Welcome to the October 2019 edition of the lithium miner news. This past month saw generally slightly lower lithium prices and some forecasts that lithium prices could go even lower not helped by the recent EV sales slowdown and lithium oversupply. There was a lot of company news which is summarized at the end of this article.
Lithium spot and contract price news
During October, 99% lithium carbonate China spot prices were not available (AsianMetal.com). Spodumene (5% min) prices were down 1.62%.
Fastmarkets (formerly Metal Bulletin) reports 99.5% lithium carbonate battery grade spot midpoint prices CIF China, Japan, and Korea of US$10.00/kg (US$10,000/t) and min 56.5% lithium hydroxide battery grade spot midpoint prices CIF China, Japan, and Korea of US$12.00/kg (12,000/t).
Lithium hydroxide, battery grade, CIF China, Japan, And Korea
Lithium carbonate, battery grade, CIF China, Japan, and Korea
On October 2, Mining.com reported:
Top producer says lithium prices to keep falling. Free-on board prices of lithium carbonate from South American brine ponds are down 31% over the past year to average $10,375 a tonne in September, according to Benchmark Mineral Intelligence data... The office of Australia's chief economist expects the hydroxide surplus to gradually decline and prices to start recovering in 2021, but spodumene "is expected to face a longer period of oversupply, with prices forecast to remain soft through the whole outlook period."
Lithium demand versus supply outlook
On October 8, Roskill released:
Current prices provide limited incentive for new supply. Longer-term, there is still necessity for the industry to deliver sustained supply growth to fuel the next wave of electric vehicle market growth-that driven by economics rather than incentives. However, current spot prices and sentiment are providing limited incentive to develop much of the greenfield capacity currently being evaluated, and that could impact future supply.
Below are some useful charts on long-term lithium demand.
The impact of the proposed megafactories on raw material demand (lithium in yellow)
Source: Benchmark Mineral Intelligence
Bloomberg NEF 2019 Li-ion battery demand forecast
Source: Bloomberg NEF 2019 Electric Vehicle Outlook
Lithium market and battery news
On September 25, The Korea Times reported:
LG Chem buys cathode materials from Belgium's Umicore. LG Chem has signed a multi-year supply deal with Belgian materials technology company Umicore to buy large amounts of cathode materials to meet growing global demand for electric vehicle [EV] batteries, the Korean company said Tuesday. The supply agreement takes effect next year and covers 125,000 tons of nickel manganese cobalt cathode materials, capable of manufacturing 1 million high-performance EVs that can cover more than 380 kilometers on a single charge.
Despite higher raw material costs, Li-ion cells costs continue to tumble
Source: LinkedIn Simon Moores - Benchmark Mineral intelligence
On September 26, Automotive News China reported:
CATL shrugs off headwinds with plan for $1.4 billion EV battery plant in SW China. China's top maker of electric-vehicle batteries plans to spend 10 billion yuan ($1.4 billion) building its first factory in the southwest part of the country. Contemporary Amperex Technology Co. will build the facility in Sichuan province, an outpost of China's car industry, it said in a statement. The first phase will be operational within 26 months from the start of construction, and the second phase two years after that, it said.
On October 3, Canadian Mining Journal reported:
LITHIUM: Researchers in Canada develop million-mile lithium-ion battery. A group of scientists led by Jeff Dahn, a professor at Canada's Dalhousie University and a research partner with Tesla, published a paper in the Journal of The Electrochemical Society where they present the concept of a new battery able to power an electric vehicle for over one million miles. The battery, thus, could make Tesla's robot taxis and long haul electric trucks viable. It is also expected to last at least two decades in grid energy storage. The power cell uses a nickel-rich alloy for its cathode. The alloy contains 50% nickel, 20% cobalt, and 30% manganese and it is considered to be very stable.
