There have been reports of a deficit in battery metals. Mine developers struggling to meet the demand for battery metals see the threat of looming supply as a trigger for electric-vehicle makers to step in with investments.
The mining industry is already undergoing a rough time as it is to raise project finance for the mines. This is being worsened by the impact of the coronavirus pandemic and dipping global auto sales of lithium, nickel and cobalt materials.
As such, auto companies have outlined plans to spend more than US $140Bn on electric vehicle production, an industry shift that will need producers of specialist materials and metals for batteries to dramatically lift output. Nickel demand is set to reduce by 16% through 2030 from 2018. This is while there is a significant rise in demand for graphite, lithium, copper and aluminium, according to BloombergNEF.
According to the report released in February, Lithium producers alone will need an estimated US $25Bn to $30Bn in financing over the next decade to meet demand.
On the other hand, and for battery producers and automakers with no existing expertise in mining, investments would only make sense for strategic reasons, such as geopolitical security. Many large mining companies remain hesitant to enter into niche markets, or already have options to bring on capacity inside their own portfolios.
This then means smaller developers of battery metals projects “are swimming in a very shallow pool of retail capital and are starving for start-up capital,” she added.
While major car producers do understand funding challenges faced by metals producers, most are wary of exposure to mining projects that come with unfamiliar risks and can take years to move from exploration to production, according to Vivas Kumar, a principal consultant at industry adviser Benchmark Mineral Intelligence and previously a member of Tesla Inc.’s battery supply chain team.
What’s more likely is that the auto sector will move to add more offtake contracts, agreements to buy future production, that can help developers unlock traditional sources of project finance, he said.