EVs, including its Nissan and Infiniti brands.
“By reducing charging time to one-third, ASSBs [all-solid-state batteries] will make EVs more efficient and accessible. Further, Nissan expects ASSB to bring the cost of battery packs down to US$75 per kWh by fiscal year 2028 and aims to bring it further down to US$65 per kWh to achieve cost parity between EV and gasoline vehicles in the future,” the automaker said in a November 29 statement.
The company aims to increase global battery production capacity to 52 GWh by fiscal 2026 and 130 GWh by fiscal 2030. Nissan also plans to invest up to 20 billion yen by 2026 on charging infrastructure, with plans for new battery refurbishing facilities in Europe and the United States.
“We all know that batteries will be the key to transition to full electrification,” said Nissan CEO Makoto Uchida.
Toyota Motor is also investing in solid-state batteries, aiming to launch an EV powered by a solid-state battery by 2025. The world’s largest car producer in 2020, Toyota is investing 1.5 trillion yen (US$13 billion) by 2030 in the development and production of batteries, aiming to sell 8 million EVs by the end of the decade.
Honda also plans to make solid-state battery technology available for new Honda EV models from the second half of this decade, aiming for a demonstration model this fiscal year.
Meanwhile, Korean automakers Hyundai and Kia have announced a partnership with U.S.-based Factorial Energy to jointly develop and test high-density, solid-state batteries for use in EVs.
U.S.-based Factorial Energy has announced partnerships with a range of automakers to develop solid-state battery technology
Other automakers pursuing solid-state batteries include BMW, Ford, General Motors, Mercedes-Benz, Stellantis and Volkswagen. Chinese automaker Nio has also announced its 2022 sedan will have solid-state batteries capable of reaching a 1,000 km range.
“We don’t think that any cell producer or carmaker is not looking at solid state batteries right now…The technology is just too hot to ignore it,” Christoph Neef, senior scientist at Germany-based Fraunhofer Institute for Systems and Innovation Research ISI, told the Nikkei Asian Review.
Solid-state batteries are considered safer and more efficient than conventional lithium-ion batteries, being quicker to recharge and allowing automakers to extend the range of an EV or deliver smaller and cheaper batteries for the same range. A wider roll-out of such batteries could lead to greater usage in industries such as heavy road transport and shipping.
However, Benchmark Mineral Intelligence has suggested that most EVs this decade are unlikely to use more powerful solid-state and lithium metal batteries due to cost reasons.
“Lithium metal battery production capacity is set to reach 260 GWh by 2030, based on the current pipeline, as start-ups commercialise next generation technologies, according to data from Benchmark’s Solid-state Battery & Lithium Metal Anode Report,” BMI said in a November 19 report.
“But that won’t be enough to push costs below conventional lithium ion batteries used in EVs.”
Currently, a solid-state cell costs around eight times more to make than a liquid lithium-ion battery, according to analysts.
As a result, the first applications are likely to be in military drones or high-end sports cars before large-scale EVs, BMI’s Casper Rawles said.
For the EV industry, the arrival of solid-state batteries could spur mass adoption of EV vehicles, strengthening demand for key battery metals such as lithium.
“Solid-state batteries generally use substantially more lithium than conventional batteries, but require higher quality, battery grade lithium,” said Lake Resources managing director, Steve Promnitz.
“This shift will only further intensify the demand for our product, as EVs replace conventional internal combustion engine vehicles and the world moves to speed the electrification of transport to curb emissions.”
Bidding war erupts for ‘Lithium Triangle’ assets
On November 17, Lithium Americas Corp. announced it had agreed to buy its Vancouver-based counterpart in a US$400 million deal, topping an earlier bid from the world’s largest EV battery maker, China’s Contemporary Amperex Technology Co (CATL).
Lithium Americas agreed to pay C$4.70 in cash and stock for each Millennial share, 47% higher than Millennial’s average share price for the year before it attracted a takeover offer in July. CATL had made a cash offer of C$3.85 per share.
“This transaction is a rare opportunity to add a complementary lithium brine project and leverage our expertise developing Caucharí-Olaroz as the largest new lithium carbonate operation to come online in over 20 years,” said Lithium Americas president and CEO Jonathan Evans.
Millennial’s Pastos Grandes project is located near Lithium Americas’ Cauchari-Olaroz project in Argentina’s Salta province.
