Battery Metals

The discovery of extensive lithium deposits in the country, already adding to the more than 60 existing minerals, is a huge boon for Zimbabwe’s mining future outlook.

The transition to electric vehicles and adoption of electric power technologies is gaining momentum especially in the first world with major global car manufacturers such American automaker, Tesla becoming a household name in the production of electric vehicles.

Lithium is emerging as the most sought after mineral in the manufacture of the common batteries which power these vehicles due to its high power to weight ratio which increases vehicle performance.

The Deputy Minister of Mines and Mining Development, Cde Polite Kambamura is bullish about Zimbabwe’s prospects with the opening of the Arcadia lithium project set for this Wednesday by President Emmerson Mnangagwa.

“It has been established that Zimbabwe holds huge deposits of lithium after the exploration carried out by Prospect Resources of Austria. Zimbabwe is set to become a global player in lithium ion and lithium polymer batteries. This obviously will translate into employment creation and foreign currency earnings,” Cde Kambamura said.

Austria Stock Exchange listed Prospect Resources owns Arcadia lithium mine following the completion of a scoping study in late 2016.

To fully benefit from the resource, it is important that local electric vehicle battery plants are established to beneficiate the lithium premium and derive maximum benefits.

UK’s Road to Zero sets out a goal to become a world leader in zero emissions vehicle technology.

Zimbabwe is set to benefit massively in the electric vehicle market bandwagon and Arcadia lithium mine will be key in that regard.

Gold prices inched lower on Tuesday as the dollar steadied amid fears of a slowdown in global economic growth and increasing pessimism due to a worsening of U.S-China trade dispute ahead of the G20 meet. Precious metals market is on dovish price action today as investors await clues on the pace of future U.S. interest rate hikes from the speech of Key figures in US Fed scheduled to occur later today and tomorrow.

Fed’s Vice Chair Clarida will be out on the wires at 13:30 GMT later today followed by speech from other bigwigs like Bostic, Evans and George and there is a speech by Fed Chair Powell tomorrow from which investors expect forward guidance as Fed previously promised three rate hikes in 2019 while analysts and investors have only priced in two rate hikes so far owing to slowdown in global economy.

Investors Await Fed Forward Guidance As Outcome Will have Great Impact on USD Long-Term Outlook

Meanwhile, US greenback has seen increasing demand over escalating Sino-U.S trade tensions owing to latest comments from US President Donald Trump who told wall street journal that he plans to raise the tariff on Chinese goods from 10% to 25% for products worth over $200 billion. Investors continue to believe that the latest bout of dollar resilience at this juncture is borne out of market nervousness and not from any renewed Fed hawkishness which is what makes the speech from US Fed so important as this would also greatly affect price action of dollar-denominated metals and appeal for safe haven instruments on whole.

Meanwhile, Spot Silver XAGUSD is trading at $14.22 an ounce down by 0.04% on the day. Oil settled higher Monday, with U.S. prices posting their biggest one-day rise in eight weeks—just after suffering their worst session percentage loss in three years.

Talk of a meeting of Russian and Saudi oil members this week was driving speculation of an early agreement to cut production, ahead of the much-anticipated Dec. 6 meeting of the Organization of the Petroleum Exporting Countries. Leaders from Saudi Arabia and Russia are scheduled to attend the Group of 20 gathering in Argentina later this week and presence of these two bigwigs in an event which also sees the attendance of US President Trump reinforces the impression that the market could possibly see a high impact headline regarding oil production/supply cut decisions before OPEC summit. Spot Crude WITUSD is currently trading at $51.13 per barrel down by 0.60% on the day.

South Korea’s SK Innovation said on Monday it will spend 1.14 trillion won ($1.01 billion) to build its first electric vehicle battery plant in the United States to better compete in the global EV battery market.

The plant will have an annual capacity of 9.8 gigawatt-hours of batteries. SK Innovation will begin construction in the southeast U.S. state of Georgia in early 2019, with production targeted for 2022, the company said in a statement.

Last month, SK Innovation said it was considering building an EV battery plant in the United States to win customers in one of the world’s top markets for electric vehicles.

