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Battery and energy metals stocks becoming more critical as demand increases and supply falls

Stock Markets Aug 08, 2022 12:30
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Battery and energy metals stocks becoming more critical as demand increases and supply falls
 
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Critical mineral supply issues are spreading around the globe, forcing countries to put policy and strategy into play to maximise domestic and international value.

The supply crunch, particularly with battery or energy metals, comes in unison with growing demand for the minerals needed to assist the world’s clean energy transition.

The gap between projected supply and projected demand by the end of the current decade, especially in cobalt and lithium, exacerbates the issue.

While we are not heading toward a Mad Max style breakdown of society due to lack of resource, to feed the need for supply, the world needs more resources and better strategies to manage them.

A recent study by KU Leuven University is case in point.

The study shows the European Union’s Green Deal goal of climate neutrality by 2050 will require 35 times more lithium and seven to 26 times the amount of rare earth metals compared to Europe’s current use.

Further to this, 30% more aluminium will be required as well as 35% more copper, 45% more silicon, 100% more nickel and 330% more cobalt.

These are essential metals for the production of electric vehicles and batteries, renewable wind, solar and hydrogen energy technologies, as well as grid infrastructure.

The required numbers run high: about 4.5 million tonnes of aluminium, 1.5 million tonnes of copper, 800,000 tonnes of lithium, 400,000 tonnes of nickel, 300,000 tonnes of zinc, 200,000 tonnes of silicon, 60,000 tonnes of cobalt, and 3,000 tonnes of the rare earths metals neodymium, dysprosium and praseodymium are required above current levels representing an increase between 70 and 2,600% from current levels.

The report notes that "Europe faces critical shortfalls in the next 15 years without more mined and refined metals supplying the start of its clean energy system. Progressive steps will be needed to develop a long-term circular economy, which avoids a repeat of Europe’s current fossil fuel dependency.”

Europe’s battery metals needs until 2050. (Graph by KU Leuven University).

What about the local scene

Back in May, Proactive journalist Phoebe Shields outlined the Australian Federal Government’s 2022 Critical Minerals Strategy, designed to grow the critical minerals sector and “place Australia at the centre” of meeting the international demand for critical minerals.

Battery and energy minerals, including rare earth elements, will be critical to Australia’s economy moving forward.

The then Minister for Resources and Water Keith Pitt said: “Increasingly, demand for resources is expanding beyond traditional commodities such as iron ore and gold. The pace of technological development has been accelerating, and with it the demand for minerals critical to sectors including defence, aerospace, automotive, renewable energy, telecommunications and agritech.

“The addition of two new minerals to Australia’s critical minerals list – high purity alumina and silicon – reflects the expanding significance of mineral inputs in strategic applications like semiconductors and electrification.

“Australia has been blessed with extraordinary reserves of the critical minerals needed by these sectors. We produce around half the world’s lithium, are the second-largest producer of cobalt and the fourth-largest producer of rare earths. But we have the potential to do so much more.

“The Australian Government is taking action to grow Australia into a critical minerals powerhouse, capitalising on the strength of our world-leading resources sector, expertise in processing and highly skilled workforce.”

A quick look at cobalt and rare earths

Lithium stocks are much talked about in this transition and you can read about them here.

However, there is surging demand for cobalt, particularly in copper mine waste.

Australia’s governments are sending geologists into the country’s mining territories to scour mine waste for cobalt as the country continues to diversify from fossil fuels to become an exporter of clean energy minerals, such as cobalt, nickel and lithium.

The Queensland government recently sent geology professor Anita Parbhakar-Fox to Mt Isa to look at cobalt in copper waste. She found more than 200 times cobalt’s average presence in the earth’s crust – that’s 7,000 parts of cobalt per million (ppm).

“I nearly fell off my chair when I got that piece of data,” she said, explaining that 300 ppm is enough to get miners excited. “If you’ve got 7,000 ppm, that’s pretty juicy. It was a eureka moment,” she told The Financial Times.

Cobalt became the EV industry's largest end-use sector in 2021.

As for rare earths, the Russia/Ukraine war is currently disrupting the supply chain and new production has become critical.

Rare earths are key components of everything from solar panels to electric car batteries to defence equipment and much more.

