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INTERVIEW: Pandemic rekindling interest in UK mining sector: Cornish Lithium


'Wall' of electric vehicle demand on horizon

Depressed price environment could cause long-term damage

Local supply chains essential, but require return on investment

The coronavirus pandemic had prompted more interest in local UK mining supply chains, helping the domestic industry refocus after it losing its "mojo" somewhat by relying too much on China, Cornish Lithium CEO Jeremy Wrathall told S&P Global Platts.

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During a Newsmaker interview, part of an ongoing Platts series, Wrathall said the world was waking up to the fact that local supply chains were a must and no country should be too reliant on another.

Local supply chains have been thrust into the spotlight in the wake of the pandemic, especially in the electric vehicle battery industry for which lithium is a key component. Continental Europe and the UK have a clutch of lithium developers all looking to reduce the industry's carbon footprint and protect local business.

Cornish is aiming to be a near-carbon-neutral lithium producer, utilizing geothermal power to mine the element.

Wrathall said there was a huge need for battery gigafactories in the UK, adding that having raw material "on your doorstep" would attract investment.

"Lithium is a vital energy transition metal, [without it how do you] store renewables? No lithium, no energy transition," he said.

The world is at a "tipping point" he said, as humanity progressed toward a renewable and sustainable energy transition. As such environmental, social and governance metrics were more important than ever.

ESG metric essential

He noted that if companies hadn't got environmental, social and corporate governance credentials, they were in "big trouble," adding that he and his board ran Cornish as if already publicly listed, offering full disclosure and transparency.

"The ESG [acronym is] actually three words; [we] take all very seriously. [The company] actively wants to comply with ESG metrics," he said. Across Europe it was a "race to [see] who can produce lithium in the lowest carbon way."

Platts assessed lithium carbonate flat at $6,300/mt on Oct. 30, while lithium hydroxide remained at $9,000/mt. Both prices are for battery-grade quality material on a CIF North Asia basis, reflecting deliveries to the main ports of China, Japan and South Korea. Lithium carbonate, however, is normalized to deliveries at Shanghai port.

The spot market has been in the doldrums for some months, a fact Wrathall sees as possibly crimping investment in producing the metal just as a "wall" of EV demand hits in the next two or three years.

One market source told Platts there was room for price recovery in China as values had been persistently below the cost of production. However, he emphasized there was still plenty of inventory across the supply chain.

This was echoed in an update from European specialist chemicals company Umicore, published Nov. 2.

Sales volumes of Umicore cathode materials in the third quarter reflected the negative impact of excess inventories in the rechargeable battery supply chain, as anticipated. This inventory effect should subside by year-end, with Umicore expecting sales volumes of cathode materials for EVs in the second half to grow year on year and sequentially.

Turning attention to the looming Brexit decision, Wrathall cautioned that a 'no deal' result could be detrimental to UK PLC. However, if that were the outcome then the government would have to step in to help develop local supply chains.

"We [Cornish] don't need government support, but of course we'd love to have government support," he said.

He added that the pandemic had opened everyone's eyes to the need to a move toward sustainability.

"People want to do something to make things good/change the world. Buying a fully electric vehicle [is] one option," he said, noting that EVs continued to gain market share and the trend would continue.

Zombie companies buying opportunities

In Europe, EV sales more than doubled in the third quarter compared to the previous year, in particular driven by strong demand for plug-in hybrid EVs, which more than tripled and currently represent close to half of the European EV market -- compared with about one third in 2019.

In China, EV sales declined by 19% year to date and, on average, remained well below the peak levels reached in the second half of 2018. Despite growth in third quarter sales of EVs, the battery materials market in China is still facing significant excess capacity.

Wrathall also said that, in the current depressed price environment, there could be some "zombie" lithium juniors in the market.

Australian lithium miner Altura entered into receivership Oct. 27 amid difficult market conditions for the sector, leaving confusion over the future of production at its flagship mine.

Wrathall noted that these types of situations could lead to China stepping in and buying up the assets at a bargain basement price, further strengthening its hand on the global supply chain.

"The issue is not the asset, the issue [for some] is the volume of debt," he said.