Lithium as an investment

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Lithium floating in oil
World production trend of lithium
CR2032 lithium button cell battery
Lithium 9 volt, AA, & AAA sizes. The top unit has three lithium-manganese dioxide cells internally, the bottom two are lithium-iron disulfide single cells physically and electrically compatible with 1.5 volt zinc batteries.

Lithium is a critical mineral[vague],[1] and will be one of the drivers of the fourth industrial revolution. Lithium company stocks on the worldwide exchanges have rallied well at the end of 2020 and into the beginning of 2021. As lithium carbonate prices make a resurgence,[2] a chemical that is used in the manufacture of electric vehicle (EV) batteries. Lithium is an essential mineral that goes into the manufacture of electric batteries (Lithium-ion battery: portable electronics, EV and renewable ESS[3]). Lithium supply is expected to fall short of the demand for this metal by 2023.[4] The growing adoption of electric vehicles (EVs) is driving the increasing demand for lithium, significant amounts of lithium supply will need to be brought online to meet demand growth from the lithium market.

Products that reduce carbon emissions, including electric batteries, are globally expected to create a $23 trillion market over the next decade to 2030.

Lithium is considered a superior lightweight metal element for its electrochemical properties as a charge carrier in the electric battery, currently there is no known replacement element to achieve such effective performance for automotive battery applications. According to Volkswagen, in the near future lithium will be one of the most sought-after raw materials on earth.

Forecasted EV battery demand growth is driving the need to significantly increase battery production globally. Major battery manufacturers have already committed $175Billion by the start of 2021. Even though a significant amount of capital has already been committed, further investment is expected, to satisfy the forecasted growing supply chain demand of batteries to 2030.[5]

There has been a trend already with lithium chemicals compounds producing companies, battery manufacturer companies and even major car manufacturers investing or partnering with raw material suppliers/miners. Large investments are flowing into the lithium supply chain from established majors. Companies with partnerships or joint ventures will be more resilient in the long run.[4] Major car manufacturers' plans to spend over $300 billion are being invested and forecasted over the next 4 (2025) to 10 years (2030) during the adoption of electric vehicles (EV).[6] Automakers’ plans to spend at least $300 billion on EVs are driven largely by environmental concerns and government policy for GHG reduction and supported by rapid technological advances that have improved battery cost, range and charging time. Since 2018, we have seen an accelerated rate of industry spending especially through 2020.

Most importantly, with the global push for sustainable and low carbon footprint mining, processing and manufacturing, where will the lithium that is ESG sustainably sourced with a GHG low-carbon footprint come from. Necessary to feed the burgeoning energy storage needs for the growing transport and military sector; electronic consumer requirements; and in particular the domestic & commercial automotive supply chain where investment spending and forecasts are $US400 to $US500 billion . [7][8][9]

Both the drive to decarbonize and the 4IR depend on critical minerals like lithium.

The Fourth Industrial Revolution (4IR or Industry 4.0) has been defined as technological developments in cyber-physical systems such as high capacity connectivity; new human-machine interaction modes such as touch interfaces and virtual reality systems; and improvements in transferring digital instructions to the physical world[10] including robotics and 3D printing (additive manufacturing); the Internet of Things (IoT); “big data” and cloud computing; artificial intelligence-based systems; improvements to and the uptake of Off-Grid / Stand-Alone Renewable Energy Systems:[11] solar, wind, wave, hydroelectric and the Lithium-ion electric batteries (for renewable ESS[3] and EV).

As widespread economic turmoil in the first decade of the 21st century resulted in the broad destabilization of many traditional investment products and venues alternative investment options began to realize an increase in popularity among investors who may not have otherwise strayed from established investment practices under previous markets.

Speculation in lithium compounds used as feedstocks for major applications is an example of such a trend. The main intermediates are lithium hydroxide and lithium carbonate, and these are the commodities that the LME has chosen as the most appropriate to establish reference pricing.[12] Speculators hope to make a viable play on a perceived growth in demand for lithium metal due to the widespread adoption of lithium batteries in emerging technologies. Lithium batteries have become a preferred power source for energy-hungry devices such as cell phones because they are more efficient and scalable than previous-generation nickel-metal hydride batteries thus they are in high demand in support of automobile and electronics manufacturing.