On October 15, BNEF reported - Bullard:
How a battery can lead a quiet revolution. As this rather dramatic chart shows, passenger electric vehicles have vaulted past consumer electronics to become the single biggest source of demand for lithium-ion batteries... The lithium-ion battery has come a very long way in other ways, too. Battery costs have come down by more than 80% in nine years. And battery manufacturing capacity has increased more than 200-fold in 15 years... There is far more expansion planned. Next year will see more new capacity added than the global manufacturing capacity's total in 2016. By 2023, total capacity will have more than doubled.
On October 16, Bloomberg reported:
China beats U.S. 8-1 when it comes to charging electric cars." The chart below says it all.
Global EV public charging units by country and some cities
On October 17, Forbes reported:
Demand crash on the EV highway hits battery metals. A collapse in sales of electric vehicles in China has triggered a chain reaction up the raw materials pipeline and raised fresh questions about the short-term future of EVs without heavy-duty government subsidies. What rocked supporters of the EV industry earlier this week was a report from the China Association of Automobile Manufacturers that sales of new-energy vehicles, a description that include full electric and hybrids, fell 34.2% in September compared with the same month last year. On a global basis, Macquarie said the slowdown in China was being offset by increased EV sales in Europe and the U.S. but the overall picture was of "sales growth screeching almost to a halt at 8% growth in 2019" versus 52.6% year-on-year growth between 2015 and 2018.
On October 20, Oil Price.com reported:
The U.S. doubles down on domestic lithium production... While the supply response has addressed the relatively minor growth of today, it is still far from meeting the needs of tomorrow's EV expansions. Spectators that flocked to the market in 2016 on the promise of an EV super-cycle have left before the warm-up, let alone the main event. While a downturn in prices has reflected a necessary correction towards near-term market fundamentals, it fails to represent the increasing possibility of another major deficit in the market by the early-2020s, creating a deceptive narrative in both share prices and surrounding markets... Battery and EV manufacturers in the United States need to get out in front of the looming lithium supply shortage. Buy secure mine supply now or pay the pipers, Russia and China.
On October 23, Real Money reported:
Buy Albemarle and Livent on 'compelling' contrarian call, says Goldman Sachs. The combination of sharp spot lithium price declines and elevated investor skepticism makes the setup for a contrarian call on shares of Albemarle (ALB) and Livent (LTHM) "compelling." Koort believes lithium prices are approaching a bottom given limited cash margins for the marginal producers. This indicates investors "should dust off their lithium files and consider preparing for an upturn."
Lithium miner news
No significant news for the month.
On October 1, International Lithium announced:
International Lithium reports on 2019 Raleigh Lake UAV magnetic survey results. The resulting magnetic images confirm that a geologic body with elevated magnetic response, previously interpreted to be a gabbroic intrusive hosting the lithium bearing pegmatites, continues onto the adjacent group of claims acquired by ILC in 2018.
On October 2, Mineral Resources announced:
McIntosh Joint Venture termination."
On October 17, Neometals announced: 'MOU to commercialise lithium-ion battery recycling process with global partner.' Highlights include:
- MoU with leading global processing plant manufacturer, SMS Group, to form a JV to accelerate commercialisation of Neometals' lithium-ion battery recycling technology.
- Successful completion of current pilot plant program will precede a decision to form a 50:50 JV to design and construct a Demonstration Plant and complete a Class 3 Engineering Cost Study.
- Demonstration Plant to be operated in a hub and spoke configuration with Comminution and Beneficiation at SMS sites in Germany and the Hydrometallurgical Plant in Austria. All costs to be borne equally.
- MoU contemplates SMS Group constructing and operating multiple commercial scale lithium-ion battery recycling plants on behalf of JV.
- Agreement represents significant commercial validation of the Neometals recycling technology."
On October 15, 4-traders reported (re the Ganfeng Lithium/Bacanora Lithium deal):
Completion of the last of the relevant approvals has now been obtained and Bacanora has now received the GBP21,963,740 of funds from Ganfeng in exchange for a 29.99% equity interest in Bacanora Lithium PLC and a 22.5% JV investment directly in the Sonora Lithium Project ('Sonora').
