This article in The Australian today - 24 April 20 I cant remember the ratio of graphite to lithium. But it gives a dimension to the future demand for Renascor.
Electric car battery demand puts lithium in pole position April 24, 2021 — 12.00am Billionaire mining scion John Hancock’s wealth is surging off the back of record highs in iron ore prices. But from its current elevated levels, even he admits there is a limit to the upside for the key steel-making ingredient. “You aren’t going to see the iron ore price go up multiples from here,” Hancock says.There is, however, a commodity with the potential for a stratospheric rise, according to Hancock and many other industry observers. And it is well represented in Australia and on the ASX. “Lithium has risen very strongly in the last few months and I’m expecting it to go higher, especially as these giga factories come online in the next 12 to 36 months,” Hancock says. He is referring to the waves of investment in battery factories - dubbed giga factories by Elon Musk - which are now in development across the world ahead of an unfolding boom in electric vehicles (EVs).Lithium is the key ingredient in the batteries for EVs, which finally look poised to take the ascendancy over their petrol-powered rivals.
EVs are mandated to entirely replace petrol-powered cars in the UK and German markets within the decade, and in other major economies in the following years.Interest in the lithium mining sector has soared with each new announcement of a major car maker’s plans to go fully electric or major economies announcing multibillion-dollar investments to push the electrification and decarbonisation of their transport infrastructure.For more evidence of just how hot lithium’s prospects are right now - after years in the doldrums - you only need to look at Hancock’s substantial stake in Vulcan Energy Resources. The stock has risen from a low of 23 cents last year to as high as $9.95 in January, making it the best performing ASX stock over the past 12 months despite still being years away from commercial production.Hancock’s stake was worth $45 million at the January peak but cost him about one-tenth that amount.
Other lithium stocks such as Galaxy Resources and Pilbara Minerals have risen more than 500 per cent and 600 per cent respectively over the same period.And the interest from prominent investors is growing.Just days after Hancock’s notice to the ASX in mid-January declaring his substantial holding in Vulcan thanks to the vesting of 2.5 million share rights at just over a dollar each, another iron ore billionaire swooped in, acquiring shares just below the $10 mark and building a substantial stake within weeks.It was Hancock Prospecting (HPPL), the family flagship company controlled by his mother Gina Rinehart.“I’m sure HPPL had been researching the space for some time, conducted extensive due diligence on many projects globally and came to the conclusion as I did eight months prior - Vulcan is the best positioned lithium play around,” Hancock says.“I didn’t discuss Vulcan, or need to, with my mother or HPPL executives,” he adds.
The lithium sector has experienced this euphoria before.Australia’s lithium sector has provided investors with a rollercoaster ride over the past decade with a China-driven boom petering out in 2019 thanks to a drop in that country’s demand incentives just as fresh supply came online in Australia - the largest source of lithium.Prices collapsed from a 2017 peak of $US25,000 per tonne of lithium carbonate equivalent (LCE) to a low of $US5000, and so did some lithium miners.But this time is different says those in the sector.
The clear message is that the hiccup of 2018-2019 will not be repeated as Europe, and now the US, vie with China for supremacy in production of the batteries that could determine who will dominate the e-vehicle sector.And the automakers will need to deal with large reputable suppliers with global scale, not one-project wonders, says Galaxy’s chief executive Simon Hay of the merger with Orocobre to create a global player.“Our geographic diversity, and also our production diversity, means that we can supply customers, major customers, on multiple continents with multiple different product offerings,” says Hay.The challenge will be dealing with the voracious demand as Tesla demonstrated at its battery day in September last year. “Tesla’s demand for lithium by 2030 exceeded the entire industry’s projections,” says Hay. “Lithium stocks that day started to run.”In November, the UK brought forward plans to phase out petrol cars to 2030, matching Germany’s target. The industry got another major kick-along in late January when GM announced its path to purely e-vehicles by 2035.
US President Biden’s US$2 trillion infrastructure plan will include $US174 billion worth of spending to encourage Americans to switch to e-vehicles.The European Union’s “Green Deal” - a trillion euro plan for the decarbonisation of its member state - also includes carrot and stick incentives for car buyers and manufacturers, respectively, to encourage a significant uptake in e-vehicles.“What we see now is essentially the whole world really transitioning towards the electrification of transport, which is driving a massive increase in production capacity for lithium ion batteries, which is in turn driving a very sharp increase upwards in lithium demand,” says Vulcan chief executive Francis Wedin.Vulcan is planning on doing more than just providing lithium from its geothermal brine sourced from Germany’s Upper Rhine Valley. It will use the hot liquid to power its operation and produce zero-carbon lithium.
For Vulcan it means free power as well as a free pass from CBAM (the carbon border adjustment mechanism) which will ensure producers pay for their carbon footprint.“Because the geothermal pays for itself, we should be one of the lowest operating cost lithium operations out there,” says Wedin. For Galaxy’s Hay, who has been in the minerals sector for close to three decades, it adds up to an unprecedented boom ahead.“If you think of the lithium industry today, it needs to double every two or three years for the next decade. The growth is just unprecedented for a mineral.”According to investment bank Cannacord Genuity, the EU alone is planning to build 700 GWh (1,000 billion Watt hours) of battery manufacturing capacity by 2030. As a general rule of thumb, every KWh of battery capacity produced requires a kilo of lithium.Analysts agree there is a significant shortfall in supply ahead.Macquarie Equities research this month said e-vehicle demand has transformed the outlook for the lithium market and upgraded its price forecasts between now and 2025 by 30 per cent to 100 per cent.“We expect limitations on the likely supply response to see the market shift to a deficit in 2022, with significant shortages emerging from 2025."
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