Pic: Dimitrios Karamitros/iStock via Getty Images
Prime Planet Energy and Solutions, a 51-49 JV between Japanese industrial giants Toyota and Panasonic, is looking hard for commodities to supply its batteries.
By 2030, it alone requires 180,000t of lithium, 150,000t of nickel and 30,000t of cobalt.
That last number is almost a sixth of the current global cobalt market.
“This volume is not so easy to secure,” PPES’ Tsutomu Aoki said at the Benchmark Mineral Intelligence Battery Gigafactories Asia Pacific conference in Perth yesterday.
That seems like an understatement. Just one company. That is freaking wild.
Aoki said PPES wants to build partnerships with miners like it has with one of its suppliers, ASX listed brine and hard rock producer Allkem (ASX:AKE) to develop new resources at commercial costs and quantities.
But miners and explorers say the problem of tight battery metals supply can’t be solved just by throwing money at it.
Australia, and WA specifically, produces 50% of the world’s lithium, meaning efforts to find more inside our borders are getting heated.
There are as many as 300 lithium projects that have been identified by BMI in Oz, but that includes speculative projects with little more than a single drill hole in them.
Jerko Zuvela, the boss of new Argentine brine producer Argosy Minerals (ASX:AGY) said there were just 13 declared JORC resources among those Australian projects.
“People might say it’s easy but it’s not that easy, it still takes time, takes effort, you got to find it, you’ve got to prove it up,” he said.
“It puts it into context, in terms of if you want to bring projects online, there’s not a pipeline of 300 projects, it’s a dozen.”
Global Lithium (ASX:GL1) managing director Ron Mitchell, a veteran of the lithium game who spent a decade at Greenbushes owner Tianqi and Talison Lithium, said it would become much harder to find those resources in the future.
“What I will say around exploration more broadly here as it relates to pegmatites, most of the outcrop and pegs have been discovered,” he said.
“So the exploration going forward to find the next big lithium asset is going to be far more complex, because most of the resource will be under cover, so you can’t rely on drone.
“Or even Google, you’d be surprised how many pegmatites were discovered using Google Maps.
“So all the good ones have already been pegged or have been brought into a resource. It’s going to get progressively harder.”
Other explorers say finding quality people with knowledge of the lithium industry will also be a potential handbrake on the development of new operations.
It will be felt both at the mine level and in processing, especially in Australia and other new jurisdictions given the concentration of downstream expertise in China and east Asia.
Galan Lithium (ASX:GLN) boss JP Vargas De La Vega, whose company owns the Hombre Muerto West brine project in Argentina and Greenbushes South spodumene project in WA, said talent would be a major concern for new operators, while just having resources would not be enough.
“We’ve been doing this for five years, we’ve tried to go relatively nimble compared to other projects, and could be on line in 2.5 years and (look to) produce as much as possible,” he said.
“I think the the bottleneck, it’s people, the other thing is trying to find a resource that could be extractable. In Argentina itself, not all salt flats are conducive necessarily to get what you want to get.
“Even if you use direct lithium extraction technology, things that need to be taken into account — is there power? Is there water available?
“Even if you’re trying to do direct lithium extraction and other companies are trying to explore that, you need to reinject and reinjection is massive.”
While Australia and South America will continue to be the main sources of lithium supply, companies will be looking further afield to Canada and Africa as future powers.
But other jurisdictions will need to come to the fore as well, with Rio Tinto’s minerals chief Sinead Kaufman on Wednesday noting that current lithium demand projections outstrip every planned addition to global supply by 50% by 2030.
Pan Asia Metals (ASX:PAM) has identified a 113,027t LCE equivalent resource at its lepidolite style Reung Kiet Lithium Prospect in Thailand, where MD Paul Lock says it is looking to become a downstream producer of lithium chemicals.
He said South East Asia would provide benefits other regions didn’t.
