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Galan Lithium’s Mineral Resource for Argentina Project Beats Expectations
Looking ahead, Galan Lithium will work on additional drilling within the Hombre Muerto West and Candelas North projects.
Australian explorer and developer Galan Lithium (ASX:GLN) has published a mineral resource estimate for its Hombre Muerto West lithium brine project in Catamarca, Argentina, which has exceeded the company’s expectations of grade, purity and size.
Inferred mineral resources for the Pata Pila and Rana de Sal areas stand at 1,080,775 tonnes of contained lithium carbonate equivalent (LCE) grading 946 milligrams per liter (mg/l) lithium, with no cut off.
“This inferred resource helps to consolidate Galan’s scoping and prefeasibility study and has exceeded the company’s expectations significantly, further validating the high-grade, low impurity nature of the Hombre Muerto West and Candelas projects,” Managing Director Juan Pablo Vargas de la Vega said.
Last September, the company published a maiden resource for Candelas’ North Zone; it stands at 684,850 tonnes of contained LCE with an average grade of 672 mg/l at a 500 mg/l cut off.
With the maiden JORC report for Hombre Muerto West, Galan’s combined mineral resource is up by 158 percent from 685,000 tonnes LCE at 672 mg/l lithium to 1.77 million tonnes LCE at 837 mg/l.
Looking ahead, Galan Lithium will work on additional drilling within the Hombre Muerto West and Candelas North projects.
“Going forward we continue to work on our prefeasibility study, which we hope to finish on the first half of next year, and in the second half of this year we would like to have the commencement of a pilot plant and construction at site,” Vargas de la Vega told the Investing News Network (INN).
When asked about how Galan Lithium is prepared to face volatility in the space in the next few years, Vargas de la Vega said it presents an opportunity.
“Volatility will show what is the difference between a good, strong exploration project and others,” he said. “Galan has a project with high grade, low impurities and we have a very unique project — we believe we will have the strongest project in Argentina because Hombre Muerto is the second best salt flat in operation today in the world.”
Hombre Muerto is located in the lithium triangle in Argentina, where top producer Livent (NYSE:LTHM) has been in production for over 27 years. Other neighbours include Galaxy Resources’ (ASX:GXY) Sal de Vida and South Korea’s POSCO (NYSE:POSCO), which purchased tenements in the area from Galaxy for US$280 million last year.
Speaking with INN on the sidelines of this year’s Prospectors & Developers Association of Canada convention, Vargas de la Vega also shared his thoughts on the current COVID-19 outbreak, saying that despite the worries, lithium fundamentals remain strong.
“There’s no question that there’s a bit of worry in the market about it … but this is a short-term shock,” he said. “There could be a delay in demand for lithium, it’s really impacting the junior sector as people are being more cautious about investing at this stage.
Speaking about the main challenges in the lithium space right now, Vargas de la Vega pointed to funding.
“The current lithium space is in an oversupply … we’ve seen the volatility in the space very strongly, but the market (needs to) fully understand the dynamics and understand this oversupply of lithium will be short-term lived,” he said.
At the same time, there’s a gap, he added, because it takes time from investing to mining.
“So we might see a rally all over again, but the key catalyst for investment to happen is market sentiment, even though the fundamentals are there,” he said.
According to the managing director, investors new to the sector are finding it difficult to see upside potential going forward.
“(But) if you are patient, the undersupply is going to come up in the next two to three years, and when it comes there’s not going to be enough lithium to supply the market,” he said. “The sentiment will change completely, (and looking even further ahead) lithium will have a big run.”
Despite the current volatility in the lithium space, shares of Galan Lithium have increased more than 67 percent year-to-date. On Wednesday (March 11), the company’s share price closed at AU$0.25 in Sydney.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
VIDEO — John Kaiser: No Upside in Tesla, Lithium Juniors are the Future of the EV Story
Although the lithium market can be tricky to understand, the payoff can be substantial, said John Kaiser of Kaiser Research.
John Kaiser: No Upside in Tesla, Lithium Juniors are the Future of the EV Story youtu.be
Tesla (NASDAQ:TSLA) may be at the center of the electric vehicle (EV) revolution, but the Elon Musk-led company has no upside left. That means investors need to look elsewhere for opportunity.
That's according to John Kaiser of Kaiser Research. Speaking at the Prospectors & Developers Association of Canada (PDAC) convention, he said that lithium juniors have become the place to be.
