Minerallink to launch 'eBay for critical minerals,' starting with spodumene

➤ Maturing critical mineral markets need more price transparency, says Australian startup Minerallink Pty. Ltd.

➤ Miners want more visibility of the spot market to curb the risks that volatility poses to project financing and development.

➤ As the world's largest lithium producer, Australia should have a homegrown critical minerals market where trading happens.

Minerallink CEO and co-founder Peter Kelly. Source: Minerallink

Minerallink started as a digital platform to help secure Australian potash supplies and was established when supply chain and procurement specialist Sourci Pty. Ltd. secured funding from Australia's government in late 2021 to help bolster supply chains of critically needed materials.

But as Australia's potash industry struggled to get off the ground, Minerallink turned its attention to another market lacking price transparency — lithium and other critical minerals that are needed for the world's decarbonization. It became its own corporate entity Sept. 28, with Sourci as the largest shareholder. Other investors are expected to come on board over time as it raises capital.

The Australia-based platform is set to start trading spodumene in November. Australia produced 46% of global lithium output in 2022, according to S&P Global Market Intelligence data.

Lithium and other critical minerals markets need more price transparency to help project financing and development, according to an Oct. 16 industry survey conducted by research group State of Play and sponsored by Minerallink.

Minerallink CFO and co-founder Arne Dimpfel. Source: Minerallink

S&P Global Commodity Insights sat down with Minerallink's co-founders, CEO Peter Kelly and CFO Arne Dimpfel, to discuss how some critical minerals' opaque pricing impacts project financing and how their company's platform could solve that. The interview has been edited for clarity and brevity.

S&P Global Commodity Insights: What are you hearing from miners about how they want the spot market to evolve?

Arne Dimpfel: As we've engaged with people in the industry and potential customers, we've consistently heard the theme that there is a lack of price transparency in critical minerals markets and this is one of the barriers to securing the investment to get all those new projects up and running that are required for the energy transition. State of Play, which went out to a bigger universe of industry participants, confirmed this is a widely held view.

The lack of price transparency and liquidity and the opaque nature of those immature markets mean that any new project trying to get up needs offtake contracts. But once they establish those [contracts] for a large portion of their output, that, in turn, further reduces the trading volumes in the market, which is actually what's causing the lack of liquidity and transparency in the market.

State of Play found that miners' No. 1 challenge in transacting outside offtake contracts is the lack of a central market, which is what our platform is designed to achieve. If all of the production is just sold under these contracts, which have confidentiality provisions and are bilateral in nature, then that volume is not going into the spot market. So the volumes that are going into the spot market are very low, which is where the lack of liquidity comes from.

Peter Kelly: Say you're a miner that goes to the market with a current spot price according to benchmarks of about $2,800 per metric ton. All of a sudden that drops down to $1,400/t and your project is bankrupt. The big swings in price volatility like lithium has experienced this year need to be taken out of critical minerals markets. You're always going to have price volatility to a certain degree, but you shouldn't really have the big highs and lows that lithium is going through.

Spodumene from Allkem's Mt Cattlin lithium project in Western Australia. The lack of a central spodumene platform hinders transactions outside offtakes, Minerallink executives say. Source: Allkem

So how does Minerallink plan to address that?

Dimpfel: We've built an online marketplace which connects many sellers with buyers globally, making it easier and more cost-effective for new players in the industry to get to market.

Minerallink provides an auction mechanism as well as fixed price listings and tender processes which achieve the price discovery. Then as we gain critical mass and sufficient volume in different products, we intend to publish aggregated, anonymized benchmarks that are based on real transactions. In the long term, that is where we can really make a difference.

How does this differ from other systems like Pilbara Minerals Ltd.'s Battery Material Exchange (BMX)?

Dimpfel: The mechanics of our auction process are very similar to BMX, but the key difference between Minerallink and BMX is that what we've built is a true marketplace where you have many sellers on the one system.

Kelly: A single-seller auction system precludes you from addressing this issue around price transparency. You really need both a multitude of sellers and a multitude of buyers in one marketplace over time. We see that kind of marketplace as being the next step, a natural evolution, from what Pilbara Minerals has done with BMX.

Pilbara Minerals essentially proved the process works, but they haven't got the result that the whole market needs, because the only price discovery they've had is for themselves. That's why the Australian government's Critical Minerals Office is also highly interested in Minerallink. It supports the investment they're putting into the market because of the risk around private investors and others coming into critical minerals. So the better we can achieve price transparency and more liquidity, it helps everybody.

You aim to start the trading platform with spodumene. What is needed for that spot market to mature?

Kelly: The lack of a true spot price impacts offtake agreements, because those contracts are based on the spot price and are adjusted periodically during the contract.

A lot of the data that does come into the current pricing is driven by the buyers, not necessarily from the miners — and if I'm a buyer, I want to keep the price down, not necessarily up.

At the moment, it's near impossible for a miner of a critical mineral with an opaque market to try to find 20 people to create competition for their spot market by manually making phone calls and sending emails. But if you're on a digital marketplace where there are lots of people searching for product, competition just goes through the roof, which will maximize prices for them as well.

We have also spoken to mineral sands and rare earths producers, which are all experiencing the same issue. This is exacerbated by the sudden growth in demand from electric cars and renewable energy.

Dimpfel: Minerallink is product agnostic — a marketplace that has been designed to enable any mineral to be sold, so in very simplistic terms you can think of it as an eBay for critical minerals. We're not targeting any one particular sector. You can list a non-homogenous product [on the platform]. Whether the outcome is then published or not is controlled by the miner.

We've got all these resources in Australia we're trying to develop, while also trying to get a bigger share of the value chain by building processing capability in the midstream. Why shouldn't we also have a critical minerals market that's based in Australia where the trading actually happens? In the long term, this will lead to other associated services being developed in Australia like management and financial products.

S&P Global Market Intelligence and S&P Global Commodity Insights are divisions of S&P Global Inc. S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.