Running discussion on SP, page-73724

Way more lithium needed

Rio Tinto’s lithium boss Sinead Kaufman says it is underestimated just how much of the material needs to be mined by 2030 to keep pace with demand from EVs.

Unlike its biggest competitor BHP, the iron ore giant has decided to diversify into lithium via its stalled Jadar mine in Serbia and the US$825 million Rincon project in Argentina, which will be producing lithium carbonate from 2024.

“Battery materials in Rio has really been dedicated to trying to build at scale a portfolio of mining assets across lithium, but also other critical minerals and battery materials,” Kaufman said.

“And we see as others do an enormous demand for lithium as a building stock for lithium ion batteries. I mean, forecasts show that light electric vehicles will make up about 50% of the light vehicles on the road by 2030.

“Which means that lithium consumption, as Andrew said, needs to surge way above anything that’s currently been planned to be mined.

“With every project in the world that’s projected to come on, we’ll still be short by 50% of the amount of lithium that’s required to build the electric vehicles.”

The bottleneck is exaggerated by the fact that ESG credentials are becoming increasingly important for customers.

“Consumers today, they want to know where the product comes from. They also want to know all of the hands that it’s gone through to get to where it is, and I think the refining, the aspects of bringing that to market we’ve never seen more interest now than ever before on provenance,” she said.

“One of the parts of the portfolio for me in Rio Tinto is diamonds. We’ve done a lot of work over the years working on provenance and sustainability of diamonds and where they’ve come from.

“We’re seeing a similar level of interest now in what’s happening with critical minerals.”

Miller said the reality is we need more production now to meet ambition timeframes to electrify the transport sector, with automakers currently making multi-billion dollar investments to shift from ICE to EV production lines in line with community expectations and government policies.

“Ultimately lithium is one of the major limiting factors to how big that actual demand number ends up being,” he said.

“Fundamentally that demand is not going anywhere.

“So if we don’t have the lithium volumes we need this year, the push towards electrification will just be knocked back. And that’s the big risk the industry is not capturing that opportunity today, but it doesn’t mean that the opportunity is going away.”

Changing raw material strategies

But demand for lithium and other raw materials like graphite, nickel and cobalt continues to grow as battery makers ramp up in scale.

The strategy head of South Korean battery cell maker SK On Donghoe Gu said the company had previously focused its lithium procurement on long term contracts with major players, but may have to change track and lower its eyes to junior miners as it increases its production capacity.

“We are not a miner, we are not a processing player. So our optimal capital allocation is to still keep focusing on investing in manufacturing plants globally,” he said.

“But we also allocate our capital to source critical minerals.

“Previously we are focusing on the major players but the market is not easy right now. So we want to talk (to) junior minor players to source and to support our future growth.”

Which commodities won and lost in September?

Let’s get the keyphrase stuffing out of the way. Lithium, lithium, lithium.

Investors can’t get enough of the stuff right now, precisely because people who make batteries and electric vehicles, quite literally, can’t get enough of the stuff.

The battery metal continued to climb new highs in September, confounding expectations that Chinese authorities could rein in prices that were starting to concern the CCP.

Supply shortages mean they can do little, just as little it appears can be done right now about coal prices, with energy coal still above US$400/t.

Meanwhile, China’s Covid lockdowns and international rate rises continued to darken the outlook for base metals and gold, which sunk to multi-year lows before a rebound late last month.

WINNERS


Lithium

Price (Fastmarkets Lithium Hydroxide): US$77,476.19/t %: +2.43%

Ah dee, ah say do you remember a time when lithium prices weren’t on the march?

It feels like a long time ago (only 2019) that miners were going to the wall left, right and centre.

Now the lithium stocks are the kings of the ASX, with Allkem, Pilbara Minerals and Mineral Resources each hitting all time highs last month.

MinRes hit that milestone after news leaked out that it was considering a spinout of its lithium business into a multi-billion dollar New York listed vehicle to capture the multiples being enjoyed by pure play miners in the States.

Pilbara Minerals meanwhile showed how hot the market is for uncontracted lithium raw materials, selling a cargo via its Battery Materials Exchange for US$6988/dmt for a 5.5% product.

That’s US$7708/dmt at a benchmark 6% Li2O basis. Converters would be making less than 5% margin on those feedstock prices, informing the shockingly high prices currently being seen for lithium chemicals.

Lithium hydroxide and carbonate crossed the magical 500,000 RMB per tonne mark in China according to multiple pricing agencies, equivalent to over US$71,000/t.

Fastmarkets’ lithium hydroxide CIF price, which takes into account Chinese, Korean and Japanese sales hit US$77,476.19/t on September 30.

The need for spod is so hot that Core Lithium, which plans to enter full scale lithium concentrate production at its Finniss mine in the Northern Territory in the first half of 2023, sold a 15,000t DSO cargo at 1.4% Li20 for US$951/t yesterday.

That’s over US$4000/t at benchmark prices; not bad, considering the customer is receiving well over 14,000t of worthless dirt as part of the package.

EVs remain a luxury purchase for the most part, meaning downstream demand is pretty inelastic even with higher prices being passed on to consumers.

Production numbers continue to increase at the world’s leading car brands. Tesla delivered 343,000 cars in the September quarter, producing 365,000.

While that fell short of analyst expectations, it was up almost 100,000 vehicles from the same period in 2021 (254,695).










Food for thought on the Road to Mining Manono with RIO

Or Not, need ML / Permits sorted asap

Frank