Referencing a report from Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO), Kaiser said that by 2035, roughy 1 million tonnes of lithium metal equivalent will be needed to support EV demand.
"The brines are going to come up with a big chunk, and Australia's pegmatites will add more, (but) that probably still will take care of only half," he said, noting that he expects companies working in Eastern Canada to step up.
Eastern Canada has suffered setbacks as a lithium jurisdiction due to past issues, including the downfall of Nemaska Lithium, but Kaiser said that the area is similar to Western Australia, where companies have seen success with pegmatite exploration. And in addition to that, it benefits from good access to water.
"Without this lithium becoming a reality, Tesla goes to a buck — it dies," he said.
Kaiser sees the lithium market as a gateway to the mining sector for young people, and said that although it can be tricky to understand, the payoff can be substantial.
"Play a statistics game. Look at the sector, see who's serious. Put together a basket of these lithium companies and treat it like a Silicon Valley startup portfolio where they have dozens of high-risk stories," he said, noting that while there will be failures, there will also be a handful of "superstars."
Watch the interview above for more from Kaiser on lithium and the opportunities he sees in the space. You can also click here for our recap of PDAC, and here for our full PDAC playlist on YouTube.
Don't forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Housing the world's largest deposits of lithium, Chile's unique geological landscape and climate make it ideal for lithium brine extraction
As the world continues on the path towards a future dominated by clean energy, lithium's importance only continues to grow. Demand for the battery metal has already reached an all-time high, increasing by 400 percent in 2021. What's more, there is every indication that this growth will continue in 2022, with prices increasing by 126 percent in just the first quarter.
Currently, Australia and Chile are the two leading producers of lithium, respectively accounting for 46.3 percent and 23.9 percent of worldwide production. Both countries are jurisdictionally inclined to support the mining sector. However, Chile's potential could one day see it outstrip even Australia where investment is concerned.
Housing the world's largest deposits of lithium, Chile's unique geological landscape and climate makes it ideal for lithium brine extraction. The country thus has a pivotal role to play in meeting demand and establishing a stable global supply chain.
A critical component of sustainability
Climate change is an undeniable problem, one which requires a collaborative effort to address. It is for this reason that governments around the world have all agreed to pursue full climate neutrality by 2050. Because combustion engines represent an inordinate percentage of greenhouse gas emissions, replacing them with electric vehicles (EV) is essential if any nation is to achieve their sustainability goals.
Lithium is used extensively in both consumer and professional electronics. It is also a staple metal in multiple other sectors, including mining, manufacturing and energy storage.
Given its cross-sector industrial importance, the battery metal was already in high demand.
The large-scale manufacturing of electric vehicles has caused this demand to increase exponentially. As multiple automotive manufacturers construct gigafactories to ramp up EV distribution, the need for lithium is growing well beyond our current production capacity.
Investors and mining companies can benefit by turning to jurisdictions like Chile to ramp up supply. The world's migration towards a sustainable future simply cannot occur without lithium.
Lithium: Australia versus Chile
Although Australia houses impressive lithium reserves, the majority of the country's stores occur in hard rock deposits. Mining these deposits is relatively inexpensive, but hard rock lithium operations also tend to have narrow margins compared to other methods. In particular, lithium brine extraction offers higher yields, greater efficiency and a lower overall environmental impact.
Currently, the largest lithium producer in Australia is Pilbara Minerals (ASX:PLS,OTC Pink:PILBF). Its flagship project, the Pilgangoora operation, is situated atop one of the world's largest hard rock lithium deposits. It also jointly owns a pegmatite lithium project with Atlas Iron (ASX:AGO), the Mt Francisco project.
Geography represents Chile's first major advantage over other jurisdictions. Alongside Bolivia and Argentina, Chile lays claim to a geographic region known as the Lithium Triangle. Located in the Andes in South America, it contains an estimated 68 percent of the world's identified lithium resources.
The Lithium Triangle is home to a series of vast salt flats, beneath which sit incredibly lithium-rich brine pools. More promising still is the climate of the region, which is known for being incredibly hot and dry. This represents a considerable boon for extraction operations, which typically rely on evaporative processes.
A powerful investment opportunity
Chile's mining sector has leveraged its arid geography to great effect. The country's Salar de Atacama salt flat is the largest-producing brine deposit in the world. It is also home to several major lithium brine operations.