SK Innovation, which owns South Korea’s top refiner, SK Energy, and a unit of the country’s No. 3 conglomerate, supplies its batteries to several global automakers, including Daimler and Hyundai Motor , but it does not have any U.S. clients.

“SK Innovation has been actively looking for a production base to secure competitiveness in the battery business in the major global market,” Kim Jun, CEO of SK Innovation, was cited as saying in the statement.

“With our business in the hub of the global auto industry, we will grow as a top player in the battery business,” he said.

SK Innovation’s cross-town rival, LG Chem, runs an electric battery factory in Michigan that supplies batteries to General Motors.

SK Innovation operates battery plants at home and has plans to build battery plants abroad, including in Hungary and China.

In October, it said it plans to invest $355 million in a plant to produce key EV battery parts in China.

Chile’s state development agency Corfo plans to file an arbitration suit against US lithium miner Albemarle in two weeks, claiming the world’s No.1 producer of the white commodity has failed to adhere to the terms of a contract dating back to 2016.

Such document says Albemarle must provide as much as 25% of its annual production at a discount (or “preferential price”) to companies seeking to produce battery metals within Chile. This, as the country seeks to spur a value-added local lithium industry.

Corfo Vice President Sebastian Sichel told Chilean paper La Tercera last week that Albemarle’s initial price offer was too high and had violated the terms of its contract with the miner, prompting the agency to push forward with a previously announced suit to be seen by the Paris-based International Chamber of Commerce.

Earlier this month, the Charlotte, North Carolina-based decided to put in the backburner plans to increase output capacity in its operations in Chile beyond 2021. That project would have produced lithium carbonate. Instead, the company has chosen to expand its Kemerton plant in Western Australia, which processes hard rock from the Greenbushes mine to produce lithium hydroxide.

Chile holds the world’s largest known reserves of lithium, which are found in brines, underneath vast salt flats located in the north. Brines only require enough space for evaporation to occur, which is taken care of by the sun and the expansive solid surface that is a salt flat.

In contrast, reserves in Australia, the world’s top lithium producing country according to the United States Geological Survey (USGS), are found in hard-rock sources, which make them more expensive to process than brines.

Each week our High Voltage column wraps all the news driving ASX battery metals stocks with exposure to lithium, cobalt, graphite, manganese and vanadium.

Industry focus

It’s a pretty tough market for junior explorers right now, there’s no doubt about it.

But investor confidence could be returning to the beaten-up lithium small cap space as metal prices stabilise and a slew of significant global announcements puts electric vehicle (EV) adoption on the fast track.

Over the last year just under 14 per cent of the lithium-facing stocks on our list have made share price gains (see graph below).

But this has been trending up over the last month or so, and in the last fortnight – to Tuesday November 20 — more than 36 per cent had made share price gains.

The number of stocks moving into negative territory has also dropped significantly over this time.

A number of big announcements are supercharging investor confidence, as fears of lithium oversupply subside.

For starters, Australia’s mid-tier lithium miners are making good profits and actually expanding as customers demand more product.

PwC’s 12th Aussie Mine Report, which analyses the 50 biggest ASX-listed mining companies with market values under $5 billion (MT50), shows overall market capitalisation up 28 per cent to $58.7 billion.

The push to electric vehicles means lithium miners are now the second biggest contributor to growth in terms of dollar value to the group’s total market capitalisation.

There are now seven lithium-related companies in the 50 mid-tier ASX miners list.

“Lithium was a standout, but we’re also seeing interest in other tech metals like manganese, nickel and rare earth,” says PwC Australia mining leader, Chris Dodd.

At the same time, global lithium heavyweight Albemarle is stepping up its investment in Australia because of “a significant acceleration in demand for lithium hydroxide” from EV battery makers.

Lithium hydroxide is often cheaper to produce from hard rock mines — like those found in Western Australia — than brine operations, like those found in Chile.

This echoes commentary from fellow lithium producer SQM.

