Despite bearish forecasts from major investment banks, lithium industry pioneer and Scorpion Minerals boss Michael Fotios believes a potential tripling in carbonate prices could be on the cards by the end of the year.
As lepidolite mining in China stalls and growth in electric vehicle production surges, Fotios – a second-generation geologist and founding father of Galaxy Resources – says carbonate prices could lift from their current base of US$18,000/t up to projections of US$50,000/t.
“I think the price will recover, double again and move higher between now and Christmas for lithium carbonate,” he says.
“We’re seeing outstanding growth in electric vehicle production in China which is running at a 50% growth rate year on year.
“America will eventually catch up, but you also have India and Europe who are actively trying to reach 50% EV adoption rates over the next decade or so which is a very meaningful number.”
Signs of a market shift
An 80% slump in the price of lithium over the past 12 months has led to industry-wide pullbacks on exploration opportunities and project development.
Some companies are cutting back while others are shelving projects, unable to raise enough capital to find the lithium needed to feed the market.
“The Chinese have been destocking their large inventories that sit in front of their refineries in China, which has taken them out of the market for six months but they’re back very strongly as we’re starting to see now,” Fotios says.
“We’re seeing incoming interest from all over the world at the moment, especially China who’ve driven the price down.
“They are now aggressively trying to take advantage of these low prices, chasing lithium companies since December and January looking for deals.”
Early bet on battery minerals proves prescient
Fotios was one of the first Australian mining executives to identify the potential of the battery minerals sector.
In 2005, he started Galaxy and focused on proving up a hard rock deposit at Western Australia’s Mt Cattlin mine that had traditionally been known for its potential to produce tantalum.
“I was involved in the tantalum business up until about 2005 when I was asked to help fund and run Galaxy Resources who were trying to list on its tantalum resources down in Ravensthorpe,” he says.
“We evaluated the deposit early on and realised it was full of lithium so spent the following two years drilling it out.”
Galaxy Resources was the first-ever lithium exploration company to list on the ASX in 2007.
After setting out specifically looking for lithium, Galaxy found lithium and under the helm of Fotios, Mt Cattlin quickly went from exploration to production.
That same project, which has gone on to produce up to 200,000t of concentrate per year, was part of Allkem, a company born out of the $4b merger between Orocobre and Galaxy Resources in 2021 and now part of the recently created Arcadium Lithium.
Unwavering dedication to lithium exploration
Now, as the managing director of junior lithium stock Scorpion Minerals (ASX:SCN), Fotios says his goal is to carry on exploring for lithium, irrespective of market trends, given where prices are headed.
“The world is going to run out of lithium sources if we don’t extract it from wherever we can efficiently,” he says.
“Chris Ellison and Gina Rinehart have been the savviest of the big investors, they’re both just going out and buying these assets while they’re relatively cheap because if this market turns in the next 12 months those same assets will be unavailable and more valuable.
“Apart from this sort of 6 to 9-month period where the market got manipulated down – and investors got spooked because of it – the future for lithium looks really bright,” he says.
“That shift to electrification is not changing, it’s all mandated and isn’t going to go away.”
Over the past 12 months, Fotios and his team and have set out on an aggressive exploration campaign across the 1,77km2 Youanmi project, which – through 8,000m of targeted drilling – has so far resulted in a 7.6–13.6Mt exploration target grading 1%-1.4% Li2O.
While an important step in demonstrating the potential value of Youanmi, the exploration target only covers ~35% of the entire mineralised strike identified to date at Youanmi in WA’s Murchison mineral field.
“There’s still a lot of work to do but it supports our view that this system will continue to grow considerably with future drilling,” Fotios says.
“This is an area that we believe holds potential for 20 to 50 million tonnes of material, that is what we are looking for here at Youanmi as well as at our Pharos project near Cue.”
‘Blue sky potential’ at Pharos
In fact, Fotios believes the opportunity at Pharos could be much bigger than the Youanmi project.
Although Pharos is at an earlier stage of development, Fotios says the project has “real blue sky prospectivity” with historical surface sampling returning values up to 2.99% Li2O.
As well as lithium, the 1,295km2 of ground also contains substantial copper, gold and nickel-PGE mineralisation with an indicated and inferred copper resource of 647,000 tonnes at 2.4% copper, 1.8% zinc, 0.1% cobalt and 20g/t silver already defined at the project.
“We’ve got big ground positions at both projects where we have contiguous tenure and highly prospective geology,” he says.
“At Pharos, we have 40km of mineralised granite greenstone contact to explore with multiple prospects, at Youanmi probably around 20 or 25 km – that gives us room to find a big deposit.”
Medium to long term thematic getting stronger and stronger
While it seems investors may have thrown the baby out with the bath water, Fotios believes the lithium market will turn around at a rate that will be significantly stronger than what most might think.
“People are always inclined to believe bad news before they believe good news, but the market has overreacted,” he says.
“There are several juniors making good inroads into new prospective terrains, the medium to long term thematic is just going to get strong and stronger.
“At these prices, it’s the savvy investors who’ll be out there buying more stock.”
At Stockhead we tell it like it is. While Scorpion Minerals are a Stockhead advertiser, they did not sponsor this article.