In July, Millennial received a takeover offer from China’s Ganfeng Lithium, which aimed to acquire the Canadian company for C$3.60 a share.
“We…see the situation as proof of increasing scarcity of quality upstream lithium assets,” Daiwa Capital Markets analysts commented.
In other moves, Chinese stainless steel company Tsiangshan announced plans to invest US$375 million to build a lithium plant in Argentina with France’s Eramet. The plant is expected to supply 24,000 tonnes a year of lithium for batteries.
As stated in October’s Ripple, the Lithium Triangle has seen other M&A deals this year, including the move by China’s Zijin Mining to acquire Canada-based Neo Lithium Corp. for C$6.50 per share in cash, with a total cash consideration of C$960 million. Just a year prior, the TSXV-listed company was trading at C$0.60 per share.
As reported in May’s Ripple, the Lithium Triangle has seen other recent investments this year, including a move by China’s Ganfeng Lithium to establish a lithium-ion battery factory in Argentina’s Jujuy Province.
German automaker BMW also signed a 285 million euro lithium supply deal in March with U.S.-based Livent from its Hombre Muerto lithium brine project, located just 80km north of Lake’s Kachi project.
Also this year, ASX-listed lithium producers Orocobre and Galaxy Resources joined through a A$4 billion merger, with both having their largest lithium resources in Argentina.
The moves highlight the expansion of Argentina’s lithium-ion battery industry, with the South American nation projected to produce almost as much lithium as its neighbour Chile by the end of the decade, according to Benchmark Mineral Intelligence.
Chile is currently the world’s second-largest lithium producer behind Australia and holds the world’s largest reserves.
For Lake Resources, the recent focus on Argentina has shown the attractiveness of its 100% owned holdings, which span some 2,200 square kilometres across four projects in a prime location within the Lithium Triangle.
“Lake’s projects are readily scalable and are in a prime position to capitalise on the increased demand for battery-quality lithium,” Lake’s Mr Promnitz said.
“With the backing of export credit agencies from Canada and the United Kingdom, strong support from local stakeholders and the ESG benefits of our DLE technology, we are well placed to advance towards production by 2024, capitalising on the surging demand for this key metal of the 21st century.”
New Lake investor research, events and media
On November 4, Bell Potter initiated research coverage on Lake with a buy rating and valuation of A$1.37.
“LKE is leveraged to the dominant market themes: decarbonisation and ESG investing. With an attractive development project, uncommitted product offtake and an independent share register, LKE has strategic appeal,” analyst Stuart Howe said in his report.
Earlier, on October 27, Euroz Hartleys initiated research coverage, rating Lake a “speculative buy” and with a price target of A$1.28 per share.
Analyst Trent Barnett said lithium investors should follow Lake closely given its position as “an industry leader in DLE.”
Lake also participated in Benchmark Mineral Intelligence’s “Benchmark Week 2021 Online” from December 6-8, with Managing Director Steve Promnitz presenting at both the “Cathodes 2021” and “Battery Sustainability Summit 2021” events.
The presentations are available via Lake’s website.
The company also continues to gain media attention, with recent reports in publications including the Australian Financial Review, Paydirt and Reuters, among other publications. (Check our website for the latest media coverage and video interviews.)
The lithium sector has continued to pick up speed in 2021 on the back of accelerating demand and constrained supply. As of December 12, BMI’s lithium index was showing a nearly 240% gain year-to-date, with its carbonate index up 288% and its hydroxide index rising by 192%.
BMI Managing Director Simon Moores reported a battery-grade lithium carbonate price (ex-China) of US$31,400 per tonne in November 2021, up fivefold on its November 2020 price of US$6,100. With a structural shortage expected to hit hard in 2022, Moore suggests lithium carbonate prices could “soar above US$40K in 2022.”
“COP26 has only further intensified the global push to decarbonise and lithium has a key role to play in this clean energy drive. Lake is perfectly placed with our ESG-friendly projects capable of producing the necessary battery-quality lithium in an environmentally sustainable and economically competitive manner,” Lake’s Mr Promnitz said.
“After the gains of 2021, we look forward to the year ahead as we advance our flagship Kachi Project towards production, while expanding the lithium resource at our other projects including Cauchari and Olaroz. We’re in the right place at the right time and have a huge opportunity to deliver further growth for shareholders.”
Finally, thanks for being part of Lake’s community in 2021. We would like to extend all our readers the very best wishes for a safe and happy festive season and a prosperous New Year 2022!
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