“We have been positively surprised by the demand growth in the lithium market, especially lithium hydroxide,” SQM’s chief executive Patricio de Solminihac told investors last week.

“We believe that total lithium demand growth will surpass 25 per cent this year. As a result, prices in the lithium market remain strong.”

Australian mid cap Mineral Resources revealed last week that it had inked an “exclusivity agreement” with Albemarle for a potential $1.5 billion sale of 50 per cent in its Wodgina lithium mine in WA’s Pilbara.

Investors loved the news, driving MinRes shares up over 32 per cent.

Albemarle already has a 49 per cent stake in Talison Lithium, which operates the Greenbushes mine — the world’s largest hard rock lithium mine — 250km south of Perth.

Small cap spotlight

Of the ~200 battery metals stocks on our list, about 102 lost ground, 48 were ahead and 41 were steady.

Major small cap winners included Pepinnini Lithium up 40 per cent, Six Sigma Metals up 20 per cent, and Pacifico Minerals, also up 20 per cent.

At Metals Australia’s Lac Rainy graphite project in Quebec, a sampling program returned results including 20.4m at an average grade of 15.6 per cent total carbon-within-graphite (Cg), including 4.5 metres at an average grade of 20 per cent Cg.

Investors liked the news, sending the explorer’s share price up 33 per cent to 0.4c for the week.

(Typical graphite grades average around 10-15 per cent, so 20 per cent and above is very good.)

Australian Mines  dropped 23 per cent to about 4c after the explorer released a bankable feasibility study (BFS) on its mammoth Sconi nickel cobalt project in Queensland.

The battery metals project in Queensland could make profits of $2.6 billion over an initial 18-year life — but it will also cost over $1.3 billion to build, and that has made investors wary.

The market is now waiting for Australian Mines to finalise project funding through a combination of debt and equity before it gets too excited.

The two countries enjoy some of the largest global reserves of gold, silver, platinum, palladium, uranium, and other valuable and strategic resources, and have just committed to increasing bilateral cooperation in mining and exploration into the next decade.

Last week, South African foreign minister Lindiwe Sisulu arrived in Moscow to speak with her Russian counterpart Sergei Lavrov and take part in the 15th annual South Africa-Russia Intergovernmental Committee on Trade and Economic Cooperation.

The little reported-on event, focusing on trade and investment collaboration, included a roadmap on future joint projects in platinum metals, as well as a broader agreement on the exploration, extraction and processing of mineral resources up to the year 2025.

“Russia and South Africa, possessing rich reserves of mineral resources, having long traditions in the development of the mining industries, as well as a high level of technological knowledge, have the opportunity to promote the growth of the market of platinum group metals through partnership and cooperation,” the press release from the meeting between Sisulu and her Russian counterparts said.

The agreement comes on the heels of soaring prices for platinum’s sister metal, palladium, another resource whose market Russia and South Africa firmly control.

Used in automotive pollution control devices, the aircraft industry, weaponry, dentistry and as jewelry, platinum has anti-corrosion, heat resistance and strength characteristics which make it one of the world’s most important strategic metals. The rare earth metal’s prices reflect its significance, hitting $843.70 per troy ounce in Friday COMEX trading.

In 2017, South Africa produced 140 tonnes of platinum, with Russia producing 21 tonnes. The same year, the rest of the world combined produced 34,9 tonnes, meaning that South African and Russian production alone accounted for some 82 percent of total output.

The two countries’ control of the palladium market is similarly impressive, with Russia and South Africa mining 81 tonnes and 78 tonnes, respectively, out of a total global output of 211.4 tons in 2017, giving them control of 75 percent of the world total that year. With palladium prices jumping 80 percent over the last decade to $1,170 per troy ounce as of Friday trading, precious metals analysts expect platinum prices to creep up over the next two years to substitute for its sister metal.

Russia and South Africa, both members of the BRICS group of nations, are looking expand their total trade to $1 billion by the end of 2018. In addition to cooperation on precious metals, the two countries are also working on joint projects in nuclear energy, agriculture, oil and gas, banking, fisheries, water resource management, science, technology, education and space.