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February 3rd, 2022 | 13:46 CET

Allkem, Edison Lithium, NIO - The battery of the future

  • Lithium
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The transformation from diesel- or gasoline-fueled vehicles to battery-powered electric vehicles is underway, the market is growing strongly, and automakers are increasingly adopting an electric strategy. However, this requires the necessary raw materials such as cobalt, copper, lithium and nickel. Increased demand meets a more than scarce supply. The result is sharply rising prices. The primary beneficiaries are the producers, who can expect growing sales in the coming years.

time to read: 3 minutes | Author: Stefan Feulner
ISIN: Allkem Ltd. | AU0000193666 , NIO INC.A S.ADR DL-_00025 | US62914V1061 , Edison Lithium Corp | CA28103Q1090

Table of contents:

    Lithium and electromobility

    Alongside cobalt and manganese, lithium is one of the raw materials of the mobility revolution. The silvery white-gray light metal is needed to manufacture rechargeable batteries with a very high energy density, such as those used in e-cars. It is responsible for why the demand for the element has been rising steadily for years. However, supply and production capacities are lagging. As a result, the price of battery-grade lithium carbonate has literally exploded with an increase of over 400% in the last year and a half. According to experts, this is likely to intensify significantly over the next few years.

    The lithium market is highly concentrated, both geographically and in terms of group structures. For example, 85% of global lithium production comes from Chile, Argentina and Australia. The sharply rising prices on the world market make previously uneconomic projects attractive and significantly increase the expected project returns. While Australian lithium is extracted from spodumene ore, which comes from mining mines, lithium in South America is extracted from the brine of huge salt lakes. It is estimated that up to 60% of global lithium reserves are stored in Chile, Argentina and Bolivia.

    Argentina, the land of lithium

    Argentina, in particular, is betting heavily on lithium extraction. According to forecasts, Argentina will overtake Chile in lithium production by 2030. Due to the strong demand from the electric car industry and the government's open attitude, more and more established players are settling in the country. There is currently a veritable rush to several Andean provinces. Livent and Allkem have been exploring for a long time, followed by industry giants Posco, Ganfeng, Tianqi and Zijin Mining Group.

    In addition, there are smaller junior exploration companies such as Edison Lithium, which want to become producers in the next few years. Edison Lithium, known as Edison Battery Metals until the name change in November, is a junior Canadian mining exploration company focused on sourcing, exploring and developing cobalt, lithium and other energy metal properties. The Company's acquisition strategy focuses on acquiring mineral properties in areas with proven geological potential.

    Buy and build strategy as key

    In June of last year, the Company entered into the definitive buy and sell agreement to acquire Resource Ventures S.A. This Argentine company owns or controls over 148,000 hectares of prospective lithium brine claims in Catamarca Province, Argentina. The claims are primarily located in the two geological basins known as the Antofalla Salar and Pipanaco Salar in South America's famous "Lithium Triangle". The purchase price from Resources Ventures, including the 100% interest in its properties, was USD 1.85 million, which was paid through the issuance of ten million common shares of the Company at a deemed price of USD 0.185 per share.

    In addition to lithium, the Company, led by experienced management, owns another cobalt project. The project is located near the town of Cobalt in northeastern Ontario, Canada. The project hosts the historic Thomas Edison, Shakt-Davis and Cobalt-Kittson mines and numerous historic pits. Historical reports from the Shakt-Davis mine indicate values of 1.5% Co over 1.37m and selected grab samples of up to 4% Co and 93.3 g/t gold. Nickel, copper and to a lesser extent, lead, zinc and bismuth also occur in the quartz-carbonate veins.

    The Company, which is traded on the Canadian TSXV, the US Stock Exchange OTC and in Frankfurt, currently has a market capitalization of EUR 10.08 million. The investments are in an early phase and promise long-term potential due to the increasing demand.

    NIO - Overtaken by the competition

    The delivery figures for electric car manufacturer NIO for the month of January were disappointing. Compared to the same period last year, the Chinese Company sold 9,652 vehicles, an increase of around 34%. However, Nio did not manage to break the sound barrier of 10,000 cars. None of the three Nio models set a new sales record in January, but sales of the ES6 almost doubled YOY to 5,247 units. In contrast, sales of the EC6 coupe were disappointing, up 1%, and the ES8 posted an 8% drop in sales.

    In addition, NIO was overtaken by competitors Li Auto with 12,268 models sold and XPeng with 12,922 electric cars. Chart-wise, the stock continues to be battered. Although the share was able to defend the resistance at USD 20 for the time being, further setback potential is not unlikely.

    Lithium is an enormously important raw material for electromobility. Particularly in Argentina, there is an enormous upswing in lithium production. Alongside the established players, Edison Lithium is trying to participate in the lithium boom by building up a portfolio. NIO is weakening in terms of sales figures and is currently a value for the watch list.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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