One of these is owned and operated by Albemarle (NYSE:ALB). Currently the largest business provider of lithium for electric vehicle batteries, Albemarle also operates a lithium carbonate plant at La Negra. According to an Albemarle spokesperson, the company has a long history in Chile backed by a unique contract.
SQM (NYSE:SQM) operates another major lithium brine operation in the salt flat. As the world's largest lithium producer overall, the company recently announced plans to reduce brine extraction in the region by 50 percent by 2030. This announcement came in tandem with a commitment to reduce water usage across all its operations by 40 percent.
Finally, just south of Salar de Atacama is situated the highest-quality lithium pre-production project in Chile. Maricunga is jointly owned by Lithium Power International (ASX:LPI), Minera Salar Blanco and Li3 Energy. Situated just 250 kilometers from Chile's coast, and 170 kilometers from the mining town of Copiapo, it's said to possess characteristics directly comparable to Atacama. Maricunga is also adjacent to Highway 31, which connects Northern Chile to Argentina.
The most significant challenge to Chile's growth, from an investment perspective, is sociopolitical. Although the country has a history of being relatively friendly towards the mining sector, its current government is exploring new legislation that could nationalize both copper and lithium. A new mining royalty bill is also in the works, which could increase tax rates by up to 80 percent.
It's worth noting that not every investor considers the current political climate to be a risk. South32 (ASX:S32), a spinoff of BHP (ASX:BHP), recently invested US$1.55 billion to purchase a 45 percent stake in the Sierra Gorda copper mine, and a lithium auction held by Chile earlier this year saw Chinese manufacturing company BYD acquire extraction rights for 80,000 metric tons of lithium.
Takeaway
Chile is home to the largest, richest and most valuable lithium deposits in the world. For many investors, the high margins and low cost of lithium extraction in Chile more than make up for the potential of a few political speed bumps.
This INNSpired article is sponsored by Lithium Power International (ASX:LPI). This INNSpired article provides information that was sourced by the Investing News Network (INN) and approved by Lithium Power International in order to help investors learn more about the company. Lithium Power International is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Lithium Power International and seek advice from a qualified investment advisor.
Experts in the field weigh in on Goldman Sachs' lithium oversupply call and whether they think it accurately depicts what's happening in the market.
Last week, the lithium market was shaken by a report from investment bank Goldman Sachs (NYSE:GS) saying that the bull market for battery metals was over for now.
Prices for lithium, which increased more than 400 percent in the past year, are expected to drop in the next two years, with a “sharp correction” happening by 2023, according to Goldman Sachs analysts.
They project that lithium prices will fall from current levels to an average of just under U$54,000 this year, from an average of above U$60,000. By 2023, the bank forecast is for an average price of just over US$16,000.
There’s been “a surge in investor capital into supply investment tied to the long term EV demand story, essentially trading a spot driven commodity as a forward-looking equity,” the analysts said. “That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend.”
Analysts at the investment bank said investors are fully aware that battery metals will play a crucial role in the 21st century global economy.
“Yet despite this exponential demand profile, we see the battery metals bull market as over for now,” they said, adding that the long term prospects for the metals remain strong.
Following the report, lithium analysts and experts shared their concerns over a call that they say misses the fundamentals of this battery metal market.
Commenting on the Goldman Sachs analysts call on lithium, Rodney Hooper of RK Equity said he strongly disagrees with their findings on both supply and demand.
“My biggest issue with the report is that it will discourage upstream investment in mining,” he told the Investing News Network (INN). “We clearly haven't seen sufficient upstream investment to meet current and future demand.”
Also speaking with INN, Daniel Jimenez of iLi Markets agreed, saying analysts at the investment bank are overestimating supply and underestimating demand.
Goldman Sachs analysts are expecting a global demand of around 1.2 million metric tons (MT) of lithium carbonate equivalent (LCE) by 2025.
“We think that lithium producers have better industry insights and truthful talks with most of the OEMs they supply,” Jimenez said. Top lithium producer Albemarle (NYSE:ALB) is calling for around 1.5 million MT LCE while Chinese giant Ganfeng (OTC Pink:GNENF,SZSE:002460) is expecting around 1.6 million MT during the same period.
“On the supply side they are extremely optimistic in terms of the lepidolite production that could come from China in the coming years, which is also not realistic,” Jimenez said. “Bottom line — we believe it will be just the contrary.”
