Lithium ore prices fall, making it difficult to attract investment, and the electric vehicle industry may be affected

According to foreign media reports, investors' interest in the entire lithium metal industry is gradually fading, and lithium is a key raw material to drive the electric vehicle revolution. At the Lithium Supply and Market Conference held in San Diego this week, mining companies and analysts saw half of the seats empty at the venue, and there were no investors and fund managers among the attendees. This is in stark contrast to last year, when the price of lithium ore used in rechargeable batteries was at an all-time high, and has fallen 17% so far this year.

“A lot of the risk capital that was going into lithium is now going into hemp,” said Tobias Tetter, managing director of Commodity Capital AG, a Zurich-based fund manager. The lithium market “definitely needs more investment, not just from carmakers or chemical companies, but also from institutional investors and fund managers.”

Lithium miners need billions of dollars in investments to expand production to meet demand that is expected to grow at a double-digit rate in the coming years, said conference participants, including Anthony Tse, chief executive of Australian producer Galaxy Resources Ltd.

Relevant data show that although the current market supply of lithium metal is slightly greater than demand, supply is expected to remain tight in the future. By 2025, the market demand for lithium metal will increase from about 325,000 tons last year to 1 million tons per year.

New Capacity

Tse said the entire lithium mining industry must invest about $9 billion to add 600,000 tons of new capacity to meet demand in the next few years. Galaxy Resources Ltd. operates the Mt. Cattlin lithium concentrate mine in Australia and is developing a project in Canada and Argentina.

“Unless we start to see meaningful funding coming in and actually writing checks to the industry, I think it’s going to be very difficult to get the volume of supply that’s needed to meet demand,” Tse said at the conference. “You can build all the electric vehicle factories you want, but if you don’t have any of the raw materials, you can’t feed that supply chain.”

The recent acquisition of Randgold Resources Ltd. by Barrick Gold Corp., the world's second-largest gold producer, and recent mega deals by Newmont Mining Corp. and Goldcorp Inc. have raised hopes among investors that more investors will return to mining. But those funds have yet to go to lithium, according to conference attendees.

“U.S. capital is firmly invested in the hemp industry,” Chris Berry, an analyst at mining market research firm House Mountain Partners, said during the conference. “As this speculative idea matures, the hope is that the money will move back into mining, but I’m not seeing a lot of money coming into the space at this point.”

Nemaska ​​Lithium, a Quebec City lithium miner, successfully raised C$1.1 billion, or about $824 million, for its Whabouchi project in Canada last year. But in February, the company announced it would need an additional C$375 million to complete the mine and said it was evaluating several options. The company's stock price has plunged 51% since the announcement, as investors see it as a typical example of the lithium industry's difficulties in building new mines and supplying the market.

“A lot of speculative money has gone into hemp and cryptocurrencies,” said Wanda Cutler, Nemaska’s head of investor relations. “People are getting very attractive returns on their investments there, and I’d like to see that money go back into junior mining. We’re a little stagnant right now, but I do think interest will come back — it’s just hard to predict when.”

The situation in Australia is slightly better, said Jerko Zuvela, managing director of Argosy Minerals, which has a lithium project in Argentina and raised $9 million two months ago.

“It’s not as easy as it used to be,” he said on the sidelines of a conference in Santiago. “Maybe it’s not the medium-term investment you want, but as long as you keep the focus on the projects you’re developing, you’re getting closer to production.”