Zimbabwe Hoping to Become Top Lithium Producer

Battery Metals
NYSE:SQM

The country’s minister of mines and mining development has signed a deal with a lithium junior that is expected to generate $1.4 billion in revenue.

Zimbabwe is aiming to become a top lithium producer after reaching a deal with a junior miner, Winston Chitando, the country’s new minister of mines and mining development, said on Tuesday (February 6).

The deal, signed last week, is expected to generate $1.4 billion in revenue over eight years from a lithium asset. Chitando said he is unable to give any further details until an official stock market announcement is made.

However, he noted that two other lithium companies are currently finalizing feasibility studies, while two more are exploring for the metal in Zimbabwe.

“Zimbabwe will become a very significant producer of lithium,” Chitando told Reuters. Zimbabwe was the world’s fifth-largest lithium-producing country last year, with annual output coming in at 1,000 MT, the US Geological Survey says in its latest report.

Demand for lithium, a key component in electric car batteries, is expected to surge in the next decade. According to Benchmark Mineral Intelligence, to meet increasing demand, supply of the metal will need to reach 550,000 tonnes by 2026 from just over 75,000 tonnes in 2016.

Even so, some investors are concerned about oversupply in the market, especially after last month’s news that SQM (NYSE:SQM), a top lithium-producing company, has reached a deal with Chile’s Corfo to expand production.

Speaking on the sidelines of a mining conference in Cape Town, Chitando said he is not worried about oversupply of “the mineral of the future.” 

Since he took office in November 2017, he has announced changes to mining laws to attract foreign investment. For example, last month, the Ministry of Mines and Mining Development identified Prospect Resources’ (ASX:PSC) Arcadia lithium project as a priority mining development.

“The project has been identified as one of those key projects within Zimbabwe that can help turn around the economy,” Prospect said at the time. According to a prefeasibility study completed in June 2017, Arcadia has an expected 18-month lead time to production, with plant commissioning in Q3 this year.

Aside from lithium, other minerals attracting interest in Zimbabwe are gold and coal. The biggest problem for mining in the country is the lack of capital, Chitando said.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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