Similarly, analysts at Benchmark Mineral Intelligence said the industry cannot rely on China’s feedstock to meet the needs of the market.
“Known domestic Chinese spodumene and other hard rock resources are low quality, a key reason why there has been an increasing reliance by Chinese converters on Australia for supply instead,” analysts said in a note. “China’s deposits of lepidolite may have the potential to help bridge the deficit in coming years, but are unlikely to lead to oversupply.”
Forecasting the lithium market not an easy task
Goldman Sachs analysis of the lithium market is not the first one to be called out by experts in the field. Back in early 2018, when prices had been interestingly also on the rise for a couple of years, Morgan Stanley (NYSE:MS) predicted a decline in prices by 2021, with escalating fears of an oversupply in the market.
“We’ve seen this before, we will see it again. Goldman Sachs: you can’t just add up all the lithium mine level potential and make an oversupply call … the speciality chemicals world is more nuanced than iron ore,” Benchmark Mineral Intelligence’s Simon Moores said in a tweet when the recent Goldman Sachs report came out. “It’s why the world doesn’t rely on investment banks for research any more.”
Predicting how the lithium market will perform in coming years is not an easy task. As a specialty chemical, not all lithium is created equal and not all auto and battery makers' needs are the same. There have been countless constraints to bringing supply into the market, and as analysts would often point out, delays are as common for new projects as for producers expanding existing operations.
For Hooper, it is both demand and supply that some analysts usually get wrong.
“The best indicator of battery-grade demand is cathode production,” he said. “Historical analysis shows that demand linked to cathode production has the highest correlation to lithium prices — this indicator flagged a demand/supply deficit in late 2020.”
When assessing the supply side, Hooper does not consider projects until they are fully permitted, financed and under construction. And even then, he allows for a long ramp-up phase and qualification timeline, especially if it's a greenfield project.
“What happens when you use these indicators is that cathode production brings demand forward 6 months and supply adjustments push qualified material out 6 to 12 months,” he explained. “The net result is a structural deficit as analyst forecasts of the supply/demand balance in the market are out by 12 to 18 months.”
In a market like copper, that could mean a few percent of total demand, Hooper added, but in a market like lithium, growing at 30 percent, the difference is “enormous.”
Commenting on the biggest challenge for analysts to determine what will happen in lithium, Jimenez, who before iLi Markets worked at top lithium-producing company SQM (NYSE:SQM), said there is clear excess optimism in capacity increases and production ramp up times.
“Feasibility reports are, based on past experience, very optimistic,” he said. “Furthermore, the confidence that new technologies or resource types will be able to deliver are overly optimistic. In many cases we are talking of unproven technologies that have not been scaled from lab to industrial yet.”
Is the lithium market really facing oversupply?
At the end of last year, INN talked to analysts and experts on the field to get a better understanding of the outlook for lithium, with most agreeing demand would outpace supply on the back of electric vehicle (EV) sales. What has changed since then? Not much.
For Benchmark Mineral Intelligence analysts, the lithium market will remain in structural shortage until 2025.
“The lithium market will balance over the next few years, but it’s unlikely that an unprecedented ramp-up of marginal, unconventional feedstock will fill the deficit,” they said. “It is also unlikely that demand will weaken significantly.”
Similarly, iLi Markets' Jimenez doesn’t think supply will be able to catch up with demand at least until 2026 to 2027 mainly because of the difficulty to bring greenfield projects into production at full capacity.
“Over this period of time, lithium should be the limiting factor in EV sales,” he said. “Even with demand growing very strongly, the investments the industry is making today might yield additional capacity in 6 to 10 years from now that we are not able to see today.”
Another expert echoing these thoughts was RK Equity’s Hooper.
“Aggregate supply may match demand in the years to come; however, battery-grade supply qualified into the battery supply chain won't match EV demand,” he said.
“If OEMs continue to ignore battery raw material supply risks, they will pay the ultimate price soon enough. Signing meaningless binding (but not really binding) lithium offtake agreements with no associated capital flows or permitting assistance attached to them will lead to disappointment.”
As EV demand from around the world enters its rapid growth phase, lithium quality will be critical.
“We haven't seen sufficient upstream investment to cause oversupply for some time,” Hooper said. “The only way we see the market being balanced in the near future is if there is EV demand destruction and that is unlikely.”