Macro issues have meant prices are sluggish and weak downstream demand and insufficient orders weighed on the overall performance of the market in July.

However, the long-term outlook still remains positive.

The following discussion outlines the latest trends in rare earths.

In the spotlight: ASX Battery Metals/Energy stocks

Horizon Minerals

Horizon Minerals Limited’s (ASX:HRZ) key highlight for the quarter was the completion of the restructure and demerger of its 25% interest in the 1.8-billion-tonne Richmond vanadium project in northwest Queensland. Richmond Vanadium Technology (RVT) now owns 100% of the project with shares held by Horizon (25%) and the existing shareholders of RVT (75%). RVT’s IPO process has now started. The move gave HRZ the freedom to continue with its exploration drilling with 8,879 metres completed at the Greater Boorara, Yarmany and Black Flag areas testing high priority multi-commodity targets.

The company raised a total of $6 million via placement and SPP and had $5.58 million in cash and $2.3 million in listed investments at the end of the June quarter.

Looking forward the company will continue its large-scale exploration program and release of further drilling results, advance the Cannon, Penny’s Find and Rose Hill underground gold projects, progress the IPO and ASX listing of the Richmond Vanadium Project (RVP) and continue to pursue value-accretive consolidation and divestment opportunities.

First Graphene

First Graphene Ltd (ASX:FGR) delivered record Q4 revenue of around A$359,0001, closing FY22 with around A$723,0001 total revenue, which is 111% revenue growth against FY21. Its revenue performance was the highlight of the quarter, with the Q4 revenue breakdown consisting of 46% from Composites and Plastics, 31% from Cement/Concrete, 12% across Coatings, Adhesives, Sealants and Elastomers (CASE), and 11% in Energy Storage and other revenue streams. Forward-looking orders received for fulfilment within FY23 totalling around A$160,000.

A further milestone was the joint development agreement (JDA) with Greatcell Energy Limited to advance the development of graphene-enhanced solar cells.

First Graphene’s contract with the Graphene Engineering Innovation Centre in Manchester has been extended by an additional 12 months beyond the end of the initial lease period. This enables the company to continue its focus on R&D support for commercial teams and development of energy storage applications. The new lease period runs until 31 March 2023.

American Rare Earths

American Rare Earths Ltd (ASX:ARR) found consistent high-grade mineralisation at Halleck Creek Project, averaging 4,252 ppm Total Rare Earth Oxides (TREO) from surface. This remains open at depth.

The Le Paz Project has demonstrated significant resource upside, with the company now accelerating its exploration plans to expand and upgrade the current JORC 2021 resources at La Paz after receiving highly promising assay results from recent exploration drilling in the Southwest area.

One key highlight was ARR’s US subsidiary, Western Rare Earths, becoming the sole industry member of a consortium led by federal research facility Lawrence Livermore National Laboratory (LLNL).

The company is well funded to deliver on its objectives and as of June 30 has a cash position of A$6.32 million.

Looking forward, drilling permits have been submitted with the Wyoming Department of Environmental Quality for the Halleck Creek Project. This drill campaign will be conducted, with the intention to define a JORC resource at the Halleck Creek Project as soon as feasible. Drill permit approvals are expected in the coming quarter, with a campaign start date announced soon after.

Technology Metals Australia

Technology Metals Australia Ltd (ASX:TMT) received outstanding results from roast-leach testwork undertaken on Yarrabubba material as part of the Integration Study for the Murchison Technology Metals Project (MTMP).

The company also received Notice to Proceed with front end engineering and design (FEED) services on the key roasting kiln section of the MTMP processing plant issued to leading kiln supplier, Danish company FLSmidth.

An early works agreement has been executed with APA Operations Pty Ltd, a wholly owned subsidiary of APA Group (ASX:APA) Ltd for the proposed Gabanintha Gas Pipeline. The implementation phase of the MTMP has started with TMT targeting a decision to develop for MTMP by the end of 2022.

A feasibility study on production of vanadium electrolyte in Australia is underway with support from LE System under an extension of the memorandum of understanding (MoU).

As at June 30, the company had cash of $18.6 million.

