September 7th, 2022 | 10:58 CEST
Edison Lithium, Rock Tech Lithium, BYD - Shares of the entire lithium value chain
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Edison Lithium - Property in the South American Lithium Triangle
Lithium has long been needed to produce lithium-ion batteries, which are used in laptops, cell phones, tablets and wireless headphones, for example. However, unlike the battery in an electric car, these devices are much smaller and consume much less of the precious raw material. Lithium itself is common, but much rarer in the quantity that it can be mined in an economically viable way. The Canadian explorer Edison Lithium owns two promising lithium brine deposits in Argentina, located in South America's famous Lithium Triangle. Livent is already producing lithium in the immediate vicinity.
The main project, called Antofalla, covers 107,000 hectares and is located in the Salar de Antofalla, one of the largest salt pans in the world. According to Albemarle Corporation, the world's third largest lithium brine reservoir is located there. Edison Lithium's property is therefore optimally positioned. In total, there are results from 56 historical drill holes that have produced resources amounting to 83 million tons of potash with an ore grade of 6,400 mg/l and 2.22 million tons of lithium with a grade of 350 mg/l. The second lithium project, Pipanaco, is located 50 km west of the town of Catamarca and has been little explored. However, the site could be considered for a lithium processing plant.
In addition to the lithium projects, the Company owns a cobalt deposit in northeastern Ontario, Canada. The property is home to three historic mines demonstrating cobalt grades up to 4%. The project is to be separated from Edison Lithium via a spin-out, and existing shareholders will receive shares in the new company. With an investment in Edison Lithium, one can secure two critical raw materials for the future of electromobility at the same time. The share is currently quoted at CAD 0.07 and thus has a market capitalization of just CAD 8.1 million. If exploration data is positive, the Company could quickly find itself in the sights of the major local lithium players.
Rock Tech Lithium - Go-ahead for the construction of the converter
Rock Tech Lithium also originally started with a lithium mining project, but today the focus is on a lithium refinery to be built in Guben in Brandenburg. The first lithium converter in Europe will go into production by the end of 2024. Four more are to follow by 2030. The aim is to secure European supply chains, especially for automakers. In doing so, the Company is pursuing a holistic approach and already has recycling in the pipeline, even though the topic will not really become important until 2025/2026. Talks are already underway with suppliers to this end. The management is trying to implement the vision of a closed-loop company with zero waste.
For example, by-products generated during production could be sold to the concrete industry and positively contribute to profits. Internally, the Company conservatively expects sales prices between USD 20,000 and 30,000 per ton of lithium hydroxide. If it proves true that the processing of the lithium is the bottleneck, prices are likely to be significantly higher in the future as well. In October, the first steps will begin for construction at the Guben site, which has been carefully selected and offers advantages in logistics, proximity to customers and more. In addition, the Company has options on other lands for possible expansion. The converter is scheduled to go into production at the end of 2024, and the lithium mine should be ready by the same date.
Supervisory Board Chairman Dirk Harbecke told our editorial team, "We will be able to sell our lithium hydroxide with very good margins from the first day of production. The demand from the global car and battery companies for our product is increasing almost daily. The market is incredibly dynamic, and we are building a new industry with world-renowned strategic partners like Mercedes-Benz." On August 23, it was announced that the Stuttgart-based automaker plans to purchase 10,000 metric tons of lithium hydroxide annually starting in 2026 as part of the intended binding agreement. This news gave the share price a brief boost. The previously implemented capital increase caused pressure from Canada, so the gains were given up again. At a share price of CAD 3.36, one can now access more favorably than at CAD 3.50 during the capital measure.
BYD - New sales record
BYD grew up as a battery producer before the development of electric cars began. This technological lead has presumably even persuaded Tesla to install the Chinese company's blade batteries in the future. Various media recently reported that this would be the case from 2024. After recently overtaking Tesla in terms of sales figures, the Company is now also gaining ground in the sale of batteries for electric cars. For a long time, BYD was only considered No. 3 among battery manufacturers, but in July, it secured second place and increased its market share by 2.2% to 16.2%. CATL is in the lead with 33.5%.
In terms of sales figures, the Group continues its record chase. In August, 174,915 vehicles were sold, an increase of around 185%. That means more than 1 million electric vehicles have been sold this year. The first vehicle from the joint venture with Mercedes-Benz, the Denza D9 MPV, is also scheduled for delivery starting in September. By the end of next year, the CEO wants to have sold 4 million electric vehicles. To this end, the Company is continuing to invest in expanding production capacity, including EUR 4 billion in a mining and battery project in Yichun.
One can see that BYD is also trying to expand its value chain to operate independently. Despite all the good news, the stock is clearly under pressure. Warren Buffet, who has been invested in the Company since 2008, is selling the stock. Investors fear that the Oracle of Omaha could sell all his shares. That would not only put additional pressure on the share but would also tempt Buffet imitators to sell. Already, the short ratio in the share has risen. At the moment, one is paying EUR 28.42 for a share certificate. At the beginning of July, it was still EUR 41.80.
The lithium market will remain volatile for a while. The question remains how long it will take until enough lithium can be produced to meet demand. Edison Lithium has a property in what is said to be the world's third largest lithium brine reservoir. The next set of drill results will be interesting here. Rock Tech Lithium is turning the big wheel by going after the bottleneck of lithium processing. High profits beckon here. As a battery producer and electric vehicle manufacturer, BYD is dependent on lithium and is also investing in this area.
Conflict of interest
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