Lithium prices expected to remain at steady levels
The lithium price rally has made news headlines around the world since 2021, with the world's largest asset manager BlackRock’s (NYSE:BLK) Evy Hambro, who is bullish on metals needed for the green energy transition, talking about the essential need for lithium into the future.
Lithium pricing is usually a common concern for investors new to the space, with experts generally reminding anyone interested in the battery metal that there’s no single lithium price. Lithium traded at spot prices only reflects a portion of the market. In fact, most lithium is locked up in contracts, which in some cases include fixed pricing.
Combined with existing contracting arrangements set in 2022, prices are very unlikely to crash in 2023 and 2024, according to Benchmark’s Lithium Forecast.
“Benchmark’s view is that contract prices are likely to continue to rise as a lagged effect of the major step-change in spot pricing over late 2021 and 2022 while spot prices will fall, with the two prices coming into more of an equilibrium than they are now,” analysts at the firm said.
Structurally, prices will remain high through 2025 to 2026, at least, iLi Markets' Jimenez said.
“Now high means above US$40 per kilo, which is significantly higher than the incentive price to develop a marginal cost greenfield project,” he said, adding that whether the price will be U$40, U$60, U$80 or U$120 is a difficult call to make.
For the expert, each year the industry will need to grow supply by 200+ kMT LCE per year, which was the total demand of 2017.
“The possibility that greenfield projects suffer delays is high,” Jimenez said. “Probably lithium units will be the bottleneck of the lithium-ion battery supply chain.”
China’s measures to contain COVID-19 have recently hit EV sales, and as a result the need for lithium, although this pullback in lithium demand is seen as temporary.
“When EV demand resumes in H2 2022, as China lifts restrictions, I expect spot and contract pricing to remain firm,” Hooper said.
Even for Wood Mackenzie analyst Allan Pedersen, who sees lithium prices declining by the end of 2022, a “sharp correction” like the one called by Goldman Sachs is not coming.
“We do not forecast a sharp correction but more a 'softer landing' as demand remains strong, providing a cushion for prices,” he told INN.
The research firm is expecting additional supply entering the supply chain both from brine and mineral concentrates to increase supply beyond demand in the short term.
“It is worth noting the surplus is fragile and small changes in electric vehicles forecasts can have a significant impact on the demand for lithium and therefore on the market balance,” he said. “We forecast that the supply surplus for battery-grade lithium chemicals will be less than the market in general as producing high quality battery grade lithium chemicals is difficult.”
Growth in the lithium industry is happening at a rapid pace, with changing market dynamics expected to emerge as a result.
“As the market wrestles between long-term supply security to fuel the lithium-ion economy, and increasingly market-led pricing mechanisms to incentivise supply growth, the era of lithium market volatility is likely just beginning,” analysts at Benchmark Mineral Intelligence said.
Lithium stocks hit — now what?
Following last week’s Goldman Sachs report, top lithium producers saw their share prices plunge. Chile’s SQM was down 5 percent, rival Albemarle declined more than 7 percent and Argentina-focused Livent (NYSE:LTHM) fell around 14 percent following the oversupply and sharp correction in price calls from the bank.
Despite the recent slump, looking at how lithium stocks have performed in the past year paints a different picture — many lithium stocks in the US, Canada and Australia have been on the rise year-on-year on the back of improved market conditions, as the price rally for the battery metal saw many investors turn to the space.
For RK Equity’s Hooper, there is still value in the current market.
“My suggestion would be to look at current or near term producers that have been hit in the latest downturn,” he said. “Shares that are pricing in spodumene or chemical prices that align with Goldman Sachs outlook — which by 2023 sees spodumene concentrate at $1,100 and lithium carbonate ex VAT at US$15.6k/t. We see 2023 average pricing well above those levels.”
Giving his best suggestion for generalist investors who have jumped to the lithium market in recent months, Hooper said they would do well to look at history and decide for themselves how supply and demand have and will evolve over time.
“Will internal combustion engine vehicles sell in any great volumes after 2025 to 2027 given legislation and consumer preferences?” he said. “Then load in a realistic long-term price for lithium chemicals and decide if the company has a low enough valuation multiple and some room for error.”
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
VIDEO - Winsome Resources: Drilling Toward Maiden Resource at Quebec Lithium Project
Work at the company’s Cancet project is building toward a maiden resource in Q1 2023, said Managing Director Chris Evans.
Although prices have cooled off from the highs seen earlier this year, the lithium market remains in focus and investors are interested in how to get exposure to the green energy transition.
