Battery Metals in Australia

Battery metals in Australia: A promising investment opportunity

It’s common thinking among investors that as the world continues to gain awareness of the benefits of renewable energy, including lower greenhouse gas emissions, the market for battery metals will balloon. Over the past few years, more and more governments have committed to net-zero emissions targets and all-EV production, meaning that demand for battery metals is likely to continue rising for years to come.

Rystad Energy, an independent energy research intelligence company, forecasts that the price of lithium will rise by 50 percent over the next year. Similarly, S&P Market Intelligence predicts that in 2022, demand for cobalt will rise nearly 48 percent as compared to 2020 levels.

While it might seem like countries such as the Democratic Republic of Congo (DRC) and China have cornered the market for battery metals production, Australia presents a great opportunity for investors. From its top position in the lithium market, to its up-and-comer status in cobalt and vanadium mining, Australia is a formidable contender.

Battery metals in Australia: Catalysts for lithium, cobalt and more

While battery metals exist as a group and are largely expected to be buoyed by EV demand, they each have their own individual drivers and characteristics that investors should know about.

For example, the lithium market is predicted to soar, with EV sales as the primary catalyst. In 2021, lithium prices spiked by a staggering 437 percent, a trend likely to continue into 2022 as demand outstrips supply. Other key catalysts could include the performance of top lithium miners, such as US-based Albemarle (NYSE:ALB), China's Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460) and Australia-based Pilbara Minerals (ASX:PLS,OTC Pink:PILBF).

Much like lithium, cobalt’s value is contingent on the EV market’s success. After seeing its price double in 2021, the blue metal is likely to continue capitalising on the global push toward greener energy. Graphite, too, is largely dependent on the renewable energy market, as it used to make both solar panels and EV batteries. Geopolitical factors could also affect graphite’s valuation, as China accounts for about 70 percent of production worldwide.

Vanadium, another China-dominated metal, is used to manufacture steel, particularly for the construction industry. Going into 2022, vanadium production will likely continue to be driven by the demand for steel, including in the thriving aerospace industry. However, the battery market is likely to account for more vanadium demand over the next few years as vanadium redox batteries gain traction.

Like vanadium, the manganese market is largely propelled by the demand for steel, with 90 percent of manganese output used to make ferroalloys. Only 10 percent is used to create more specialised alloys, such as manganese sulphite monohydrate and electrolytic manganese metal, but since these alloys can be used to manufacture lithium-ion batteries, this rate is likely to rise in coming years.

Battery metals in Australia: Opportunities to invest in the market

Although the production of many battery metals is dominated by Chinese mining companies, Australia has gained a solid foothold in the battery market, creating investment possibilities across the gamut.

Australia is the world’s top producer of lithium, and is home to the world’s largest lithium mine, Greenbushes. The Western Australia-based asset is majority controlled by a joint venture between China’s Tianqi Lithium (SZSE:002466) and Australia’s IGO (ASX:IGO,OTC Pink:IIDDY). The joint venture owns a 51 percent stake in Talison Lithium, which runs the mine, while Albemarle owns the other 49 percent stake in Talison.

Two of the key Australian lithium miners produce significant amounts of spodumene concentrate, an important source of lithium. They are Mineral Resources (ASX:MIN,OTC Pink:MALRF), owner of the Mount Marion lithium project, which boasts annual production of around 450,000 tonnes of spodumene concentrate, and Pilbara Minerals with its Pilgangoora lithium-tantalum project, producing around 330,000 tonnes of it per year.

When it comes to cobalt, recent top performers in Australia are Jervois Global (ASX:JRV,OTCQX:JRVMF), Australian Mines (ASX:AUZ) and Cobalt Blue Holdings (ASX:COB). Currently, the DRC accounts for about 65 percent of all cobalt production, but Australia is fast emerging as a viable competitor. Plus, while labour abuses abound in the DRC, Australia presents a more sustainable and ethical alternative.

For those interested in graphite in Australia, Renascor Resources (ASX:RNU) recently received a AU$185 million loan facility from the federal government to support the development of its Siviour graphite project, while EcoGraf (ASX:EGR,OTCQX:ECGFF) received the remaining AU$54 million for its anode facility.

Meanwhile, investors interested in vanadium could consider looking to Australian Vanadium (ASX:AVL), which updated its prefeasibility study in late 2020, as well as Neometals (ASX:NMT) and Atlantic (ASX:ATI), which own the Barrambie and Windimurra projects, respectively.

Australia is the world’s third largest producer of manganese, so this battery metal is another top pick for shrewd investors. The country’s top manganese-mining companies include South32 (ASX:S32,OTC Pink:SHTLF) and OM Holdings (ASX:OMH,OTCQX:OMHI).