Lithium investment on the rise
Investors are betting big on a lithium comeback less than three years after prices of the metal used in rechargeable batteries collapsed from a record price and sent miners reeling.
Producers of the metal that had been shunned amid supply overhangs and plateauing demand raised almost $3.4 billion in equity offerings in the Americas so far this year, data compiled by Bloomberg shows. That’s seven times the total amount raised from 2018 to 2020, when the industry was in a downturn.
Interest in the industry is resurgent as electric-vehicle targets set by global automakers and a change in the US administration signal that a battery boom is finally gathering momentum. After the punishing three-year sell-off, prices of the soft silvery-white metal have started to rebound, and analysts, including those at BloombergNEF, expect further gains on rising demand and tight supplies of battery-grade lithium.
Talks with investors and discussions on potential supply agreements with automotive-equipment and battery manufacturers “which were only in my dreams a year ago are now filling my calendar,” Robert Mintak, chief executive officer of Vancouver-based Standard Lithium Ltd., told Bloomberg.
A lithium price index compiled by Benchmark Mineral Intelligence jumped 32% this year through February, after plunging 59% from mid-2018 to mid-2020. The metal reached an all-time high in May 2018.
The investor pool “is expanded to technology investors and others,” said Mintak, as major automakers’ determination to deploy hundreds of billions of dollars to electrify their fleets gives investors “that safety that there’s going to be a supply pinch.”
The majority of the financing has been done by the world’s top two lithium miners - Albemarle Corp. and SQM, or Soc. Quimica & Minera de Chile SA, as it’s known formally - as they took advantage of their recent stock surges. Albemarle completed a larger-than-planned equity offering of $1.5 billion in early February, while Santiago-based SQM raised $1.1 billion in January.
Junior miners, most of which have yet to produce substantial amounts of lithium, are also attracting strong interest from investors. Take the case of Standard Lithium, which opened its first direct lithium extraction plant in El Dorado, Arkansas, in September, with the facility using a new technology that allows for a 90% lithium recovery rate. It raised C$34.53 million ($27.6 million) in an over-subscribed share offering in December. Investor interest was so strong that it had to turn away offers for more, said CEO Mintak.
Lithium Americas Corp., which is developing the Thacker Pass mine in Nevada, raised a total of $500 million through two primary share offerings in October and January, respectively.
“The tide is finally turning, and much faster than I thought,” Chris Berry president of House Mountain Partners, an industry consultant. “You see that with Lithium Americas being able to raise a total of half a billion dollars recently. This is for a pre-revenue company regarding lithium.”
Sigma Lithium Resources Corp., which is developing a hard-rock lithium project in Brazil, had to upsize its private placement and increase offering price, which “says a lot about investor demand for lithium exposure, that asset, and that company’s vision,” said Berry.
Junior lithium miners raised $529 million this year, Bloomberg data showed. That’s about $63 million more than the total amount raised from 2018 to 2020.
Ford Motor Co. announced last month that its passenger-vehicle range will be all-electric in Europe by 2030. General Motors Co. plans to sell only zero-emission models by 2035. Volkswagen AG went further, announcing plans this week to build six battery factories in Europe and invest globally in charging stations, as ensuring scaling battery production has become a key in the EV race.
Batteries make up about 30% of an electric car’s cost. And automakers around the world look to pivot to EVs, with hopes to get batteries at the cheapest price possible but also secure enough supply to meet those ambitions.
Meanwhile, US President Joe Biden has pledged to build back the economy after the devastation of covid-19 with cleaner energy and a lower carbon footprint. The administration said in late February it would conduct a government review of US supply chains to seek to end the country’s reliance on China and other adversaries for crucial goods.
The election of Biden is “a very favorable signal to investors” as it boosted confidence that the switch to clean energy will accelerate, which along with existing favorable subsidies and regulations in Europe and China bodes well for raw materials needed for that energy transition, said Seth Goldstein, an analyst at Morningstar Inc. The US is the second-largest EV market, after China.
Andrew Bowering, a director at Vancouver-based American Lithium Corp., called the US review on supply chains “huge” for the lithium industry as it shows the government’s realization that in order to meet clean-energy goals, it’s important for the US to have a security of supply of raw materials such as lithium.
“All of a sudden, after three years of downturn, you’ve got the price of the commodity starting to go up again and a change in the administration in the US that’s pushing a green new deal and support big money going into the green automobile industry,” said Bowering. “That leads investors into space.”
AngloGold Ashanti establishes BG Umoja JV in Tanzania
AngloGold Ashanti, in line with it s strategy to ensure a sustainable contribution to the economies of host countries, has established the BG Umoja joint venture (JV), in Tanzania.
Awarded a $186m two-year mining contract for the Nyankanga and Geita Hill underground mining projects, the 80/20 joint venture is a partnership between Africa Underground Mining Services (AUMS) Tanzania, a subsidiary of Australia’s Perenti Group, and local drilling services and mining- supply company, Geofields Tanzania Limited.
The partnership is modelled on a similar underground mining joint venture at the Company’s Obuasi Redevelopment Project in Ghana between AUMS Ghana and Accra-based, wholly Ghanaian-owned Rocksure and will help build local specialised mining capacity.
“We’re working with our experienced mining contractors to assist in establishing local joint ventures for long-term transfer of sustainable skills, and to continue building on our sustainable local procurement programmes,” commented Sicelo Ntuli, AngloGold Ashanti’s Chief Operating Officer: Africa.
“AngloGold Ashanti is building sustainable local procurement programmes that will allow it to stimulate economic and social development at all of its operations, evidenced by the significant contribution Geita has made to the fiscus and people of Tanzania.”
AngloGold Ashanti’s annual expenditure with indigenous Tanzanian suppliers has almost tripled to $162mn since 2016. The company’s local team in Tanzania has set itself an ambitious target of 60% to 70% of all expenditures with indigenous Tanzanian companies, by 2025.
Scope 3 Emissions
In addition, AngloGold Ashanti’s Geita Gold Mine has awarded a two-year fuel transportation contract, worth approximately $10.8m a year, to two local contractors - one of which is originally from Geita. This is in line with the mine’s commitment to contribute to the economies of host communities. The Geita-based company was part of Geita Mine’s supply chain capacity building initiative for host community suppliers, a partnership between the Mine and the National Economic Empowerment Council.
To influence Scope 3 emissions, trucks are to be compliant with EURO IV emissions standards, tankers are to be made of an aluminium alloy material to reduce weight and the age of the fleet will be maintained at less than six years.
Diversity & Inclusion
The contractors already employ women fuel tanker drivers, fulfilling the Mine’s requirements for diversity and inclusion. The two contractors both own workshop facilities in Geita town and participate in social initiatives aimed at uplifting the lives of host community residents.
AngloGold Ashanti has been operating at Geita Gold Mine for more than 20 years, with the project initially a single pit mine, evolving now to a predominantly underground operation, employing 5,700 employees and contractors.
Earlier this year, the Government of Tanzania recognized AngloGold Ashanti’s contribution to the economy of the country, awarding it for its outstanding performance in a number of areas, including environmental and safety performance, corporate social investment, the best taxpayer in the mining sector, the runners up in local business content and overall best performer in the mining sector in Tanzania in 2019/2020.
Geita Gold Mine
Geita, one of AngloGold Ashanti’s flagship mines, is located in north-western Tanzania in the Lake Victoria goldfields of Mwanza region, about 120km from Mwanza and 4km west of the town of Geita. It has been in operation as a large-scale mine since 2000.