Sociedad Quimica y Minera S.A. (SQM)
No news for the month.
Investors can read the company's latest presentation here.
(Chengdu) Tianqi Lithium Industries Inc. [SHE:002466]
On October 23, Reuters reported:
Tianqi Lithium has first loss in 5-1/2 years as lithium prices crash. Tianqi has loss of 53.9 mln yuan in Q3, first since Q1 2014. Lithium prices fall sharply; firm also blames SQM loans. Full-year profit seen at 80-120 mln yuan, implying Q4 loss.
No significant news for the month.
Investors can read my recent article "Livent Is Looking Cheap."
Orocobre [ASX:ORE] [TSX:ORL] (OTCPK:OROCF)
On October 22, Orocobre announced quarterly activities report - September 2019. Highlights include:
Olaroz lithium facility (ore 66.5%)
- Q1 FY20 production was 3,093 tonnes, up 35% on the previous corresponding period [PCP] and the highest ever recorded in a September quarter following a strategy of managing brine quality, new pond preparation and tailoring production to seasonal conditions. Record production was achieved despite extended maintenance activity during August which saw a full plant shutdown for five days and one of the two reactor units offline for the month.
- Quarterly sales revenue was US$22.1 million, down 21% QoQ with a realised average price achieved of US$7,111/tonne on a free on board basis [FOB]. September quarter product pricing was below that of the June quarter due to current market softness. Sales volume for the quarter was down 8% QoQ to 3,108 tonnes.
- Gross cash margins (excluding export tax) of US$2,226/tonne were down 40% QoQ mainly due to the lower average price received and this represents 31% of revenue.
- Cash costs for the quarter (on cost of goods sold basis) were US$4,885/tonne, up 9% on QoQ excluding the export tax of US$420/t applicable since September 2018."
Lithium Growth Projects
- During the quarter... (management) hosted a ground breaking ceremony to signify the commencement of construction at the Naraha Lithium Hydroxide Plant (Naraha Plant).
- Project finance documentation was executed for a US$180million debt facility that will be used for the Stage2 Expansion of the Olaroz operations.
- Construction of key items for the Stage2 Expansion of the Olaroz Lithium Facility such as ponds, secondary liming plant, roads and camp upgrades continue to advance."
- As at 30 September 2019, Orocobre corporate had available cash of US$223.5 million after expenditure mainly related to funding Olaroz expansion activities, corporate costs and Cauchari JV expenditure. Including Sales de Jujuy S.A. [SDJ] and Borax Argentina S.A. [Borax] cash, project debt and working capital facilities, net group cash at 30 September 2019 was US$151.2 million.
Cauchari Joint Venture (Advantage lithium operator 75%/Orocobre 25%)
- "During the quarter Orocobre participated in a Private Placement by Advantage Lithium Corp. (Advantage) contributing C$1,536,025 at a price of C$0.41 per Common Share."
On October 23, Orocobre announced: 'Advantage Lithium release a summary Cauchari JV Pre-Feasibility Study.'
Upcoming catalysts include:
- H2 2020 - Olaroz Stage 2 (42.5ktpa) commissioning.
- H1 2021 - Naraha lithium hydroxide plant (10ktpa) commissioning (ORE share is 75%).
Galaxy Resources [ASX:GXY] (OTCPK:GALXF)
On October 24, Galaxy Resources released their September Quarterly Activities Report: Highlights include:
- Mt Cattlin production volume of 50,014 dry metric tonnes ("dmt") of lithium concentrate, grading 6.0% Li2O, the midpoint of production guidance of 45,000 - 55,000 dmt.
- Mt Cattlin production unit cash cost of US$387/ dmt produced free-on-board ("FOB"), reinforcing Mt Cattlin as one of the lowest cost lithium concentrate operations globally.
