As lithium prices drop, private equity investors hunt for deals

Nov 22 (Reuters) - Private equity groups and other investors have grown emboldened by the lithium industry’s malaise, forging plans to invest billions of dollars in mining projects to develop the electric vehicle battery metal.

A more than 50 percent drop in lithium prices since 2018 has unnerved industry executives, fueling cuts to capital spending and halting expansions. Shares in major lithium producers have dropped as a result, exacerbating retail investor anxiety.

But Carlyle Group-backed Traxys and other nontraditional investors and lenders say they sense a buying opportunity, as electric vehicles grow in popularity and fossil fuels are phased out in a rising number of countries.

“Now is the time to invest,” said Erez Ichilov, managing director of Traxys Projects, which earlier this month launched a $2 billion fund with metals financier the Pallinghurst Group to invest across the electric vehicle supply chain. “When you look at how under-invested this value chain is, $2 billion is not a lot.”

The Pallinghurst-Traxys Battery Materials fund plans to focus on lithium projects, as well as copper and graphite, in developed economies to reduce risk, Ichilov told an industry conference earlier this month.

That and a recent spate of other deals should help bridge what analysts forecast will be an under-investment by the lithium industry in coming years.

“Mining needs a lot more capital than it has been getting,” said Sam Jaffe of Cairn Energy Research Advisors, who estimates more than $100 billion needs to be invested in the battery minerals supply space, including for materials like lithium, nickel and graphite.

Texas-based private equity firm Centaurus Capital took up half of ioneer Ltd’s A$40 million ($27 million) stock offering in late November, a tacit bet that the company’s Nevada lithium project will see strong demand in coming years. The offering was backed by Goldman Sachs Group Inc and Australian private wealth business Ord Minnett.

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