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With Tesla record launch, have rosy times for lithium only just begun?

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Essential Metals & Mining Insights - January 2021

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With Tesla record launch, have rosy times for lithium only just begun?

The rise in lithium prices since late 2015 has fueledoptimism for the metal, with miners eager to acquire assets and securingfunding to advance lithium projects toward production.

The price per tonne of the lithium carbonate 99% price indexhad been languishing in the range of US$6,000 to US$7,000 for most of lastyear. Since hitting the US$8,000 per tonne level in November 2015, it has beenon a rapid climb. As of April 7, the commodity closed at US$22,107.82 per tonne.

Tesla Motors Co. ignited further the excitement around thelight metal after it secured 180,000 orders for a new electric vehicle just 24hours after it launched its new Model 3 vehicle on March 31, Mining Weekly reported.By April 1 afternoon, the figure ballooned to 198,000, raking in over US$7billion of potential revenue in one day.

After a week, preorders for the electric car talliedover 325,000, reflecting potential sales of US$14 billion, according to Investors Business Daily.

This is great news for lithium miners and projects, but putsfurther pressure on hydrogen-fueled vehicles and platinum miners, Investecsaid. Platinum is a key component in catalytic converters, a device used toreduce toxic pollutants for diesel engines.

To power its electric cars, Tesla is a US$5 billion Gigafactoryplant in Nevada. The plant will be operational in 2017, processing some 25,000tonnes of lithium hydroxide annually.

To secure the supply of lithium hydroxide, the automotiveand energy storage company in September 2015 entered into an off-take agreement with that willsource the commodity from its Clayton Valley South project.

For its part, Pure Energy this week an exploration drilling permitfor the Nevada project.

Goldman Sachs has called lithium the new gasoline, with therise of electric vehicles the key to buoying the demand for the commodity inthe coming years.

Lithium demand for use in electronic vehicles in 2014 was27,000 tonnes of lithium carbonate equivalent, or 17% of the total lithiummarket. Goldman expects that the growth in electric vehicle applications couldtriple the size of the entire lithium market to 470,000 tonnes by 2025.

These expectations of a steep demand for lithium promptedinvestors to jump on the lithium bandwagon.

PilbaraMinerals Ltd.'s A$85 million share placement, comprising 223.68million ordinary shares at 38 cents per share, this week.The miner is looking to conduct a follow-up A$15 million share purchase plan toraise a total of A$100 million to accelerate the development of the lithium-tantalumproject in Western Australia, which is slated to construction in 2017.

Commenting on the matter in an April 6 note, Investec saidit suggested that there is still good appetite in the sector for "the rightstories."

They elaborated, "We have no view on whether [PilbaraMinerals] is such a right story but we do note that shortages of niche mineralsare normally quickly overcome — as we saw with rare earths, tungsten anduranium in recent years — through identification of new resources and throughtechnological developments."

RioTinto's Jadar deposit in Serbia, for instance, can apparentlysupply nearly 20% of global lithium demand and be up and running in six yearsshould the mining giant elects to proceed, the analysts noted.

Meanwhile, Galaxy Resources Ltd. announced the of lithium concentrate productionat its MountCattlin spodumene-tantalum project in Western Australia, a 50/50joint venture with General MiningCorp. Ltd.

LithiumAmericas Corp. and the Sociedad Quimica y Minera de Chile SA joint ventureCauchari-Olarozlithium project in Argentina is expected to begin construction in early 2017and start operations in 2019, El Mercurioreported,citing Lithium Americas CEO Tom Hodgson.