How lithium shortages could sink the EV transition

FinancialNewsMedia.com News commentary

PALM BEACH, Florida., April 13, 2022 /PRNewswire/ — Lithium is extremely important to the electric vehicle industry as it is an essential component of electric vehicle batteries. Therefore, the race is on to bring these vehicles to market by securing this necessary raw material. In response, demand for lithium is skyrocketing and prices are hitting record highs as supply issues persist. In today’s article, we discuss this issue with reference to You’re here (NASDAQ: TSLA), Rivian Automotive (NASDAQ: RIVN) and Ford (NYSE:F).

The electric vehicle industry is preparing for a boom. Although many electric vehicle stocks have plateaued recently, there is no doubt that they represent the future of domestic travel. Therefore, investors are looking longer term. In this EV earnings season in particular, investors are keeping tabs on delivery projections.

For example, as Tesla (TSLA) seeks to conduct a second stock split, the most famous electric vehicle company of all is also set to report its monthly deliveries. However, the shortage of raw materials such as lithium could slow down production across the industry, which would be detrimental to inventories.

Lithium is often the first product that comes to mind when considering electric vehicles. This is because it is an essential part of the EV battery. So, to ensure that EV companies meet their delivery targets, they need to secure the necessary raw materials. In response, demand for lithium is skyrocketing. Prices are at record highs and supply tightness persists.

A company looking to bring high quality lithium products to market is Arena Minerals (OTCQB: AMRZF) (TSX.V: AN). Arena is a junior developer operating in South America and it stands out with its new lithium brine processing technology.

A competitive solution

Arena Minerals has developed a proprietary brine processing technology and risk-free business model designed to produce more competitive battery-grade lithium products.

Lithium brine deposits are salty groundwater accretions enriched in dissolved lithium. These lithium brines are only found in certain regions of the world, with the majority found in Chile and Argentina. Arena Minerals’ projects are strategically located in these regions.

Arena Minerals takes an integrated approach to developing lithium brine resources for the battery industry. Its process is unique, potentially economical and less risky than other conventional methods. Even better, its timing is impeccable as it catches the wave of rising lithium demand.

Arena is redefining its lithium brine processing with this new, streamlined approach. This will potentially reduce capital expenditure (CAPEX) and operating expenditure (OPEX) while reducing cash lead time and operational risk. Combined, this method greatly enhances Arena’s end goal in producing a marketable, technical-grade lithium chloride.

Strategically aligned with Ganfeng and LAC

Arena Minerals acquired a major project in Argentinahelping to attract two leading strategic investors.

Ganfeng Lithium Co Ltd and Lithium Americas Corp each owns about 18% of the company, with Ganfeng also owning 35% of Arena’s flagship asset. Ganfeng is the world’s largest producer of battery-grade lithium and has also secured a lucrative lithium supply contract with Tesla.

At the helm of Arena Minerals is an experienced management team directly involved in the processing of lithium brine and the production of battery-grade materials.

Executive Chairman, Eduardo Moraleshas been involved in the lithium brine industry for over 40 years, during which time it has developed one of today’s leading lithium mines in Chile.

Together the team was involved in building and ultimately selling two leading companies: Rockwood sold for $6.2 billion in 2014 to Albemarle Corp., and Lithium-X Energy sold for $265 million in 2018.

Arena Minerals intends to produce technical grade lithium chloride. On-site tests are underway, aiming to produce this compound which contains 6% lithium (or 35% lithium chloride) directly from solar evaporation ponds. This significantly reduces capital intensity and operational risk.

Arena’s business model, adapted from Mr. Morales’ success in Atacama (Chile), dramatically reduces capital requirements compared to other brine operations in Argentina. It’s a serious boon to the EV industry at a time when it’s badly needed.

The lithium supply crisis could hamper the transition to electric vehicles

Major electric vehicle companies are scrambling to secure lithium supply contracts and source raw materials. That’s great as long as the supply is there, but even with deals in place, supply is tight and demand is skyrocketing as more companies jump on the EV bandwagon.

Although there are abundant quantities of lithium on the planet, the rate at which it is mined and refined does not match the rate at which demand is accelerating. By 2030, global lithium demand is expected to exceed two million metric tons of lithium carbonate equivalent (LCE). This is more than double the demand forecast for 2025.

If companies like Tesla, Rivian and NIO have to wait to secure their lithium supplies, consumers have to wait to get their cars. This will lead to higher prices and impatience of the ordinary buyer who may lose interest in the transition and continue to buy petrol and diesel cars. With so much investment in the transition to electric vehicles, no one wants it to slow down just because the supply chain crisis couldn’t be managed.

You’re herefor example, has ambitions plans to expand its portfolio sedans and SUVs to introduce semi-truck and supercar by 2023, with electric mountain bike, affordable vehicle $25,000 car and a van in the pipeline too.

A continued tightening of supply could hurt the likelihood of these additions occurring in time.

Likewise, Rivian plans to manufacture up to 400k vehicles per year from 2024, but are already scrambling to meet 55k pre-orders for its R1T and R1S by the end of next year. Next, it has the ambitious goal of providing 100k delivery vans to Amazon by 2030, but preferably by 2025.

To finish, Ford waits 40% to 50% of its global vehicle volume be fully electric by 2030. Ford said it will introduce three new electric passenger vehicles and four new electric utility vehicles in Europe by 2024. In addition, it plans to sell more than 600k electric vehicles in the region by 2026. Ford’s global goal is to sell more than two million electric vehicles per year and achieve an adjusted operating profit margin of 10% by 2026.

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