- Total shipment volume of 58,278 dmt of lithium concentrate, slightly under guidance of 60,000 - 70,000 dmt.
- ...The review is nearing completion and the expected outcome for 2020 is that mining operations will be scaled back with material mined to be reduced by approximately 40%.
- Stage 1 test work related to optimising the base case flowsheet at Sal de Vida is now complete, with positive results from preliminary evaluation; final evaluation will be completed in Q4 2019.......
- Galaxy executed an agreement with a consortium of lenders to acquire the senior secured loan facility provided to Alita Resources Limited (ASX: A40); Galaxy continues to assess restructuring options related to Alita and Bald Hill.
- Closing cash of US$169 million and debt of US$32 million as at 30 September 2019."
Upcoming catalysts include:
2020 - James Bay FS.
Investors can read my recent article "Galaxy Resources Plan To Be A 100,000tpa Lithium Producer By 2025", and my CEO interview here, and the latest company presentation here.
Pilbara Minerals [ASX:PLS] (PILBF)
On October 11, Pilbara Minerals announced:
Completion of a $20.0 million tranche 1 of CATL's strategic investment in Pilbara Minerals. Pilbara Minerals Limited is pleased to announce completion of a A$20.0 million strategic investment by Contemporary Amperex Technology (Hong Kong) Limited ("C AT L"). The issue of 66.67 million fully paid ordinary shares was conducted at the agreed price of A$0.30 per share. As announced on 4 September 2019, CATL executed a Share Subscription Agreement for a A$55.0 million strategic investment in Pilbara Minerals ("CATL Placement") split into two tranches according to the relevant approval conditions. The A$20.0 million received represents the completion of Tranche 1 of the CATL Placement.
2020/21 - Stage 2 commissioning timing to depend on market demand.
Alita Resources Limited (Formerly Alliance Mineral Assets Limited ("AMAL")) (merged with Tawana Resources) [ASX:A40][SGX:A40]
No news for the month.
Altura Mining [ASX:AJM] (ALTAF)
On October 3, Altura Mining announced:
Shipping update. Altura Mining Limited is pleased to advise that during the past week it has loaded and shipped a combined 19,500 wmt of spodumene concentrate from Port Hedland for delivery to existing China-based offtake partners.
On October 9, Altura Mining announced:
Resource and reserve estimate update following first year of mining operations."
On October 17, Altura Mining announced 'Quarterly activities report. September 2019.' Highlights include:
Production and Sales
- Record quarterly production of 45,484 wet metric tonnes [WMT] of lithium concentrate, up 7.3% from the prior June quarter, exceeding guidance and moving steadily towards nameplate production of 220,000 wmt per year.
- Record monthly production of 16,562 wmt in September, equivalent to 92% of nameplate.
- Average quarterly operating cash cost reduced to US$365/wmt produced (FOB basis), down from US$392/wmt in June and generating significant cash margins on sales prices, which remained approximately $600/dmt for benchmark 6% Li2O concentrate.
- Product demand from established offtake partners remains firm, reflecting the excellent quality of Altura product. A total of 25,601 dry metric tonnes (dmt) of concentrate sold via three shipments during the quarter, with a further shipment of 11,587 dmt sailing on 2 October 2019.
- Binding offtake agreements signed for 35,000 tpa of Li2O with Shandong Ruifu and 50,000 tpa with Guangdong Weihua Corporation, both established Chinese lithium materials producers. Annual offtake agreements now total 220,000 dmt, equivalent to Altura nameplate production."
- "$22.4 million raised through placement to new cornerstone investor Ningbo Shanshan Co, one of the world's largest integrated suppliers of lithium ion battery materials.
- Altura completed an Earn-in Agreement with Sayona Mining Limited over its Western Australian lithium portfolio in Pilgangoora district
- Cornerstone Investment Framework Agreement signed with Zinciferous Ltd in July, providing a potential opportunity for Altura to participate in the downstream processing of lithium in a newly constructed conversion facility in China."
