Carmakers urged to invest in mines to avoid battery metal pinch

Mine developers scrambling to fund projects to meet forecast demand for battery metals see the threat of looming supply crunches as a trigger for electric-vehicle makers to step in with investments.

An already tough environment to raise project finance for the mines is being made worse by the impact of the coronavirus pandemic and plunging global auto sales. It’s a scenario that’s threatening to slow a pipeline of operations planned to supply lithium, nickel and cobalt materials.

With “mind-blowing” projections from the auto industry on its future raw material needs, the best solution could be for vehicle producers to invest directly in mining operations, according to Sam Riggall, CEO of developer Clean TeQ Holdings.

“Having to invest upstream is not what a car company wants to do, we understand that, but the rules have changed,” Riggall said. “We’re building a supply chain that’s never existed before, for a range of metals that have never been needed before by this industry.”

Auto companies have outlined plans to spend more than $140-billion on electric vehicle production, an industry shift that’ll need producers of specialist materials and metals for batteries to dramatically lift output. Nickel demand is forecast to surge about 16-fold through 2030 from 2018, while there will also be a significant rise in demand for graphite, lithium, copper and aluminum, according to BloombergNEF.

Lithium producers alone will need an estimated $25-billion to $30-billion in financing over the next decade to meet demand, BNEF said in a February report.

Automakers are seeking more involvement in the riskier parts of their supply chains, Scott Tozier, CFO of Albemarle, the top lithium producer, said in an interview.

In talks, vehicle producers want better understanding on “how do I make sure I get the product I need, when I need it,” he said. “Will they go all the way to invest, we’ll have to wait and see -- it’s too early to call.”

For battery producers and automakers, with no existing expertise in mining, investments would only make sense for strategic reasons, such as geopolitical security, said Sophie Lu, BNEF’s head of mining and metals. Many large mining companies remain hesitant to enter into niche markets, or already have options to bring on capacity inside their own portfolios.

It means smaller developers of battery metals projects “are swimming in a very shallow pool of retail capital and are starving for start-up capital,” she said.

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