High Voltage: Oil tycoon Koch amasses $500m battery portfolio as lithium prices keep rising
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Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, and vanadium.
As investors, it is always good to know where the big money is flowing.
Koch Industries — led by billionaire (many times over) Charles Koch — was America’s largest private company in 2020, with revenues for the 2019 calendar of ~$US115 billion, according to Forbes. As of August 2021, Charles Koch was ranked as the 20th richest person in the world on Bloomberg Billionaires Index, with an estimated net worth of $US61.1 billion.
Built on oil, Koch Industries also has its fingers in everything from ranching, minerals, finance, and commodities trading through to tech, consumer goods… and now batteries.
The Wichita-based company has recently built up stakes worth ~US$500m in the battery ecosystem covering several different battery technologies, raw materials, chemicals, and recycling, according to Benchmark Mineral Intelligence.
These include battery recycler Li-Cycle, solid-state start-up Solid Power, a joint venture with Norwegian battery company Freyr to potentially build a Gigafactory in the US, and now a $100m stake in NYSE and TSX listed lithium project developer Standard Lithium.
Standard’s flagship project is in southern Arkansas, where it is aiming to extract lithium from brines using an innovative technique called Direct Lithium Extraction (DLE), which is ostensibly cheaper, quicker, and more environmentally friendly than existing processes.
“We’re entering an important phase for Standard Lithium, and we’re thrilled to be starting it with a globally recognized industrial leader like Koch Strategic Platforms as a partner,” Standard CEO Robert Mintak says.
“KSP has an impressive track record of investing in disruptive technologies and their backing is an important endorsement of the company’s core technology, development plans and of our intent to make the Gulf Region a leading supplier of lithium resources.”
Supply of battery-grade lithium carbonate in the seaborne East Asian market was further squeezed this week, applying further upward pressure to prices, Fastmarkets says.
“One of our suppliers has no spare capacity for lithium carbonate. They will focus primarily on honoring long-term commitments and will not allocate any extra [units for the spot market],” a consumer source active in both the European and East Asian markets said.
“Adding to the tightness of the market is the backlog of shipping that is causing delays, which is also making it difficult to get hold of material,” the consumer source added.
This increased demand for battery-grade lithium carbonate in China, at a time when supply is already tight, caused the price rally in China to accelerate, market sources said.
Fastmarkets sources say prices for carbonate are trading at a premium to hydroxide because the lithium-iron-phosphate battery market – which uses carbonate – is going mental.
In July, the sale of lithium iron (LFP) phosphate batteries for electric vehicles in China surpassed the incumbent NCM/NCA chemistries for the first time since the start of 2019.
In batteries with LFP chemistry, phosphate serves as the cathode material. NCM (lithium nickel cobalt manganese) batteries use a combination of nickel, manganese, and cobalt for the cathode, while NCMA (nickel, cobalt, manganese, aluminium) chemistry features a 90% nickel cathode.
Because iron and phosphate are more common than cobalt and nickel, LFP batteries are ~$US18 cheaper than NCM/NCA per kWh to manufacture, according to SNE Research.
The downside is that they have lower energy densities which makes them unsuitable for longer driving ranges. That is not really an issue for the stock standard work commute though, which explains their popularity.
“Due to the optimism of lithium-iron-phosphate batteries in China, the market sees more room for lithium battery-grade carbonate price to rise. Therefore, some traders are holding their units in tight hands,” a trader in China told Fastmarkets.
“Lithium carbonate is still squeezed and as long as cathode materials producers need to operate, they have no choice but to restock with expensive units,” a second producer source in China said.
“The future of NCM [nickel-cobalt-manganese] batteries looks less promising than that of LFP [lithium-iron-phosphate] batteries, so demand for lithium hydroxide is weaker than that of lithium carbonate, which keeps the price [of battery-grade lithium hydroxide] stable. Its supply was also less tight,” another trader said.
Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, and vanadium are performing>>>
The popular graphite/battery anode stock is in offtake discussions with Korean battery behemoth POSCO.
Under the agreement, EGR would supply POSCO with its environmentally friendly battery anode material products from the company’s new Australian Battery Anode Material Facility and its planned facility in Europe.
“EcoGraf and POSCO intend to enter into a formal offtake agreement for the proposed arrangements, containing terms and conditions customary for such contracts and they will also evaluate other opportunities for co-operation on product development, battery anode recycling and the development of EcoGraf’s battery anode material business,” EGR says.
EGR plans to fund the initial 5,000tpa phase ($US22.8m capex) of the Aussie development using cash reserves from a $54.6 million institutional placement completed in February 2021.
A 15,000tpa expansion phase ($US50m capex) will be financed through a combination of debt and equity.
SC’s flagship project is the advanced 72.7 million tonne hard rock ‘Arcadia’ asset, located on the outskirts of Harare in Zimbabwe.
The near-term developer was on the lookout for a partner to develop and fund the project after “multiple enquiries” from “a range of international parties”.
Last week it said that within a seven-day period it had received seven non-binding proposals for the advancement of Arcadia from a range of international parties, “encompassing structures including development joint venture, offtake prepayment debt funding and outright acquisition of Prospect’s interest in Arcadia”.
“Prospect, in conjunction with its financial advisers, Azure Capital and Vermilion Partners, is currently assessing the non-binding proposals to determine the preferred path forward,” it says.