On October 17, Altura Mining announced: "$21.5 million non-renounceable rights issue."
AMG Advanced Metallurgical Group NV [NA:AMG] [GR:ADG] (OTCPK:AMVMF)
No lithium news.
2020 - Stage 2 production at Mibra Lithium-Tantalum mine (additional 90ktpa) to begin. No recent timeline updates on this.
Lithium Americas [TSX:LAC] (LAC)
On September 25, Lithium Americas announced 'Lithium Americas provides update on the Thacker Pass Lithium Project.' Highlights include:
- Plan of Operation deemed complete by Bureau of Land Management; all major permits for Phase 1 operations expected to be received by the end of 2020.
- Partnered with Sawtooth Mining LLC, a subsidiary of NACCO Industries, Inc. (NYSE: NC) and The North American Coal Corporation, in a long-term mining contract to provide mine engineering, construction, operation and reclamation services as well as certain equipment.
- Secured water rights sufficient to meet or exceed requirements expected for Phase 1 production.
- Produced over 3,000 kg of high-quality lithium sulfate solution at the process testing facility in Reno, Nevada.
- Engaged third-party vendor to engineer and design lithium carbonate and lithium hydroxide evaporator and crystallizer as well as provide performance guarantees and product samples.
- Commenced a definitive feasibility study with a Phase 1 production capacity of 20,000 tonnes per annum of battery-quality LCE expected to be complete by mid-2020.
- Entered into a design and build contract with TIC - The Industrial Company to complete key aspects of the definitive feasibility study, with an option to expand to the role as prime contractor for the plant.
- Evaluating financing options, including the possibility of a joint venture partner at Thacker Pass."
On September 30, Lithium Americas announced 'Lithium Americas announces 40,000 tpa Feasibility Study for the Caucharí-Olaroz Lithium Project.' The post-tax NPV10% was US$1.33b. Highlights include:
- 40,000 tpa of Li2CO3 production for 40 years. Updated Mineral Reserve supports annual production in excess of 40,000 tpa of battery-quality Li2CO3 for 40 years.
- Construction capital cost of $565 million. Construction capital costs include a contingency, over $200 million in capital already committed in contracts and purchase orders of which $105 million in capital spent as of June 30, 2019.
- Operating costs of $3,576/t for battery-quality lithium carbonate. Operating costs reflect process optimizations designed to consistently achieve more stringent purity specifications currently required by battery material customers.
- Fully-funded to production. Lithium Americas 50% share of Minera Exar is expected be fully-funded with $221 million available under the Company's credit and loan facilities and net proceeds from the $160 million Project investment by Ganfeng Lithium.
- First production targeted by early 2021. Construction on the 40,000 tpa Project is underway and expected to be completed by the end of 2020 with first production expected in early 2021."
Caucharí-Olaroz Lithium Project Feasibility Study summary (100% project basis)
- 2019 - Cauchari-Olaroz plant construction.
- Early 2021 - Cauchari-Olaroz lithium production to commence and ramp to 40ktpa.
- 2022 - Possible 2022 lithium clay producer from Thacker Pass Nevada (full ramp by 2025). Also any possible JV announcements prior.
NB: LAC owns 50% of the Cauchari-Olaroz project and partners with Ganfeng Lithium (50%).
Investors can read my article "An Update On Lithium Americas."
Nemaska Lithium [TSX:NMX] [GR:NOT] (NMKEF)
On September 25, Nemaska Lithium announced:
Nemaska Lithium receives notice from the Nordic Trustee regarding its USD 350m senior secured bonds."
On October 7, Nemaska Lithium announced 'Nemaska Lithium provides an update on its Whabouchi Project and negotiations with Pallinghurst Group.' Highlights include:
- Nemaska Lithium and Pallinghurst making progress furthering the proposed financing and extend the exclusivity negotiation period until December 31, 2019.
- Pallinghurst expressed its continued commitment to work cooperatively with the Corporation and its principal shareholders to consider optimized capital structure.