“One of the reasons we’re in Asia is a cost environment. So touching on the cost blowouts at (Tianqi and IGO’s hydroxide plant in) Kwinana I think it’s pretty interesting,” he said.
“The reason Lynas is in Malaysia, the reason companies like Redflow, which is a small zinc battery producer, moved up to Thailand is the cost environment works so you can realistically look at downstream opportunities.
“We’ve got a huge, a huge manufacturing and chemical industry there, which you can bring in the expertise to partner with.
“That’s our objective and it’s very regionally suited. So I think, if you want to get involved in downstream, you sort of need to be up there somewhere or associated with someone up there (in Asia).”
Christian Barbier, the chief sales and marketing officer at Allkem, which is planning to triple production to 120,000t of LCE by 2026 to maintain a global market share of 10%, says demand is routinely under forecasted.
“The problem with supply is that it’s been the opposite. And it has been consistently over forecasted,” he said.
“There have been significant delays that most analysts have not included in their forecasts and it’s also interesting to note that the overall delay is longer for the most recent projects.”
Barbier says chronic underinvestment in resources due to the mining cycle, a shortage of brine and chemical expertise in the labour force and escalating inflation and supply chain challenges post-Covid are all contributing to the under supply situation.
While BMI analysts expect a demand supply balance to be reached by the middle of the decade (with chronic undersupply growing from there), senior analyst Cameron Perks said that scenario was itself on a knife edge.
“In the short term, we don’t see much of a possibility of a balanced market out until at least the mid 2020, so out to 2026,” he said.
“And even still in that scenario, it’s going to be fairly tight. This is contingent on a lot of things going well.
“I believe it’s a conservative demand scenario compared to our peers, but we’ve come up with this base case scenario because we’re realistic.
“And then we also came up with a few more scenarios in terms of an upside demand scenario, in which case, you will never arrive at a balanced market ever.”
Even the upside demand scenario is not as extreme as what it would be if every pledge from OEMs to phase out ICE vehicles with EVs were taken on face value.
Of course, lithium is just one part of the lithium ion battery, with multiple difference cathode chemistries creating boom demand scenarios for a host of future-facing metals.
While lithium’s astonishing price rise in 2022 has captured the imagination of investors and made lithium companies the darlings of the ASX, nickel, manganese and cobalt are all expected to see a surge in interest from car and battery markets.
Michael Willoughby, global head of metals, mining and transition materials at bank HSBC, said the disconnect between battery metals supply and carbon reduction targets would lead to higher prices.
“I think the good thing for all of us is demand is clearly going to outstrip supply in the next three to five years, which I think is completely understated,” he said.
“We spend so much time on carbon abatement, carbon abatement and that is a noble goal and you’ve got to have an alternative.
“You’ve got to have an economic supply of metal enough to give you an alternative to get away from that carbon and you know, particularly with lithium, you can just see that as there’s just not going to happen in the next three to five years.
“That’s going to increase the cost of the raw material, which is going to slow down transition. And, you know, that’s a problem for all of us.”
Without ASX retail investors, who backed companies like Galaxy Resources and Orocobre (now merged as Allkem), Pilbara Minerals (ASX:PLS) and Liontown Resources (ASX:LTR) in their early days, lithium prices could be double their already record highs today.
Willoughby said OEMs now need to invest in raw material supply to support their role in the energy transition, but had only realised it too late.
“You’ve got the five major battery makers, the automakers, you’ve got 10 major groups, and they’re all looking at this going, hang on, we’re in a position now we’ve never been in before (where) we’re beholden to those five battery makers,” he said.
“So they need to jump over those and get into upstream and they’re all only now realising it, but they don’t have any experience in doing it.
“They don’t want to invest in raw materials, their investors don’t want them to invest in raw materials. That’s a very, very hard thing for them to do.”
At Stockhead, we tell it like it is. While Pan Asia Metals and Galan Lithium are Stockhead advertisers, they did not sponsor this article.
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