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Lithium miner back in the driving seat on electric vehicle rebound

In their post-pandemic recovery push, world governments started unleashing “green” stimulus programs supporting transport electrification. Demand increased in China with electric vehicle sales and uptake of lithium-ion batteries to store renewable energy. Britain said it would ban new petrol and diesel car sales from 2030. Europe rose to become the world’s largest electric vehicle market. And new US President Joe Biden laid out plans to boost the sector with a roll-out of 500,000 electric vehicle charging stations and vowed he would make all federal fleets fully electric.

“Towards the end of the year, this started to be reflected in improvements in pricing outcomes,” Brinsden says.

UBS is projecting electric vehicles to comprise 40 per cent of new vehicle sales by 2030, fuelling an increase in lithium demand.

“A really significant turnaround… albeit coming off a very low base. Pricing is not fantastic but it is heading in the right direction.”

Prices for spodumene delivered to China were $US392 a tonne between September and November, marking a heavy 25 per cent year-on-year decline, but now appear to be rebounding.

Pilbara Minerals exported a record 70,609 dry metric tonnes of spodumene concentrate from WA’s Pilgangoora mine, beating its target, and told investors that a material uplift in lithium chemicals pricing in China had led the Platts battery-grade carbonate price to rise 35 per cent after hitting its bottom in September.

“Buying has become a bit more urgent,” Brinsden says, “and we think that’s ultimately going to reflect well in pricing.”

Pilbara Minerals' Pilgangoora lithium mine.

Pilbara Minerals’ Pilgangoora lithium mine.

Renewed optimism about the electric vehicle revolution and signs of strengthening sales in China and Europe are not going unnoticed by investors. The share prices of Australian lithium producers have been soaring since October. Pilbara Minerals’ stock has more than tripled from 30¢ a share to $1.15.

Australia is the world’s top exporter of lithium, accounting for 55 per cent of supply, which it ships mainly to China for processing. The market downturn since 2018 years has pushed some Western Australian operators to breaking point. Alita Resources collapsed into administration in 2019 after opening its Bald Hill mine just 18 months earlier. Another miner, Altura, went into administration in 2020 and mothballed its operations at Pilgangoora.

Pilbara Minerals, whose assets neighbour Altura’s, struck a deal to buy Altura’s lithium operations for $US175 million ($224 million), which was finalised last week.

Brinsden says the deal gives Pilbara minerals ownership of the largest independent hard-rock lithium complex in the world, and a larger, more resilient and flexible operation with available offtake, “which is an important strategic advantage at a time when a turnaround in the lithium market appears to be upon us”.

“It’s been tough period,” Brinsden says, “but I feel like we’ve weathered the storm pretty well.”

Analysts are expecting 2021 price rises for lithium products including spodumene, carbonate and hydroxide of 10 per cent on average. UBS is projecting electric vehicles to comprise 40 per cent of new vehicle sales by 2030, fuelling an increase in lithium demand.

Globally, demand sits at about 300,000 tonnes of lithium-carbonate equivalent. Brinsden says this is expected to triple by 2025 and “then likely double again through to 2050”, as the change of pace sweeping the car industry accelerates.

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“It’s not going to be too far down the track before the average consumer is thinking about buying a new car and the EV will be cheaper than the internal combustion engine,” he says.

In Australia, we have been a bit of a laggard, because there is this general fear about what does the EV mean to me? Am I going to be able to find a plug? What if I want to drive down to the beach, am I going to make it?

“There’s an element of fear about the adoption of the technology but I think that gets broken down pretty quickly when people work out how convenient it is to chuck your car in the garage, plug it in and never have to go to a service station ever again.”

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