Financing Lithium Projects Today Key for Energy Transition

Moving to greener sources of energy means more demand for batteries to power electric vehicles and energy storage systems — which in turn need key metals such as lithium.

However, lithium junior miners need investments to move their projects forward and bring new supply online, as any delays could significantly impact how fast the energy transition materializes and could delay countries around the world reaching their net zero goals.

When asked about the fundraising environment today compared to a year ago, Ernie Ortiz of Lithium Royalty (TSX:LIRC,OTC Pink:LITRF) said there are now many more parties at the table.

“The overall investment universe is growing, but at the same time the opportunities have grown alongside it,” Ortiz said during a panel discussion at this year’s Fastmarkets Lithium Supply and Battery Raw Materials conference. “We estimate well over US$50 billion in capital expenditure needs to be spent in the lithium sector for the rest of the decade, so that presents a lot of opportunities.”

Orion’s Philip Clegg said it all depends on which capital structure you are looking at.

“Certainly we’ve seen new forms of finance with government, banks, loan schemes and similar arrangements,” Clegg said. “I think that if you look at the original equipment manufacturers (OEMs) and what they are doing on the equity side of things, that is a potential new source of capital as well, but overall we need more capital to achieve what we need to achieve.”

From Tesla (NASDAQ:TSLA) to General Motors (NYSE:GM), the past year has been full of news about OEMs and EV makers jumping into the battery metals sector to secure steady and quality supply.

Dual-listed Lithium Americas (NYSE:LAC,TSX:LAC) inked the first-of-its-kind lithium supply deal with General Motors at the end of January 2023 to develop the Thacker Pass mine in Nevada. Under the agreement, the Detroit-based carmaker will make a US$650 million equity investment in Lithium Americas, which is the largest-ever investment by an automaker to produce battery raw materials.

More recently, in early May Ford (NYSE:F) signed multiple lithium supply deals. Two were with producers Albemarle (NYSE:ALB) and SQM (NYSE:SQM), and the others were with Nemaska Lithium, Compass Minerals (NYSE:CMP) and EnergySource, all companies that are working towards bringing supply on stream.

Commenting on what OEMs have been doing in the past year when it comes to the lithium mining sector, Jonathan Beagle of Ridgeline Royalties pointed out there’s a limit to the amount of OEM capital that is out there.

“So whether it is private equity or royalties and streams, there are other options that need to be considered,” he said.

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