Factors that could result in limitations affecting overall lithium supply are seen by some as prescient; with predicted supply chain volatility potentially overpowering other market factors and becoming the primary price driver, essentially resulting in a seller's market and thereby making the metal a profitable investment. However this model tends to disregard the influence of other factors outside basic supply/demand curves such as market regulation and the increased tendency for costlier components to be targeted for replacement by new technologies. Current projections of the global market for lithium-ion batteries range from $26 billion in 2023 (Navigant Research) to a very optimistic $33 billion in 2019 (Transparency Market Research).[13]

Uses of lithium[]

Main article: Lithium

Lithium metal is an extremely soft, highly reactive, and flammable element. It is most frequently found in deposits such as spodumene and pegmatite minerals,[14] with larger resources in the Democratic Republic of Congo, U.S., Canada, Australia, China, Zimbabwe, and Russia. Lithium possesses a unique chemical profile making it the lightest metal in the periodic table and the least dense solid element. Its atomic number is 3 (right behind helium at 2 and hydrogen at 1), and its density is just 0.53 kg/L.

This alkali metal is probably best known for its wide use in lithium batteries common in all sorts of electronics devices. Other industrial applications include manufacturing heat-resistant glass and ceramics, high-performance alloys used in aircraft, and lubricating greases.[15] Lithium deuteride is used in staged thermonuclear weapons as a fusion fuel. Compounds of lithium are also used as mood stabilizing drugs in psychiatry. The breakdown of the global end-use lithium markets is estimated as follows: ceramics and glass, 31%; batteries, 23%; lubricating greases, 9%; air treatment, 6%; primary aluminum production, 6%; continuous casting, 4%; rubber and thermoplastics, 4%; pharmaceuticals, 2%; and other uses, 15%.[16]

Global resources and production[]

% Global Lithium Hard Rock Resources By Company. Major car manufacturers and lithium battery chemical converters are securing long-term agreements for lithium supply, a key raw material in the production of electric vehicle (EV) battery cells

The global production of lithium is set to grow five times from 80,000 tons in 2020 to 400,000 tons by 2030. Volkswagen described hard-rock lithium mining as the “future-proof solution, both commercially and in terms of sustainability.” Mining lithium metal is not expensive, especially at high mountain plateaus, where lithium is collected from brine ponds evaporated by the sun. The environmental and social impact has been a contentious issue in northern Chile for a decade from farmers and indigenous groups in certain locations where natural water is scarce in the arid deserts, where these highly lucrative mining exists, prompting a recent study completed by the Chilean government regulator Corfo, which will be released early in 2021.[17] There is a shift towards a preference for spodumene hard rock partly due to the inputs (Lithium Hydroxide chemical) for the production of electric vehicle (EV) battery cells. Favored for newer cathode technologies, specifically higher nickel chemistries to increase battery energy density. In the five years to 2018 the largest increase in world lithium production has come from hard rock mines in Western Australia, with 6 mines now in production.[18]

Identified lithium resources total approximately 80 million tons, lithium has been added to the critical minerals list[1] in 2020. Identified lithium resources for Bolivia and Chile are 9 million tons and in excess of 7.5 million tons, respectively. Identified lithium resources for Democratic Republic of Congo (Manono), Argentina, China, United States and Australia are 6.6 million tons, 6.5 million tons, 5.4 million tons, 5.5 million tons and 1.7 million tons, respectively. Canada, Russia, and Serbia have resources of approximately 1 million tons each. Identified lithium resources for Brazil total 180,000 tons.[19]

The world's top 3 lithium-producing countries from 2016, as reported by the US Geological Survey.[20]

Democratic Republic of Congo[]

A new entrant into the lithium market as a developing producer.

Since 2018 the DRC is known to have the largest lithium spodumene hard rock deposit in the world.[21] The total resource of the deposit located in Manono, central DRC, has the potential to be in the magnitude of 1.5 billion tons of lithium spodumene hard-rock. The two largest pegmatites (known as the Carriere de l'Este Pegmatite and the Roche Dure Pegmatite) are each of similar size or larger than the famous Greenbushes Pegmatite in Western Australia. In 2023, the Democratic Republic of Congo is expected to be a significant supplier of lithium to the world with its high grade and low impurities.

In 2021, AVZ Minerals,[22] an Australian company, is developing the Manono Lithium and Tin project in Manono, DRC and has a resource size of 400 million tonnes of high grade low impurities at 1.65% Li2O[23] (Lithium oxide) spodumene hard-rock (this figure is expected to more than triple with further drilling), based on studies and drilling of Roche Dure, one of several pegmatites in the deposit. There is a push globally by the EU and major car manufacturers (OEM) for the lithium battery supply chain to produce and source materials sustainably along the entire chain and incumbents practising ESG initiatives and aiming for zero to low carbon footprint.[24] The AVZ Minerals Manono project has completed a GHG greenhouse study in Jan 2021 into its future carbon footprint,[25] showing the project to likely have one of the lowest carbon footprint of all the spodumene hard rock producers by 30% to 40% and some brine producers throughout the world. AVZ Minerals recently signed a long-term offtake partnership with major Ganfeng Lithium, China's largest lithium compounds producer. Importantly, the partnership makes provisions for both parties to focus on environmental, social and governance (ESG) development.