Chris Evans, managing director at Winsome Resources (ASX:WR1), said Australian investors in particular are aware of the lithium opportunity, and reacted well to the company’s ASX listing this past November.
The company initially came to market with three lithium assets in the James Bay region of Quebec, and has since acquired two additional lithium projects in the province.
Speaking to the Investing News Network, Evans explained that Cancet is the company’s main focus. Recent assay results released during the Prospectors & Developers Association of Canada (PDAC) convention build on previous drilling at the property, and have increased the known pegmatite strike length to 1,200 meters from 600 meters.
Looking forward, Evans said that two geological teams are now on the ground at Cancet, and are investigating targets identified through geophysical surveys to figure out which of them require drilling.
Known pegmatites that have already been drilled are also being stripped and cleared so that the company can complete field mapping and decide where to drill next.
“Really all that’s working towards a maiden resource in the first quarter of 2023,” said Evans.
In terms of the overall lithium market, he said a recent Goldman Sachs (NYSE:GS) report saying the battery metals bull market is “over for now” put a damper on sentiment, but is generally not thought to be a major concern.
“I think that probably initiated a bit of a correction in the market, which may have been needed because lithium prices and stocks were at all-time highs,” he said. “But in terms of an oversupply like Goldman Sachs is predicting, I haven’t heard anyone agree with that since I’ve been here at PDAC.”
Watch the interview above for more from Evans on Winsome Resources and its plans for the next six months. You can also click here for our recap of PDAC, and here for our full PDAC playlist on YouTube.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Winsome Resources is a client of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Experts believe the positive long-term outlook for electric vehicles means lithium demand’s breather could just be temporary.
Lithium prices climbed over 400 percent last year, with other key battery raw materials such as cobalt and nickel also seeing prices rally as demand from the electric vehicle (EV) industry picked up pace.
But by the end of the first quarter, prices started to stabilize as demand took a breather, particularly in China, where the government has imposed lockdown measures to contain a new wave of COVID-19.
“We expect lithium and cobalt prices to peak this year, from dented but still strong demand and supply chain challenges,” Alice Yu of S&P Global Market Intelligence said at a recent webinar.
For the past year, the sharp rise in prices, which has seen lithium increase almost 130 percent year-to-date, according to Benchmark Mineral Intelligence data, has pushed major lithium miners to restart idle capacity and outline expansion plans, with juniors also moving ahead with their projects.
For Yu, supply should ease in H2 and into 2023 as new capacities commission and ramp up. “These will pressure larger price corrections,” she said, adding that she expects the annual price to drop by a third in 2023. “Lower lithium prices will be good news for the downstream and lift some of the demand resistance we have seen so far.”
COVID-19 restrictions are behind the recent demand pullback seen in China, where the measures have impacted the entire supply chain, from the closing of factories to shipping and transportation networks.
“There are also constraints on Chinese lithium chemical exports to Japan and South Korea due to port and logistical challenges stemming from the lockdown,” Yu said.
Overall, Chinese vehicle sales for April plunged almost 48 percent compared to a year earlier due to lockdowns, as per data released by the China Association of Automobile Manufacturers. Meanwhile, sales of EVs and plug-in hybrids in the country plunged 38.3 percent compared to the previous month, but jumped 45 percent year-on-year and more than doubled over the first four months of the year from 2021 levels.
According to the S&P Global Market Intelligence, plug-in EV sales across key markets China, Europe and the US were up 96 percent year-on-year in the first quarter of 2022, despite weaknesses in the overall vehicle market caused by the ongoing computer chip shortage.
The long-term EV sales outlook is positive, which means lithium's recent demand breather could be temporary.
“We don't know how long the lockdowns are going to last in China, but the underlying fundamentals are still there,” William Adams, head of base and battery metals research at Fastmarkets, said at a recent webinar. “The lithium market is very tight. We don't see that easing anytime soon.”
In fact, he added that to some extent the market may have seen some destocking coming into the pullback in prices. “So we could be set up for quite a sharp rebound once we see the end of lockdowns.”
Looking further ahead to mid-decade, in the period between 2023 and 2026, lithium prices are expected to remain above historical levels, and above prices in and before 2021, according to the S&P Global Market Intelligence.
“This is because the market expects a lithium deficit from 2024 onward, so a strong price environment will be needed to incentivize supply,” Yu said.
