A sharp rise in the price of lithium on the back of growing worldwide demand for electric vehicle batteries has helped shares in miners such as Albemarle, SQM and AVZ Minerals to reach new heights.
Nasdaq-listed Albemarle (ALB) is the world’s largest quoted lithium miner and its share price has risen 160% to $150 since this time last year. SQM, a Chilean miner listed on the NYSE, is up 145% to $54.
Even in the junior mining sector lithium exploration companies such as Savannah Resources SAV.L) and Australia’s AVZ Minerals (AVZ.AX) have seen their shares rise, although AVZ continues to be dogged by corporate governance issues.
Lithium is a key ingredient in the batteries that are used to power electric vehicles and electronic devices like smartphones. Strong demand for batteries has pushed lithium’s price up by more than 50% to $9,000 per tonne so far this year.
Goldman Sachs and JP Morgan have both commented that they think we are entering a “green supercycle” where commodities that help reduce carbon emissions see continued price rises that take them far above historic levels.
This optimism about green commodities has helped fuel an investment boom. The Global Lithium and Battery ETF is up 170% in the past year and mining-industry heavyweights such as former Xstrata boss Mick Davis are getting into the sector. Davis announced recently that he was launching the Vision Blue investment fund to target battery metals such as lithium.
Asa Bridle of Savannah Resources, which is listed in London, said: “If forecasts for EV penetration are to be believed – along with the billions of dollars car companies have sunk or will sink into EV development and production – then lithium demand is set to increase 10-fold over the next decade.”
These demand forecasts have encouraged explorers like Savannah Resources and AVZ Minerals to increase their supply plans.
AVZ, which has seen its share price rise from 5 cents each to 20 cents during the past year, is developing the world’s largest lithium deposit in the Democratic Republic of Congo (DRC). But while there is investor excitement about lithium generally, projects such as AVZ’s Manono mine can be controversial.
AVZ is currently talking to lenders about a $400 million loan to start construction of its mine but the talks have not progressed in over a year. One reason for this delay are allegations of corruption surrounding the award of the Manono license to AVZ’s partner in the DRC.
The Boatman Capital Research, a short seller, published a report in 2019 that highlighted concerns about the Manono project.
It said: “We believe that AVZ Minerals’ only significant asset, a license to explore the Manono region of the Democratic Republic of Congo, may have been awarded corruptly.”
Another factor making investors wary of AVZ’s Manono project are its environmental credentials. The mine will be located more than 2,000km from the coast, which means AVZ will have to use trucks to carry its lithium ore 500km by road before it can be transferred onto trains to head to ports in Tanzania or Angola.
This lengthy and expensive transport network will produce enormous quantities of greenhouse gases, damaging any green claims made for lithium mined from AVZ’s Manono project.
Leave a Reply