Growing Demand for Evs, Prospects for Zim’s Lithium

TESLA aficionados erupted into celebration last week on news that the electric-car maker was accepted into the S&P 500, launching a surge in its share price by 22% in just two trading sessions. Tesla’s stock has skyrocketed over 500% in 2020, bringing the valuation to around half a trillion dollars.

Eben Mabunda

Driving the gains is an increasingly buoyant sentiment from Wall Street analysts, who are looking at the prospects of the company’s new plant in Shanghai to drive future vehicle delivery growth.

Meanwhile, General Motors recently announced plans to invest over US$27 billion in future electric vehicle development and that it had plans to introduce up to 30 new EVs by 2025.

At the core of the EV’s frenzy are optimistic projections that the electric vehicles market will reach 26,9 million units by 2030 from an estimated 3,3 million units in 2019, at a CAGR of 21,1% during the forecast period, according to “Markets and Markets.” With such bullish developments in the segment, it is vital to also look across the EVs value chain, upstream where the raw materials are concerned.

The surge in EVs spells increased demand for lithium and nickel, vital minerals in the lithium-ion batteries used in the manufacture of EVs. Lithium is very much a rare mineral, which is still in its infancy in terms of production in Zimbabwe

There is a boom in the global battery metals mining space, owing to a global focus on environment-friendly power initiatives, or “green” energy. Manufacturers commonly use lithium carbonate or lithium hydroxide in these batteries rather than the lithium metal. Although lithium is a key ingredient in lithium-ion batteries, they also include other metals such as cobalt, graphite and nickel.

According to the most recent stats issued by the US Geological Survey, Zimbabwe is the world’s fifth largest lithium producer after Australia, Chile, China and Argentina respectively having produced 1 600 metric tonnes in 2019 with a potential of accounting for 20% of the global lithium demand.

The country’s privately owned Bikita Minerals is currently the only lithium producer, and reportedly holds one of the world’s largest-known lithium deposits at over a million tonnes, while three other miners are working towards production.

Canada-based mineral exploration company, Chimata Gold, has exclusive rights for the Kamativi Lithium Tailings deposits.

The project is under way at the old Kamativi mine that had previously been mined for tin. None of the lithium was ever recovered and now sits in the tailings dump as spodumene.

The Arcadia Lithium project is the flagship of ASX-listed Prospect Resources, holding a 15,5 year mine life, increasing its exposure to the long term EV demand. The mine is estimated to hold proven and probable reserves of 29,8Mt grading 1,31% Li20.

The third player, Mirrorplex is a local exploration company which has in recent years been mobilising for investment. In a key development, “Mining Index” reported in August 2020 that drilling commencement was at an advanced stage at Mirrorplex’s wholly-owned high grade Lithium project in Bindura.

In the interim, the price of spodumene concentrate (feedstock for lithium hydroxide production) continues to fall on the back of rapid expansion in Australia, the world’s leading producer.

Historically, lithium prices have traded around $5 per kilogramme. Demand growth in the lithium-ion market during 2015-2016 superseded industry expectations as prices peaked at just above $20/kg. That spurred production by Australian and Chinese refiners. As such, companies increased output faster than expected causing a production overshoot and plummeting prices. Prices now hover around $7/kg.

However, with mounting demand from electric carmakers like Tesla and smartphone producers like Apple and Samsung, demand is expected to drive prices higher in the years to come.

This translates to huge possibilities for Zimbabwe’s lithium mining sector. Policy consistency is key. Power supply and an investor friendly business environment are imperative. If well harnessed, the mineral could be an absolute game-changer for Zimbabwe’s economy.

Mabunda is an analyst and TV anchor at Equity Axis, a leading Financial Research firm in Zimbabwe. — ebenm@equityaxis.net.

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