Neometals square in middle of lithium hotspot
Australia is on each side of the lithium barricades: it is the world’s largest producer of lithium feedstocks and it is now in the thick of the lithium-ion battery storage wars.
And battery wars are important for lithium. Just look at the projected growth: batteries account for 38% of the consumption of lithium carbonate at present, in a world market of about 200,000 tonnes. By 2025 batteries will be using 63% of all lithium produced – but, by then, the global market will be consuming 500,000 tonnes.
Probably more. As Chris Reed, managing director at Neometals Ltd. (ASX:NMT) says, estimates of lithium demand for batteries has always been wrong on the low side. With Tesla and other players, battery use is moving in (very large) leaps and bounds, and the cost of battery storage continues to plunge. As Reed says, Mercedes will soon have 10 plug-in automobile models on sale. The German automaker recently confirmed it is also to enter the home electricity storage market.
But Australia is the place to watch. On the production side, the country in 2014 produced 68,000 tonnes of lithium feedstocks, thanks to the huge Greenbushes mine in Western Australia, 51% owned by a Chinese company, the rest by Germany’s Rockwood Lithium. Then there’s Neometals, which has the largest fully-funded hard rock project in the world. Also powering ahead is Cobre Montana NL (ASX:CXB) which recently reported a breakthrough in producing lithium carbonate from lithium micas. Then there are also Altura Mining Ltd. (ASX:AJM) and Pilbara Mining Ltd. (ASX:PLS) with advanced projects in Western Australia. In fact that state, already the iron ore capital of the world and with the world’s largest lithium mine, looks like to become a lithium powerhouse with Neometals and the others on track to production.
Neometals emerged out of Reed Resources, which was listed initially as a gold play in 2002 on the ASX by father and son team, David and Chris Reed. David Reed had been a prospector and then a well-known West Australian stockbroker. The company still has iron ore and nickel interests, but the replacement name of Neometals reflects the new focus: lithium and titanium.
The company has expanded the footprint at its Mt Marion lithium project with acquisition of additional ground. It has a semi-pilot plant at Buffalo, NY, as it moves to position itself as a high purity lithium hydroxide supplier.
Get our daily investorintel update
Chris Reed is encouraged by each development in the lithium-ion battery market: the pincer movement of falling battery production costs and the (consequent) surge in demand.
And he can see that change taking place on his own doorstep. One of the reasons battery makers are targeting the island continent is because of the spread of solar power: in Queensland alone (the “sunshine state” as it’s known) more than a third of houses have photovoltaic systems. Overall the proportion of solar-equipped homes in the country is far higher than in the U.S., hence the interest of the industry to capture the storage market. Reed believes the home storage batteries will become such a cost saving that they will give a real push to renewable energy systems at the expense of coal and nuclear generation.
Australian utilities are powering into the market gap. Sydney-based AGL Energy, which has nearly four million customers, has recently launched a six kilowatt home battery. Origin Energy, another of the big players, will be in this market by December. Queensland’s Ergon Energy, along with an arm of Snowy Hydro (the publicly owned corporation that runs the 3,950 MW hydro network in the Snowy Mountains of New South Wales but which has also spread into gas generation and power retailing) are going to sell the Panasonic 8kW lithium-ion battery; Snowy Hydro sees the business of providing storage for those with solar arrays as complementing its hydro storage capability across the renewable energy spectrum.
As one technical news site notes, the battery systems are manufactured in Japan, but the company is Tesla’s manufacturing partner for battery packs at its Gigafactory in Nevada.
For Neometals and Cobre Montana, the trend is certainly their friend.
Footnote: Panasonic will no doubt gain useful experience from its involvement in battery storage sales in Australia. This is going to become big business in its home market as Japan gets prepared for energy market deregulation.
InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.