extract taken from PwC's 10th edition of Aussie Mine: The next act. ....
Lithium was a rising star in 2016 with a 477% increase in market capitalisation and four new entrants in the MT50, joining Orocobre.
Investors reacted to:
• unequalled growth in demand, which reportedly will continue to surge;
• the willingness of China to pay whatever price to guarantee supply; and
• the infiltration of portable and mobile devices and eagerly anticipated shift to “green” electric vehicles, all of which are powered by lithiumion rechargeable batteries.
Will the future demand for lithium be sufficient to support the influx of supply that is currently in the pipeline. If global lithium demand doesn’t continue to trend as aggressively as expected, the consequences of failing to win the race-to market will be magnified.
Have we have seen this show before?
In many ways, what we are seeing in lithium today is reminiscent of the iron ore supercycle:
• three major producers dominate supply and have large untapped reserves;
• a sharp price rise has prompted immense investor support for yet to be proven junior miners;
• a wave of new projects in Australia and South America are rushing to capitalise on high prices;
• China is the largest consumer in the world; and
• new economic forces are driving unprecedented expectations of global demand.
We anticipate two scenarios that could play out:
1. major lithium producers will slash costs and crowd out junior and mid-tier producers; or
2. junior and mid-tier producers will secure off-take agreements with end-users attracted to controllable prices and a reliable source of supply
