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16 December 20223 minute read

Battery metal investment

As countries across the globe continue to sharpen their focus on building a sustainable future, many investors are looking to the electric vehicle (EV) market for strategic investment opportunities.

The battery metal space has attracted considerable interest in recent years, as demand and prices for materials such as lithium, copper, nickel, cobalt, manganese, rare earths and graphite continue to skyrocket in light of anticipated increases in EV production. With Australia the largest producer of lithium globally and supplying over half of the world’s lithium (as at 2019) through a mineral concentrate called spodumene, there is significant opportunity to unlock domestically.

In recent years, lithium has been at the centre of investment hype amid evidence of supply issues which threaten to outweigh the growing demand for electric vehicles, and potentially delay the fruition of net emissions targets. Lithium-ion batteries are the most commonly used batteries for EVs because of their high energy to weight ratio, as well as their energy efficiency comparative to other electrical energy sources. These attributes have asserted lithium’s position as one of the most sought-after resources for EV battery production globally.

Most lithium resources in Australia are located in Western Australia and are hard-rock lithium (as opposed to brines found in South America and elsewhere). This has created a centralised hub in Western Australia for mining companies such as Mineral Resources Limited (ASX:MIN) (Mineral Resources) and Pilbara Minerals Limited (PLS:ASX) (Pilbara) to capitalise on the rapid increase in global demand for lithium-ion batteries. The share prices of Mineral Resources and Pilbara have had a very strong year and are continuing to rise with lithium prices as demand increases.  

Similarly strong demand for other metals like nickel and cobalt has also emerged, because these materials are crucial to the production of lithium-ion batteries. Recently, General Motors Company (GM) announced its plans to invest up to AUD108 million in Queensland Pacific Metals Limited (ASX: QPM) to secure nickel and cobalt supplies for EV battery production in the United States. The deal is part of GM’s commitment and transition toward producing only zero-emission vehicles by 2035.

Graphite has also experienced an uptick in interest, with Resnascor Resources Limited (ASX:RNU) (Resnascor) recently receiving a AUD185 million loan facility from the Australian Government to fund its Siviour Graphite Project in South Australia. Resnascor believes the loan facility will assist it in becoming one of the global leaders in sustainable production of one hundred per cent Australian-made graphite products (including anode production) for use in lithium-ion batteries. There is strong sentiment amongst investors that graphite prices, just like lithium, may increase significantly within the short to medium term in light of domestic and international policy initiatives which welcome a push for ‘greener vehicle’ production.

Ultimately, the outlook for battery metal investment in Australia is highly positive. As the demand for EVs continues to rapidly grow, so does the need for substantial investment in battery inputs and battery metal resources. Australia remains at the forefront of battery metal production through its extensive mineral deposits, particularly those in Western Australia, which are providing desirable inbound investment opportunities in Australia for corporations across the globe.