22/01/2021 - 14:00

Lithium stars again for WA miners

22/01/2021 - 14:00


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A sharp jump in the uptake of electric vehicles, particularly Tesla models, puts the state in the box seat again as a raw metals supplier.

Lithium stars again for WA miners
Tesla’s share price has soared 700 per cent over the past 12 months on the back of record sales. Photo: Austin Ramsey

Periods of dramatic change can often be traced to a handful of events and that will certainly be the case after a pair of game changers lit a fire under Western Australia’s emerging industrial star, lithium.

The first of two significant developments last week was a report that Tesla, the world’s electric vehicle (EV) leader, achieved record sales of almost 500,000 vehicles in 2020, up 40 per cent at a time when every other car maker was flattened by COVID-19.

The second event was an agreement reached in Paris to merge two of the once great names of motoring, Fiat and PSA, the maker of Peugeot and Citroen cars.

The European transaction has been driven largely by the failure of both organisations to produce cars popular with consumers.

But there is another factor at work, and that’s the inability of either organisation to develop an EV offering able to compete with leaders such as Tesla, Toyota and Mercedes-Benz.

The Fiat/PSA merger might succeed but given past failures of vehicle makers which failed to modernise, it is more likely the deal is simply death delayed.

If in doubt, ask anyone of a certain age who once drove a Morris or an Austin produced by the car industry’s last great failure, British Leyland, a once-famous brand which committed a form of corporate suicide by producing, in its final years, dreadful cars no-one wanted to buy.

This time around, the car industry challenge (and opportunity) is more significant, especially for WA which, while it might not have a vehicle manufacturing industry, is emerging as one of the world’s leading suppliers of the raw materials used in EV batteries.

Lithium is top of WA’s battery metals sector, with nickel not far behind. Toss in a bit of graphite and cobalt and the seeds are being sown for the supply of almost everything a battery maker needs.

Talk of a battery metals boom is not new, first surfacing about three years ago when the price of lithium carbonate (one of the ways the metal is traded) rocketed up to an unsustainable $US20,000 ($26,000) a tonne, largely because of inadequate supply and a surge in speculative hoarding.

It is history that the first flash of the battery boom faded when EV sales failed to take off because consumers were concerned about a lack of charging stations and the travel range.

Those issues are slowly being resolved, with demand being boosted by government incentives (tax breaks) and disincentives (banning petrol and diesel-powered cars in city centres).

All of those issues have been thoroughly discussed but missing is a catalyst to start a sustainable EV boom and a surge in demand for the state’s battery metals.

That changed in the first week of January, starting with Tesla’s report of record sales, followed by the Fiat/PSA merger, and rounded off with a lithium carbonate forecast from Credit Suisse, an investment bank, of a 70 per cent price rise to $US9,500/t over the next two years and then a move up to a long-term $US11,500/t.

Stock market values are another way of measuring what’s happening in the world of vehicles and battery metals.

Tesla’s rise, up 700 per cent over the past 12 months to $US691 billion, means it is 13 times more valuable than the $US53 billion combined value of the merged Fiat/PSA.

Disregarding the likelihood Tesla is dramatically over-valued and that rivals with quality EV offerings will soon eat into its market share, there is a clear message in car industry developments for WA – EVs are on a roll and the state will be going along for the ride.

A second phase of growth for WA lithium will probably start with mothballed mines being brought back into production, including the big Wodgina project of Albemarle Corporation and Mineral Resources in the Pilbara, followed by completion of processing plants at Kwinana and Kemerton.

Next cab off the lithium rank should be a commitment by Wesfarmers to proceed with a mine and processing joint venture with Chile’s lithium leader, SQM.

But the best measure of how quickly the lithium star is rising in WA is in the remarkable revival of Pilbara Minerals, a company which struggled in the wake of the 2018 price collapse but emerged as a key player after snapping up the assets of its failed neighbour, Altura Mining.

From a pandemic low of 13 cents last March, Pilbara’s share price has risen by 590 per cent to 90 cents, almost matching the rise by Tesla over the same time.

From a near-death experience, Pilbara is today valued at $2.5 billion – ranking it as Australia’s 150th biggest listed company.


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