Interesting article below. Lithium and cobalt acquisitions...we...

Interesting article below. Lithium and cobalt acquisitions...we ain't seen nothing yet...

https://www.wsj.com/articles/why-li...are-the-hot-new-acquisition-target-1526558400
What Do Tesla, Apple and SoftBank Have in Common? They’re All Hot for Lithium

Tech companies, car makers rush to secure future supplies of key battery components



Many lithium and cobalt mines are located in regions that have historically been unstable.PHOTO: AARON UFUMELI/EPA/SHUTTERSTOCK
By
Amrith Ramkumar
Updated May 17, 2018 9:51 a.m. ET
9 COMMENTS

Tesla Inc. and a large Chinese firm each struck deals with lithium producers, the latest sign that big users are rushing to secure supplies of the material used in electric-car and cellphone batteries.
Both lithium and cobalt, which is also used in these batteries, face potential shortages in the years ahead as electric-vehicle use increases.
That concern is driving a number of companies like technology firms and car makers reliant on lithium and cobalt to strike deals now, even if it means joining with suppliers that haven’t started producing yet.
Tesla reached a three-year supply agreement with lithium firmKidman Resources Ltd. , which begins when the Australian company begins producing battery-grade material, Kidman said Thursday. The firm isn’t expected to begin producing lithium compounds before 2021.
Revved UpBenchmark Mineral's Lithium Price Index has more than doubled since the start of2016.Source: Benchmark Mineral IntelligenceNote: Price index based on eight different lithium carbonate/hydroxide grades
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Chinese firm Tianqi Lithium Corp. also said Thursday that it has agreed to buy a 24% stake in Chilean lithium company Sociedad Quimica y Minera de Chile SA from Canadian fertilizer firm Nutrien Ltd. for about $4.1 billion.
In addition to the sector’s dominant players such as Glencore PLC andAlbemarle Corp. , analysts estimate there are more than 100 smaller lithium miners and about 25 cobalt firms. Many are publicly traded in Canada and Australia, and some have already clinched deals with big users. “It just looks like we’re on the precipice of this wave,” said Chris Berry, founder of House Mountain Partners LLC, a New York-based adviser to battery-metals companies and investors. “You’re going to need a lot of investment in a hurry to meet demand.”
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Japan’s SoftBank Group Corp. last month paid nearly $80 million for a roughly 10% stake inNemaska Lithium Inc., a Quebec-based producer. It marked SoftBank’s first investment in a lithium company. Nemaska has produced just small samples of lithium compounds at this point, and its mine and plant are expected to be fully operational in the second half of 2019.
Cobalt CrazeCobalt prices have had a steady run that some analysts expect to continue amidsupply uncertainty.Source: Metal BulletinNote: Low-grade cobalt
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The trading arm of Toyota Group, the parent company of Toyota Motor Corp. , also said in January that it was taking a 15% stake in Australian lithium firm Orocobre Ltd. for roughly $225 million.
Chemical company FMC Corp. is expected to spin off its lithium business this year, and multiple Chinese lithium companies are also expected to go public, analysts said. Apple Inc., BMW AG andVolkswagen AG have been working to secure future cobalt supplies.

Not Enough to Go AroundAnalysts estimate cobalt demand will continue exceeding supply in the next fewyears, supporting prices.Source: Citigroup
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But the rush to lock in deals could turn out to be a speculative bust. Prices of lithium and cobalt more than doubled from 2016 through last year, but the rally has cooled off recently amid worries about oversupply. Some investors also think manufacturers will replace pricey materials like lithium and cobalt using different types of batteries with a higher concentration of cheaper metals such as nickel.
Shares of lithium and cobalt producers have slipped, too, following recent declines in the commodities. Nemaska’s stock price has fallen 3.1% on the Toronto Stock Exchange over the past month.
The number of companies producing lithium and cobalt has also soared from early 2014, when Tesla CEO Elon Musk announced plans for a big electric-car battery plant. Back then, there were about 16 lithium exploration firms and a handful of cobalt ones, Mr. Berry said.
Because most investors looking for exposure to cobalt and lithium take positions in mining companies, analysts said the recent share-price declines reflect uncertainty about which ones will end up on top and the risk still involved in the fledgling market.
Risky BusinessSome bearish analysts like Morgan Stanley see long-term lithium supply growthpushing down prices.Source: Morgan Stanley
.thousand tonsSupplyDemand2016’17’18’19’20’21’22’23’24’250100200300400500600700800
Analysts expect demand for the materials used to power electric vehicles and smartphones to more than double by 2025, pushing transportation and technology companies into exploring unconventional deals to meet that pressing need.
Many lithium and cobalt mines are located in regions that have historically been unstable: Congo in the case of cobalt, and South America for lithium, adding to worries about a supply shortage.
In a sign of how isolated some of these companies are, when SoftBank reached out to Nemaska last October, Chief Executive Guy Bourassa hadn’t even heard of the Tokyo-based company, one of the world’s largest technology investors.
“I had absolutely no clue what SoftBank was,” Mr. Bourassa said in an interview.
Losing SteamShares of lithium and cobalt producers have fallen lately with investors jittery aftertheir rapid rise.Source: FactSet
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SoftBank had specifically sought out Nemaska, because the producer uses a patented extraction technology that reduces costs, said Mr. Bourassa. And a deal was done in six months.
SoftBank didn’t respond to a request for comment.

Mr. Bourassa said the government of Quebec and the firm’s shareholders will provide the rest of the funding that will let Nemaska develop its mine and a commercial plant to process lithium and turn it into lithium hydroxide and carbonate, two of the chemicals used in batteries.
Companies like SoftBank investing directly into mining and chemicals companies marks a shift from the past. Firms have typically only worked with Chinese battery makers that obtained raw materials themselves, analysts said.
“It’s certainly an indication the metals are becoming more mainstream,” said Jon Hykawy, president of Stormcrow Capital Ltd., a consulting firm that helped negotiate a deal between Nemaska and the $4.5 billion private-equity firm Orion Resource Partners, which focuses on mining.
“They’re being incorporated as part of this broader technology story,” he said.
Write to Amrith Ramkumar at [email protected]