The high lithium price environment is accelerating product development and restarting idle operations, but whether they will be up and running fast enough is yet to be seen.
“One of the things which has surprised us is how long it has taken for some of the idle supply that was closed down during the weaker period into 2019 and 2020 to be reactivated,” Adams said.
Australia, Chile and Argentina dominate lithium production today, and they will lead the supply expansions, according to S&P Global Market Intelligence.
“At the same time, there'll be more diverse locations of lithium production,” Yu said. “We expect Mexico, Canada and Finland to start or restart lithium production over the next five years, especially as North America and Europe and their PEV supply chains in these regions seek more localized sources of lithium.”
But it has been stated time and time again how long lithium projects can take to ramp up, and how many delays they can suffer, with COVID-19 restrictions just adding to the mix of challenges.
“There's no shortage of lithium, it's all about can you get it? Can the supply chain keep up with the demand side of it in the time that is needed?” Adams said.
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.
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Revenue from Australia's mobile sector is expected to grow from AU$9.6 billion in 2021 to AU$11.2 billion in 2026. Here's what to know about this industry.
After lagging behind for a prolonged period, Australia's tech sector is ramping up at an accelerated pace. The tech sector is now equivalent to 8.5 percent of the country's GDP as of the end of 2021, an increase of 26 percent since the onset of COVID-19 through June 2021 and a massive 79 percent increase over the past five years. Tech contributes AU$167 billion to the Australian economy, trailing only the mining (AU$205 billion) and financial/insurance (AU$169 billion) sectors.
Australia's characteristically resilient economy — which had not experienced a recession in nearly 30 years prior to COVID-19 lockdowns — has provided a sturdy backdrop for its growing tech sector. The growth in the tech sector’s contribution to the GDP has outpaced average growth of other industries by more than 400 percent, a gain partly attributable to accelerated digital technology adoption during the pandemic.
This dramatic expansion is largely in response to Australia's need to catch up to the rest of the world and assert itself in the global tech marketplace. Should the tech sector continue to grow at its current rate it will eventually surpass the relative GDP contribution of the long dominant mining sector. This will also complete the process of bringing Australia more in line with other western economies such as the UK, and notably Canada, which is comparable to Australia in terms of its dominant mining and agricultural industries.
In terms of digital innovation earnings as a percentage of GDP, for example. Australia stands at 7.4 percent, significantly behind the 11.2 percent average for companies that are part of the Organisation for Economic Cooperation and Development (OECD). According to its September 2021 Policy Primer report, the Australian Academy of Sciences called for the federal government to place greater emphasis on supporting emerging digital technologies.
"Australia risks falling behind as a technologically-driven nation unless we recognise emerging digital technologies as a central, independent sector in its own right, warranting investment in the core aspects of research, innovation, and workforce development," the report stated.
Understanding Australia's mobile tech landscape
One of the drivers of Australia's tech sector expansion is its booming mobile telephone industry. This expansion has taken many forms ranging from expanded use of mobile telephony, adoption of blockchain technology for supply chain management and the rise of the cryptocurrency market. The application of mobile tech to the banking industry is just one space where mobile usage has become key and is expected to continue developing. According to research firm KPMG, digital platforms will become the preferred and dominant business model form.
Chase Bank completed a survey revealing that the COVID-19 pandemic has accelerated the adoption of mobile banking technology. Banking apps allow users to deposit cheques, pay bills and perform transfers from their mobile device.
One critical side effect of COVID-19 has been the way lockdowns and related restrictions on behaviour has changed the way people live and work. Remote working conditions and enforced isolation has triggered increased demand for improved connectivity and internet speeds to facilitate this transition in corporate culture during the pandemic.
As a result, Australia's leading mobile telephony giants have been obliged to improve data capacity and speed, especially in regional areas that have badly lagged behind urban coverage. Some people have relocated to regional areas — where connectivity remains a challenge — and others are requiring more data capacity and fast speeds to allow them to work more efficiently from home.
The Australian mobile sector is dominated by three main players: Telstra (ASX:TLS), Optus — a subsidiary of Singapore-based Singtel (SGX:Z74) — and TPG Telecom (ASX:TPG). Telstra is the largest provider of mobile services with 48.7 percent market share followed by Optus at 26.3 percent.
In 2022, there have already been several major new developments in the Australian mobile sector. One such event has been the tentative network sharing agreement announced in February between Telstra and TPG Telecom, which brings an end to the bitter rivalry between the two competitors. The agreement provides a comprehensive framework for the two telecom giants to share mobile telecommunication infrastructure across Australia.