Australian Vanadium

Australian Vanadium Ltd (ASX:AVL) released a BFS for its namesake project. The bankable feasibility study released confirms AVL’s Australian Vanadium Project as a potential globally significant primary vanadium producer. Another major highlight involving the project was the receipt of a third letter of intent for iron titanium coproduct offtake sales signed with Chinese steel producer Rizhao Steel.

The company also has an MOU with NHCE for energy market vanadium redox flow battery (VRFB) project development and its trial with Water Corporation VRFB is underway for water purification and pumping applications.

At its Coates Nickel-Copper-PGE Project, first stage drilling has been completed to provide a stratigraphic section as part of WA Government EIS and CSIRO programs. Sampling assay and interpretation is now underway.

During the quarter the company raised $20.57 million and had $26.45 million in the bank at June 30.

International Graphite

International Graphite Ltd (ASX:IG6) listed on the ASX on 7 April 2022 and at June 30 had $8.9 million in cash.

“In the past three months we have experienced significant momentum as we work to lay the foundations for our future graphite operations at Springdale and Collie. The world’s rapidly expanding focus on decarbonisation, and the critical need to plan for an expected shortage of battery materials, provides enormous opportunity,” IG6 CEO Phil Hearse said of the quarter.

A maiden drilling program began in June with two drilling rigs mobilising to IG6’s Springdale tenements.

The 7,100-metre reverse circulation (RC) and PQ/HQ diamond drilling program, comprising a total of 54 RC drillholes (3,300m) and 12 diamond holes (900 metres), will infill the existing Springdale resource, provide additional samples for ongoing metallurgical testwork, and data for initial geotechnical assessments and mine planning. In addition, 37 RC holes (3,000 metres) will be drilled to test a number of high priority exploration targets.

Accelerate Resources

Accelerate Resources Ltd (ASX:AX8) consolidated its position within the highly prospective Woodie Woodie North Manganese Corridor in the East Pilbara region of Western Australia. The company began its phase one maiden drilling program at Woodie Woodie North and an initial seven priority drill targets within the 33-kilometre corridor are being tested.

Historical metallurgical results from E45/5978 (Barramine) indicate manganese ore can be upgraded to 48% manganese, yielding a premium manganese concentrate.

Further to this, recent surface sample results from Braeside West indicate direct ship ore (DSO) potential with an average lump and fine grade of 41.4% manganese and 13.6% iron.

Finally, Accelerate and Vytas Resources delivered a maiden resource for the Tambellup Kaolin Project in the south-west of Western Australia.

Altech Chemicals

Altech Chemicals Ltd (ASX:ATC) announced outstanding results from a Preliminary Feasibility Study (PFS) for the development of a 10,000-tonne-per-annum silicon/graphite alumina coating plant, in Saxony, Germany.

The plant would be constructed by Altech Industries Germany GmbH (AIG (NYSE:AIG)) and would produce high capacity silicon/graphite battery anode TM materials “Silumina Anodes” under exclusive licence from TM Altech.

Silumina Anodes products are targeted to supply the burgeoning European electric vehicle market.

With a capital investment of US$95 million, the company estimates a project net present value of US$507 million (NPV8), with net cash of US$63 million per annum generated from operations. The internal rate of return is estimated at 40%, with investment capital paid back in approximately 3.1 years. Total annual revenue at the 10,000-tonnes-per-annum full rate of production is estimated at US$185 million per annum.

Managing director Iggy Tan said: “While Altech's top priority continues to be financing its Johor HPA project, the TM Silumina Anodes project represents an exciting downstream opportunity to utilise its HPA coating technology in silicon/graphite battery materials. We are pleased and excited about the results of the 10,000-tonne-per-annum Silumina Anodes PFS.

"Due to the attractive economics of the study, a decision has been made by the AIG board to immediately progress to a definitive feasibility study (DFS) for the project. AIG has already purchased land in Germany suitable for the project, and the plan is for the AIG team in Saxony to immediately commence TM DFS work. We believe that the production of Silumina Anodes materials could be a game changing technology for the lithium-ion battery industry.”

Read more on Proactive Investors AU

Disclaimer

Battery and energy metals stocks becoming more critical as demand increases and supply falls
 

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