- Project Investment Totals CAD 361M as at June 30, 2019, and CAD 377M as at August 31, 2019.
- Whabouchi engineering and construction have progressed well and engineering at Shawinigan has also advanced positively.
- P1P continues to deliver high-quality product."
On October 15, Nemaska Lithium announced:
That it must adjust the implementation of its project, mainly because of delays to finalize its financing. As a result, the Corporation must downsize by letting go of 64 employees. The Phase 1 Plant will cease operations at the end of December 2019. Activities at Whabouchi will slow down until the winterization of the site.
- 2019 - Whabouchi mine production on hold subject final financing
- November 2021 - Hydroxide plant planned production planned to begin.
The LIT fund moved slightly down for the month of November. The current PE is 19.42. Given lithium demand is forecast to rise ~4-fold between 2018-end and 2025-end, the lithium sector PE of 19.42 looks to be good value.
Source: Seeking Alpha
October saw lithium prices generally slightly lower. A combination of lithium oversupply and now the recent fall in electric car demand (post-subsidy & trade war-related) is causing hardship to the sector in the short term. The mid- and long-term outlook still looks good as car makers invest $300 billion into EVs.
Right now, electric car prices still need to come down so the mass market can afford to buy. This should occur in 2022 just two years away. At that point, my view is that most consumers will favor an electric car due to the 3-5x lower running costs. A recent Parkers study reported that "electric cars travel three times as far as fossil-fuel counterparts for same price."
Highlights for the month were:
- Roskill - "Current prices provide limited incentive for new supply."
- Top producer says lithium prices to keep falling, prices to start recovering in 2021, but spodumene may take longer.
- Researchers in Canada develop million-mile lithium-ion battery. The power cell uses a nickel-rich alloy for its cathode. The alloy contains 50% nickel, 20% cobalt, and 30% manganese, and it is considered to be very stable.
- CATL shrugs off headwinds with plan for $1.4 billion EV battery plant in SW China.
- Forbes reports "demand crash on the EV highway hits battery metals."
- Battery costs have come down by more than 80% in nine years. And battery manufacturing capacity has increased more than 200-fold in 15 years.
- Goldman Sachs - Investors "should dust off their lithium files and consider preparing for an upturn."
- Neometals signs MoU with leading global processing plant manufacturer, SMS Group, to form a JV to accelerate commercialisation of Neometals' lithium-ion battery recycling technology.
- Ganfeng Lithium/Bacanora Lithium deal completes.
- Tianqi Lithium has first loss in 5-1/2 years. Tianqi has loss of 53.9 mln yuan in Q3, first since Q1 2014.
- Orocobre - Production up, prices down, margins down, revenue down. Net cash US$151.2m. Construction commences at the Naraha Lithium Hydroxide Plant.
- Galaxy Resources production, costs, and sales perform well for the September quarter. Net cash US$137m.
- Pilbara Minerals completes first $20.0 million tranche 1 of CATL's strategic investment.
- Altura Mining - Binding off-take agreements signed for 35,000 tpa of Li2O with Shandong Ruifu and 50,000 tpa with Guangdong Weihua Corporation. Altura raises $22.4 million raised through placement to new cornerstone investor Ningbo Shanshan Co and $21.5m non-renounceable rights issue.
- Lithium Americas announces 40,000 tpa Feasibility Study for the Caucharí-Olaroz Lithium Project. The post-tax NPV10% is US$1.33b. Fully-funded to production.
As usual, all comments are welcome.
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Disclosure: I am/we are long NYSE:ALB, JIANGXI GANFENG LITHIUM [SHE: 2460], JIANGXI GANFENG LITHIUM [HK: 1772], SQM (NYSE:SQM), ASX:ORE, ASX:GXY, ASX:PLS, ASX:AJM, AMS:AMG, TSX:LAC, TSXV:NLC, ASX:AVZ, ASX:NMT, ASX:CXO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.