Expert guide: what to look for when investing in battery metals
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Vanadium, copper, nickel and graphite all have promise beyond the lithium and cobalt headlines, says Rob Murdoch, a Junior Resource Management specialist with 50 years of experience.
If 2017 was the year of battery metals, what does 2018 bring?
As far as the battery metals are concerned, 2018 is likely to see a continued focus on R&D in achieving more efficient and lighter weight batteries and other technology based on the battery commodities.
The jury is still out on what is the optimum battery and hence the ultimate panacea of battery metals.
2018 may see a bigger role for vanadium as the market starts to focus more on energy storage. Nickel as a battery metal seems to be also under-valued.
As the world continues to rush to Electric Vehicles (EVs) and energy storage, the demand for other minerals — for example copper — could be expected to increase.
There is also a growing view that EVs could have a greater carbon footprint than conventional vehicles and it will be interesting for the resources industry to see how the research on this subject develops.
Is there a recipe to make the perfect battery?
Not yet, but there is good progress in battery R&D and I expect we will see the results of some great on-going research in 2018.
The most common battery metals being developed by ASX-listed resource companies are lithium and graphite. Among these companies, the ones that stand out are demonstrating a downstream path.
It is nice to have a mine but you are totally reliant on the mine-gate concentrate price. The potential exists for third-party downstream processors to “pull the pin” when the commodity prices wobble.
For example, the recent announcement by lithium giant SQM is having an impact on the price of lithium products and if that ends up panicking the market then off-take MOUs (future sales deals) for concentrates with commodity traders in particular, could disappear.
Having given that word of caution, the long-term outlook for lithium seems strong.
How are advancements in processes changing the game?
Much of the focus in graphite has been on producing high-grade concentrates, by focusing on separating out large to jumbo flake graphite as it usually has the highest carbon grade.
There has been a lot of research into producing the best spherical graphite for the battery industry. But graphite has numerous other uses and there has been a lot of research into producing graphene and graphene products.
It’s great to see this work being done largely in Australia using local universities. The graphite companies that find the “niche product” the world finds useful will have the most success.
As mentioned earlier there needs to be a “story” beyond the mine-gate for a successful graphite company — even it is by way of strong associations with others who can achieve success downstream.
Much of the focus in lithium has been is converting hard rock spodumene and lithium micas plus lithium brines etc into producing lithium carbonate or lithium hydroxide for the battery market. Lithium is a very common mineral, especially within pegmatites around granites. The winners are going to be the ones that can produce, either alone or in partnership with others the lowest cost and purest battery ready lithium.
Marketing is critical. For example, some of the Companies have or are developing associations with car manufacturers that plan to develop their own batteries for their EVs.
Cost of production is also critical and most of the lowest cost operations are brine projects particularly from the so-called lithium triangle within Argentina and Chile.
The lithium is extracted from brines below salt lakes in desert environments surrounded by lithium bearing igneous rocks that have been eroded over long periods of time.
In Australia we haven’t found any potentially commercial lithium brines at this stage, due probably to a different geology and erosion history. Some low grade but very large brine deposits are being developed in Central Europe.
Is there enough room for all the battery metals small caps to flourish?
No, I would doubt it.
I think those most likely to lose investor support are those that have smaller, lower-grade deposits with no obvious path to downstream production.
The other concern to me is the number of dubious cobalt projects cropping up.
A number have already returned disappointing drill results. But there some others that seem to having some success.
The main issues for cobalt is the supply from the Democratic Republic of Congo (either flooding the market or being turned off by government suddenly wanting a bigger share of the cake) and substitution in batteries by lower-cost metals.
However, having issued a few words of caution, overall I think the signs are there for a positive 2018, maybe leading to an even better 2019.
The world economies are doing well and overall commodity prices are trending up.
Rob Murdoch is a Junior Resource Management specialist with 50 years of experience managing resource projects and companies, listed on ASX, TSX & AIM across a wide spectrum of commodities and from exploration to production.
Over the past two years Rob has developed AUSTEX as a specialist independent resources industry research and analysis advisory. Rob is a fellow of the AusIMM and a competent professional in geology and management.