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Battery Metals Investing in Australia
The electric vehicle revolution is spurring global interest in battery metals. Find out what the landscape looks like in Australia and how to invest in this growing market.
The energy sector is largely shifting away from carbon-based fuels and towards renewable alternatives, with the electric vehicle (EV) boom being an especially salient example of this trend.
As the name suggests, battery metals are key components of EV batteries, and as this sector continues to grow these commodities are quickly becoming critical raw materials. Investors have likely already heard about lithium and cobalt, the darlings of the EV industry, but other common battery metals include graphite, manganese and vanadium.
Lithium is a soft, silver-coloured metal that is most notably used in the lithium-ion batteries that power EVs. Australia is currently the world’s largest supplier of this popular metal. Cobalt, graphite and manganese are also part of the ever-growing lithium-ion battery market, while vanadium can be used to create vanadium redox batteries.
Read on to learn why battery metals represent a growing investment opportunity and to find out about the important role Australia plays in the global battery metals landscape.
Are battery metals a good investment?
Many experts believe that as the transition to greener forms of energy continues, the market for battery metals will balloon. Over the past few years, more and more governments have committed to net-zero emissions targets and all-EV production, meaning that the need for battery metals is likely to continue rising for years to come.
For example, Rystad Energy, an independent energy research intelligence company, forecasts that value of the lithium battery market will rise at a CAGR of 13.8 percent over the next five years.
While it might seem like countries such as the Democratic Republic of Congo (DRC) and China have cornered the market for battery metals production, Australia presents a great opportunity for investors. From its top position in the lithium market to its up-and-comer status in cobalt and vanadium mining, Australia is a formidable contender.
What drives prices for battery metals like lithium and cobalt?
While battery metals as a group are largely expected to be buoyed by EV demand, they each have their own individual drivers and characteristics that investors should know about before entering the sector.
For example, the lithium market is expected to continue to grow in 2023, with EV sales as the primary catalyst. Other key drivers could include the performance of top lithium miners, such as Albemarle (NYSE:ALB), Chile’s SQM (NYSE:SQM), China's Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460) and Australia's Pilbara Minerals (ASX:PLS,OTC Pink:PILBF).
Much like lithium, cobalt’s value is contingent on the EV market’s success. With demand for battery metals still soaring, the blue metal is likely to continue capitalising on the global push toward greener energy. Graphite, too, is largely dependent on the renewable energy market, as it used to make both solar panels and EV batteries. Geopolitical factors could also affect graphite’s valuation, as China accounts for about 65 percent of production worldwide.
The manganese market is largely propelled by demand for steel, with 90 percent of manganese output used to make ferroalloys. Only 10 percent is used to create more specialised alloys, such as manganese sulphite monohydrate and electrolytic manganese metal, but since these alloys can be used to manufacture lithium-ion batteries, this rate is likely to rise in coming years.
Vanadium, another China-dominated metal, is also used to manufacture steel, particularly for construction. Going into 2023, vanadium production will likely continue to be driven by steel demand, including in the thriving aerospace industry. However, batteries are likely to account for more vanadium demand over the next few years as vanadium redox batteries gain traction.
How to invest in battery metals in Australia?
Although the production of many battery metals is dominated by Chinese mining companies, Australia has gained a solid foothold in the battery metals market, creating many investment possibilities.
As mentioned, Australia is the world’s top producer of lithium and is home to the world’s largest lithium mine, Greenbushes. The Western Australia-based asset is majority controlled by a joint venture between China’s Tianqi Lithium (SZSE:002466) and Australia’s IGO (ASX:IGO,OTC Pink:IIDDY). The joint venture owns a 51 percent stake in Talison Lithium, which runs the mine, while Albemarle owns the other 49 percent stake in Talison.
Two of the key Australian lithium miners produce significant amounts of spodumene concentrate, an important source of lithium. They are Mineral Resources (ASX:MIN,OTC Pink:MALRF), owner of the Mount Marion lithium project, which boasts annual production of around 450,000 tonnes of spodumene concentrate; and Pilbara Minerals with its Pilgangoora lithium-tantalum project, which produces around 360,000 tonnes per year. An expansion is underway at Mount Marion to double its capacity by early 2023, and Pilbara is working on its P680 expansion project, which will bring output to 680,000 tonnes.
When it comes to cobalt, recent top performers in Australia are Ardea Resources (ASX:CTM,OTC Pink:ARRRF), GME Resources (ASX:GME), Altamin (ASX:AZI), Cobalt Blue Holdings (ASX:COB,OTC Pink:CBBHF) and Ark Mines (ASX:AHK). Currently, the DRC accounts for about 68 percent of all cobalt production, but Australia is fast emerging as a viable competitor. Plus, while labour abuses abound in the DRC, Australia presents a more sustainable and ethical alternative.
For those interested in graphite in Australia, Renascor Resources (ASX:RNU,OTC Pink:RSNUF) received a AU$185 million loan facility from the federal government in 2022 to support the development of its Siviour graphite project, while EcoGraf (ASX:EGR,OTCQX:ECGFF) received the remaining AU$54 million for its anode facility.
Meanwhile, investors interested in vanadium could consider looking to Australian Vanadium (ASX:AVL,OTCQB:ATVVF), which updated its bankable feasibility study in April 2022, as well as Neometals (ASX:NMT,OTC Pink:RRSSF) and Atlantic (ASX:ATI), which own the Barrambie and Windimurra projects, respectively.
Australia is the world’s fourth largest producer of manganese, so this battery metal is another top pick for shrewd investors. ASX companies with manganese exposure include South32 (ASX:S32,OTC Pink:SHTLF) and OM Holdings (ASX:OMH,OTCQX:OMHI).
This is an updated version of an article first published by the Investing News Network in 2022.
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Securities Disclosure: I, Matthew Flood, hold no direct investment interest in any company mentioned in this article.
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Matthew Flood is a writer and editor from Montreal, Canada. He's been writing professionally for four years on a wide array of topics ranging from investments and real estate to cookware and home improvement. Matt also enjoys creative writing and has written two novels and a novella.
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