Planned production of battery-grade high-purity primary lithium sulphate (PLS) containing over 80% Lithium,[26] a lithium chemical new to the electric Lithium-ion battery materials supply chain market, PLS is used in the production of lithium hydroxide (a precursor to electric vehicle battery compound production), production is expected to be in the order of 45,600 tonnes per annum, with plans to significantly increase production to satisfy the soaring electric vehicle battery demand from Europe, China, Asia, USA and other new global entrants.[citation needed] AVZ Minerals have a study currently underway to determine the viability of an initial 25Kt/a Hydroxide plant in Europe, increasing this to ≃100Kt/a capacity, including ongoing discussions with key battery industry participants to enter joint ventures with AVZ to build the plants in Europe and elsewhere.

Europe[]

Europe has no hard rock / spodumene production as of March 2021. Europe has no LiOH (Lithium Hydroxide) and Li2CO3 (Lithium Carbonate) production as of March 2021.

Australia[]

In 2016, Australian companies delivered 14,300 tons of metal, an increase of 1,300 tons from 2014. The country develops the Greenbushes lithium project, which is owned and operated by Talison Lithium. Greenbushes is the world's largest known single lithium reserve and has been operational for over 25 years. The location also provides easy access for Asian electronics companies, which are the global top lithium consumers. All Australian production to date has been in the form of spodumene concentrate containing approximately 6% LCE, all of which was shipped to China for refining. In 2017-18 Australian production had increased to 2.1 million tonnes of spodumene concentrate worth $1.6 billion. Three separate refineries are under construction which will produce lithium hydroxide and lithium carbonate. [27]

Chile[]

In 2016, Chilean mines delivered 12,000 tons of lithium, providing the second-highest amount of lithium. Overall, Chile possesses the largest confirmed lithium reserves in the world, with over 7.5 million tons of the element. By that estimate, the country hosts roughly five times more lithium than Australia, which features the second-largest reserves. In particular, the Atacama salt flat is the most significant source of country's massive lithium production, and it has been reported that one project alone encompasses approximately 20% of the world's total lithium. While Australia extracts lithium from traditional hard-rock mines, Chile's lithium is found in brines below the surface of salt flats. These brines are collected and treated in order to separate the element from wastewater.[citation needed]

Argentina[]

In 2016, for the first time, Argentina overtook China to become the third largest producer of lithium. Argentina has lithium reserves of 9,000,000 tons and the Salar del Hombre Muerto district is a part of the so-called lithium triangle which is believed to be home to half of the world's land based lithium reserves. Due to increased demand worldwide, lithium mining in the country shows no signs of slowing down with output set to triple by 2019.[citation needed]

Canada[]

Canada is a new entrant into lithium market as a potential supplier.[citation needed]

The Lithium Triangle[]

The intersection of Chile, Bolivia, and Northwest Argentina make up the region known as the Lithium Triangle. The Lithium Triangle is known for its high quality salt flats including Bolivia's Salar de Uyuni, Chile's Salar de Atacama, and Argentina's Salar de Arizaro. The Lithium Triangle is believed to contain over 75% of existing known lithium reserves.[28]

Investment vehicles[]

Currently, there are a number of options available in the marketplace to invest in the metal. While buying physical stock of lithium is hardly possible, investors can buy shares of companies engaged in lithium mining and producing.[29] Also, investors can purchase a dedicated lithium ETF offering exposure to a group of commodity producers. As of October 2020, there lithium hydroxide and carbonate futures are not yet traded, but historical reference prices are being established with a view to doing so.[12]

Lithium Index[]

The performance of the global lithium industry is covered by Solactive Global Lithium Index. The index is composed of companies that are primarily engaged in some aspect of the lithium industry such as lithium mining production and lithium-ion battery production.

