Lithium financing booms, despite funding dip for other metals

Fundraising for lithium projects has boomed amid a favorable price environment and the rush to meet heightened demand for electric vehicles, according to analysts.

Total financing for all metals and mining dropped by 10% to a six-month low of $1.43 billion in May, according to S&P Global Market Intelligence data. But specialty metals fundraising went in the opposite direction, shooting up 69% in May. Lithium has primarily driven the surge in specialty metals financing in 2021, with total funds raised from January through May reaching $1.50 billion, about 47% more than the total raised throughout 2020.

"These are good days to raise money for good lithium projects, and good days to look for financing for battery-related projects," said Emily Hersh, a lithium analyst and managing partner of DCDB Research.

The race to decarbonize the automotive sector has turned a spotlight on electric vehicles and batteries, leading to more capital availability for associated projects, Hersh and other analysts explained.

"I think stakeholders along the lithium supply chain and those who are new to it are clear and have realized that we are going to decarbonize and fight climate change appropriately, and the decarbonization of the automotive sector is going to be a big part of that," said Chris Berry, an independent analyst and president of High Mountain Partners. "That is going to take more raw materials as opposed to less."

Several other factors could also be fueling the uptick in fundraising for lithium projects. For one, rising lithium prices witnessed in 2021 likely helped junior and intermediate companies raise funds, Market Intelligence analyst Christopher Galbraith said.

Lithium prices rebounded in the early months of this year in response to increasing electric vehicle penetration rates. In March, the lithium carbonate CIF Asia price jumped 11% to $10,000 per tonne, which was the most significant monthly increase of the year to date, according to Market Intelligence data.

In addition, this year's lithium fundraising has largely been tied to operations that are already advancing, such as Piedmont Lithium Inc.'s namesake Piedmont property in North Carolina, Galbraith said in an email. The company registered two shelf offerings in May targeting an aggregate $204 million, after raising $122.5 million in March.

"Lithium projects that are advancing are those that were already being evaluated during the last lithium bull market," Galbraith said.

In 2017, the lithium carbonate CIF Asia price averaged $18,125 per tonne. The price peaked around 2018 but soon crashed due to surplus.

More consolidation

The improving lithium market has also helped facilitate a number of significant mergers and acquisitions in 2021, especially among companies operating in Australia.

In January, Australian lithium producer Pilbara Minerals Ltd. completed the acquisition of Altura Mining Ltd.'s Pilgangoora project with plans to consolidate it with its own, adjacent Pilgangoora property in Western Australia.

Another pair of Australian companies, Orocobre Ltd. and Galaxy Resources Ltd., announced their intent to merge in April. If completed, the agreement would catapult Orocobre among the top five lithium producers worldwide.

Australian nickel and gold miner IGO Ltd. also agreed to acquire a 49% stake in China-based Tianqi Lithium Corp.'s Lithium Energy Australia Pty. Ltd. subsidiary. The deal would result in a 25% interest in the Greenbushes lithium mine and a 49% interest in the Kwinana lithium plant.

There will likely be more M&A activity for lithium in the coming months too, Galbraith said. The lithium market is prime for newer and smaller companies to grow and better compete with major lithium producers such as Chile-based Sociedad Química y Minera de Chile SA and U.S.-based Albemarle Corp.

"We see it happening regularly among metals miners, but the lithium sector is largely still in its infancy," Galbraith said. "As operations are scaling up and new price levels get tested, it's providing sufficient space for that M&A."