Some punters seem to find conflict with the notion that it is possible to be bullish on lithium demand by the global uptake of electric vehicles (EV) and bearish on the need for additional resources and lithium exploration So to break the argument down as simply as possible:
1. For how many more years can investors expect the Li-ion battery to be the dominant energy storage in an EV?
The Li-ion battery has energy density limits (kWh/kg) that are theoretically superseded by a range of alternative technologies which contain no lithium. They are also fire hazards when damaged. Much of the alternatives are advancing rapidly in laboratories, and as EV production increases exponentially, then R & D spending into improved energy storage will also increase exponentially. However, it takes time for laboratory success to evolve into broad commercial application. So another 20 years of Li-ion dominance is perhaps a fair basis for assessing future demand.
2. How many EV's will be produced in the next 20 years?
Bloomberg analysts suggests around 250 million new EV vehicles will be produced from now to 2036. This is a bullish scenario, however uber-bulls could double that in their analyses but still not alter the dynamics of the supply parameters as discussed below.
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3. How much lithium will be needed to produce 250 million EVs?
There is some variability among industry commentators on the amount of lithium content (expressed as lithium carbonate equivalent, LCE) in a Li-ion battery pack required to produce 1kWh of energy storage - typically ranging from 0.6 - 1.3kg LCE/kWh. Deutsche Bank in their recent comprehensive Lithium 101 report suggest 0.7kg LCE/kWh is a suitable long term factor, citing the current state of the tech and further efficiencies to be gained by future development.
http://resourceswire.com/wp-content/uploads/2016/05/Lithium-Report-May-2016.pdf
The next generation Tesla Model 3 is anticipated to compete with its internal combustion counterparts in terms of range with a 60kWh battery pack. For the purpose of this analysis an average storage capacity of 70kWh per EV is assumed.
Therefore:
250 (million vehicles produced in 20 years) x 0.7 (kg LCE/kWh) x 70 (kWh capacity/EV) = total demand of 12,250,000t LCE.
This is equivalent to 2,300,000t of Li metal, and expressed as an oxide, 4,950,000t or ~5mt Li2O.
4. How much lithium do we already have in resource?
Deutsche Bank and the United States Geological Service (USGS) estimate that the world's lithium mining industry has currently delineated 102mt as LCE in reserves and 276mt as LCE in resources. This is ~8x and ~25x, the amount of lithium needed to produce 250m EVs over the next 20 years.
Within those global resources, lithium from brine or spodumene resources is sufficient for our future EV needs, at the total exclusion of the other. Furthermore, of those resources, any single country out of Chile, China, Argentina, Bolivia, Australia, Canada, USA, Russia has sufficient lithium potential to supply 20 years worth of EV production. Within Australia, just the Greenbushes and Pilgangoona regions combined are likely to generate sufficient resources for 250m EV vehicles. And any of the projected resources of cartel members Albemarle, FMC Lithium or SQM are also potentially large enough to supply all future EV requirements.
5. Does the EV industry require the mining industry to discover more lithium resources?
The short answer is no. There is zero risk to the industry for known geological capacity to supply. Due to the spread of resources across the world there is also zero sovereign risk to that supply.
6. Given the potential for the limited life span of lithium battery technology, and vast resources, is it still possible for fledgling hard-rock lithium producers to make money?
The short answer is yes. Production from known resources has lagged demand, such that there is currently a window of peak pricing within which efficient and advanced developers of hard rock resources can bed in new production. The key to their success is to be cost competitive in the survival of the leanest, as low cost brines continue to ramp up their production and catch up to the demand curve. If the existing lithium cartel continues to break down by new entrants, a strongly competitive supply environment is likely to benefit the refiners at the expense of returns to the investors in miners as a whole.
7. Given the geological proliferation of potential lithium resources, will any hard-rock explorers who are starting now ever achieve successful production?
The short answer is probably not. By the time they reach a decision to produce, prices for spodumene concentrate will likely be lower than today as supply catches up and overtakes demand. However if an explorer discovers a very high grade deposit at surface (like Greenbushes) then they could potentially achieve a sustained high valuation and displace existing production.
