Expert view: vanadium, tungsten and graphene lead second-boom tech metals
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Vanadium, tungsten and graphene could be the next lithium or cobalt — they just lack a promoter like Elon Musk, says top expert and Cicero chairman Mathew Walker.
Have we reached the heights of the lithium and cobalt boom?
We have reached the end of irrational exuberance in that space.
What happens next is the rational phase of the cycle which some will find less exciting.
Prices for each metal have remained strong despite recent volatility in the lithium price as a consequence of the world’s largest lithium producer, Sociedad Quimica y Minera de Chile, announcing production increases.
But more importantly, the mega-trends within our society that underpin the demand for these metals remain firmly in place.
Quality assets, specifically those that that are able to produce at the lower end of the cost curve, will endure price volatility, while the higher cost producers are most at risk.
The other issue to look for is the lead time to first production. Getting to market early before the supply imbalance is corrected is critical. Enjoying “super profits” in your early years does wonders for your project economics.
What are the forecasts for future demand of those boom battery metals — and how is supply shaping up to fit it?
Demand for both metals [lithium and cobalt] remains strong. It is the supply side that will have the greatest impact on each industry.
The case for cobalt appears stronger now than the case for lithium.
Lithium, as we have seen, is vulnerable to supply increases from existing major producers. And unlike cobalt, existing lithium production is not dominated by sovereign risk.
The cobalt supply picture is more problematic and complex, with approximately 98 per cent of global production a by-product of copper (60 per cent) and nickel (38 per cent).
More concerning, 60 per cent of cobalt global resources are in the often not-so Democratic Republic of the Congo, which has a history of conflict and allegations of child labour within the artisanal mining community.
How much should sovereign risks concern investors?
Those wanting exposure to cobalt have had no choice but to accept it. Those in the lithium space have chosen to accept it.
This is as a result of the stunning exploration results some of the explorers have achieved, most notably AVZ Minerals (ASX:AVZ).
So in respect of these boom metals, willingly or otherwise, it’s been accepted.
What is driving the demand in what you call the second boom metals? Are they alternatives to the current or complementary?
The best performing battery metal over the last year is not cobalt or lithium but vanadium.
It doesn’t have a high profile promoter the likes of Elon Musk, but the price has soared over 130 per cent in the last year, driven by tightening supply and strong orders from its conventional use in the steel industry.
The exciting part though for industry observers is its application and use in the large scale battery industry which is booming as industry and government alike seek greater energy efficiency from the renewable energy sector.
Others to watch are tungsten, which has the highest melting point of all metals, and the remarkable graphene, a single layer form of carbon, which is the strongest material known to exist with extraordinary mechanical and electrical properties.
As investments, how do these metals stack up against lithium and cobalt?
Currently the dominant form of energy storage is via the lithium ion battery and hence the market fascination with lithium and cobalt.
This picture is likely to remain in small scale applications for the foreseeable future, but there is competition in large-scale grid applications from the vanadium flow (redox) battery which lasts longer and can be charged and discharged repeatedly without performance impairment.
Vanadium undoubtedly has a bright future. If only it had a promoter like Elon.
What ASX stocks are doing it well or better than the others?
We’ve seen modest appreciation in some of the vanadium, tungsten and graphene stocks but not to the extent seen in the boom times of the lithium and cobalt sectors.
I believe all three sectors have more to run.
Mathew Walker is a businessman and entrepreneur with extensive experience in the management of public and private companies, corporate governance and the provision of corporate advice. In a management career spanning three decades, Mr. Walker has served as executive Chairman or Managing Director for public companies with operations in North America, South America, Africa, Eastern Europe, Australia and Asia.
He is Co-Founder and Chairman of the Cicero Group (Cicero) www.cicerogroup.com.au, Co-Founder and General Partner of technology incubator Alchemy Venture Capital and Founder and Director of beef cattle enterprise the Stone Axe Pastoral Company.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.