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Junior lithium miners in pole position for electric car take off, says broker

Published: 07:21 27 May 2016 EDT

Picture of Tesla battery-powered car
Tesla will lead the charge of long range battery-powered cars next year

Lithium suppliers have been quick to respond to the likely upsurge in demand when electric cars became mainstream.

Broker Liberum, however, still expects demand to outstrip even this new supply and says junior miners are in a prime position to benefit.

In an analysis of the lithium mines currently under development, it said:  “Exceptional demand growth has induced an exceptional supply response with global lithium production doubling in the next five years based on committed and funded expansions.

“However the demand story is only beginning by 2020, supply from new sources will be required to fill the void and more offtakes will be signed with junior miners.”

Electric vehicles will be responsible for 70% of demand growth, says the broker. While lithium-ion batteries are now being used in power tools, vacuum cleaners, drones and so on, lithium demand is primarily about the penetration of electric vehicles (EVs).

Liberum forecasts 71% of demand growth to 2020 is driven by EVs and 66% by plug-in EVs (PEVs). Consumer electronics accounts for 18% of growth and fixed storage just 3%, though this an area that has a lot of potential to grow.

Supply is rising to meet this demand and will add 174,000t of lithum carbonate in the next five years based on current mine plans, or the equivalent to the entire market size in 2015.

“If projects are delivered in line with current expectations, we expect a surplus from 2017-2020,” though the broker adds manufacturers making sure of supplies and hiccoughs in the development of some mines will still see prices rise.

Next year will be when traction in the market really kicks in, suggests Liberum, as long-range mass market car models such as the Tesla 3 and GM Bolt are launched.

Even sceptical producers such as Mercedes, Volkswagen, Audi and Porsche plan to launch models and as car ranges expand, so does the amount of lithium they use.

Risks include recycling, new technologies being developed of which some such as Sileach that are in lab testing currently.

Most lithium miners are listed outside of London. The three largest, Albemarle, FMC and SQM, all have US listings, while the majority of new companies are listed in Australia.

In the UK, direct exposure is limited to three juniors all of which have potentially large scale projects on the go.

Bacanora Minerals (LON:BCN 96.9p) worth £85mln has completed a pre-feasibility study on the  on its Sonora clay project in Mexico where it plans to ramp up to 35,000t of lithium carbonate in two stages and 50kt of potash for fertiliser.

A pilot plant is currently producing lithium carbonate to be distributed to potential offtakers in the third quarter this year. Based on PFS estimates the project will be significantly lower cost than a traditional hard-rock asset.

Rare Earth Minerals (LON:REM 0.53p) is worth £39m and has a 17.1% stake in Bacanora and also an interest in a European project Cinovec (9.8%) owned by European Metals Holdings (LON:EMH 16.75p).  

Cinovec, in the Czech Republic, is at a fairly early stage although EMH has completed a scoping study to produce 19.4kt of lithium carbonate.

The ultimate processing route hasn’t yet been chosen and pilot testwork will continue this year said Liberum.

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on 02/09/2021