Mining companies[]

There are many companies relying on lithium for a substantial portion of their revenues. Examples include:

  • AVZ Minerals Limited is an Australian ASX-listed mineral development company focused on financing & constructing the Manono Lithium & Tin Project, one of the world's largest lithium-rich LCT (lithium, caesium, tantalum) pegmatite deposits.
  • Ganfeng Lithium is a Chinese lithium refiner, primarily of spodumene from Mt Marion in WA.
  • Advantage Lithium, a Canadian-based lithium explorer with a large-scale development asset located in the Cauchari basin in Argentina, which now is part of Orocobre
  • Sociedad Química y Minera, a Chilean producer of specialty plant nutrients and chemicals that runs large-scale lithium production operations. The main production facilities are located in the Atacama Desert.
  • Livent Corporation, Formally FMC Lithium Division was spun-off into a dedicated lithium company in Oct 2018
  • Albemarle Corporation, an industrial company producing lithium chemicals
  • Bearing Resources, a Canadian miner developing a lithium brine project in Chile and the highest-grade undeveloped project
  • Bacanora Minerals, a Canadian miner developing a lithium mine in Mexico, Sonora, first to enter in a conditional supply agreement with Tesla
  • Lake Resources, an Australia company which holds tenements in Chile and one of the largest lithium tenement packages in Argentina
  • Westwater Resources, Inc. has projects in uranium, graphite, lithium, and vanadium. They have two lithium projects in the early stages of development - one in Utah and the other in Nevada.[30]
  • Lithium Americas Corp, a Canadian/Argentinian miner, producer and supplier of lithium, with large-scale assets located Argentina and the U.S. state of Nevada
  • RB Energy, a Canadian company developing The Quebec Lithium Project, filed for creditor protection in 2014, according to the Financial Post[31]
  • MGX Minerals, a diversified Canadian mining company engaged in petrolithium projects in western Canada and the United States[32]
  • Kodal Minerals, a small-cap mining and exploration company that currently focuses on its large lithium project in Mali.
  • Savannah Resources, a lithium miner based in Portugal and listed in London. The company focuses on hard rock lithium extraction as opposed to the brine extraction found in South America
  • E3 Metals Corp, a lithium developer based in Alberta
  • MétAmpère Limited, developing a hard rock lithium mine and processing plant in Cornwall, UK

Exchange traded funds[]

  • Global X Lithium ETF (NYSE: LIT), an ETF trading since 2010 and holding the above listed lithium producers as its top holdings. LIT is a passive ETF seeking to replicate Solactive Global Lithium Index.

Direct investment[]

  • HWS AG's German Lithium Participation investment programme offers the first direct investment opportunity for lithium. The lithium carbonate is stored in barrels in a German warehouse.

See also[]

Rare materials as investments[]

References[]

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  3. ^ Jump up to: a b "2020 how does an energy storage system ESS work".
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  5. ^ "Lithium-ion Batteries Outlook to 2030, 5th Edition". .
  6. ^ "A Reuters analysis of 29 global automakers found that they are investing at least $300 billion in electric vehicles, with more than 45 percent of that earmarked for China". . January 10, 2019. Retrieved 22 March 2021.
  7. ^ "A Reuters analysis of 29 global automakers found that they are investing at least $300 billion in electric vehicles, with more than 45 percent of that earmarked for China". . January 10, 2019. Retrieved 22 March 2021.
  8. ^ "Lithium-ion Batteries Outlook to 2030, 5th Edition". .
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  11. ^ "Off-Grid or Stand-Alone Renewable Energy Systems". .
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  14. ^ "Lithium Deposits: Pegmatite and Sedimentary". . September 29, 2020.
  15. ^ "How to Invest in Lithium". commodityhq.com. Archived from the original on 2015-04-11. Retrieved 2015-04-24.
  16. ^ "How to Invest in Lithium". elementinvesting.com. Retrieved 2015-04-28.
  17. ^ "Albemarle slams Chile over 'unjust' withholding of Atacama study". . March 4, 2021.
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  19. ^ "Lithium Statistics and Information". U.S. Geological Survey. 2011.
  20. ^ "8 Top Lithium-producing Countries". Commodity.com. December 14, 2017. Retrieved 2017-12-14.
  21. ^ "This Congo project could supply the world with lithium". . December 10, 2018. Retrieved 26 March 2021.
  22. ^ "AVZ Minerals Limited". . Retrieved 25 March 2021.
  23. ^ "AVZ Minerals Definitive Feasibility Study (DFS - April 2020)". .
  24. ^ "Green Deal: Sustainable batteries for a circular and climate neutral economy". European Commission. 10 December 2020.
  25. ^ "AVZ Minerals: Independent Greenhouse Study states Manono Project likely to have one of the lowest carbon footprints of any global hard rock lithium miner". Small Caps.
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  30. ^ Westwater Resources, Inc. (2018-09-26), Westwater Resources - Lithium Market, retrieved 2018-09-26
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  32. ^ https://www.reuters.com/article/mgx-minerals-lithium-idUSL5N1FH5U7

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