TPG and Telstra will both enjoy significant savings and benefits from this arrangement. Telstra will reap up to AU$1.8 billion in added revenues while gaining access to TPG's spectrum that expands Telstra's fixed wireless services in regional areas. Correspondingly, TPG gains access to 3,700 Telstra towers in regional areas; this means TPG does not have to spend significant money to duplicate the infrastructure for its own use.
In addition, Telstra announced earlier in the year that it will spend up to AU$1.6 billion on new infrastructure intended to improve connectivity and internet speeds as part of its response to the overall need to accommodate rising consumer demand in the wake of the pandemic.
What's the outlook for mobile tech in Australia?
One of the positive side effects of the pandemic has been the increasing adoption of wireless services by Australians and the ownership of internet-of-things devices that are prevalent in nearly all households.
According to GlobalData, a data and analytics company, mobile sector revenue in Australia is expected to grow from AU$9.6 billion in 2021 to AU$11.2 billion in 2026 at a compound annual growth rate of 3 percent. This revenue growth will mainly accrue from growth in the mobile data subsector.
Meanwhile, the three leading telephone companies will not only be expanding their 4G services but rolling out 5G networks across the country. 5G allows for improved and additional smartphone services and also enhances fixed wireless services that are competitive with higher speed National Broadband Network (NBN) connections.
In addition, low earth orbit satellite services are beginning to roll out in Australia led by Elon Musk's SpaceX's Starlink service that offers broadband connections delivered via its satellite network.
Overfall, the winding down of restrictions due to COVID-19 will likely see the big three companies enjoy higher revenues in 2022 after declines in earnings owing to the pandemic. Telstra, Optus and TPG Telecom all experienced significant earnings drops between 2020 and 2021 due to reduced international roaming fees, softening demand for headsets and ongoing adoption of NBN services.
But the outlook for 2022 is positive given overall improved economic prospects as Australia emerges from the pandemic, which actually increased overall consumer use of communication services in 2021.
Lockdowns resulted in increased consumer uptake of online services such as online shopping, data-intensive video streaming and the additional household usage of communication services. Indeed, in 2021, data traffic reached record highs as Australian consumers demanded improved internet speeds and unlimited data plans. Remote work will likely continue to remain elevated in 2022 and beyond, which should reinforce increased consumption of home communications services.
Telstar and TPG Telecom in particular are embarking on long term strategies that will drive future earnings growth via accelerating 5G adoption, expansion in dark fibre, and increased adoption of new services such as edge/cloud computing.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Harold Von Kursk, hold no direct investment interest in any company mentioned in this article.
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VIDEO - Green Technology Metals: Cashed Up and Pursuing Low-carbon Lithium in Ontario
General Manager Matt Herbert described Ontario as an “undiscovered gem,” and spoke about the company’s work on its lithium projects in the province.
After making its ASX debut this past November, Green Technology Metals (ASX:GT1) has been hard at work in Ontario, Canada, where it holds three projects covering 35,000 hectares.
Speaking to the Investing News Network at the Prospectors & Developers Association of Canada (PDAC) convention, General Manager Matt Herbert described the province as an “undiscovered gem” with the potential to contribute to the lithium supply chain in an environmentally conscious manner.
“I think the opportunity there is to create some very, very green lithium,” he said.
“At the moment, a lot of lithium is mined in Western Australia, (then) shipped to China for processing; from China it goes to European battery markets. I think by the time that lithium arrives where it’s supposed to arrive it’s left itself a bit of a carbon footprint,” Herbert explained during the conversation. “We have a real opportunity here to leverage low-carbon lithium in a place that is really screaming for security.”
Green Technology Metals has already seen support from members of the Ontario government, including recently re-elected Premier Doug Ford, and Greg Rickford, who is the province’s minister of northern development, mines, natural resources and forestry, as well as its minister of indigenous affairs.
“Both are massive supporters of critical minerals,” said Herbert. “Those things are important when you’re at the permitting and approval stage, and that’s exactly where we’re at. We’re able to leverage those relationships really well, and there’s just no better place to be at the moment.”
Watch the interview above for more from Herbert on Green Technology Metals and its plans for the next six months. You can also click here for our recap of PDAC, and here for our full PDAC playlist on YouTube.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Green Technology Metals is a client of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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