PDAC 2015: Battery minerals an oasis in the mining desert

By James Sean Dickson
Published: Friday, 06 March 2015

Most commodities are presently operating in a depressed market and financing environment. Lithium and graphite, and now to a lesser extent rare earths, are receiving interest that other minerals are not, owing to excitement in electric vehicles, grid storage solutions and high tech industries. However, even considering the extra attention, times are hard for battery mineral developers.

Most commodities are presently operating in a depressed market and financing environment. Lithium and graphite, and now to a lesser extent rare earths, are receiving interest that other minerals are not, owing to excitement in electric vehicles (EVs), grid storage solutions and high tech industries. However, even considering the extra attention, times are hard for battery mineral developers.

Graphite and lithium booths at the Prospectors and Developers Association of Canada (PDAC) 2015 conference in Toronto, Canada this week were party to a different atmosphere than the broadly depressed one experienced by many other exhibitors.

The relative level of interest in battery mineral projects, compared with properties in both the industrial minerals and wider metallic mineral commodity markets was noticeably higher, with a more positive development, financing and pricing feel being present at the conference for these minerals.

Referring to other struggling companies in other commodities which are circling the bankruptcy drain, one developer told IM that graphite and lithium companies are in far better shape, and are unlikely to experience the woes of the wider mining industry.

While lithium and graphite, and to a lesser extent rare earths companies, have struggled in the financing downturn relative to other commodities, the two minerals have received extra interest in the wake of Tesla Motors Inc.’s announcement during 2014’s PDAC that it would build a Gigafactory in Nevada, tasked with producing large volumes of batteries.

For lithium, the debate at the conference was not about supply or financing, rather where the extra demand would come from. Stria’s COO, Julien Davy told IM that the biggest short term demand would come from the "unglamorous" grid storage industry, while Pure Energy’s Jeremy Poirier and Nemaska Lithium’s CEO, Guy Bourassa said that the primary growth driver would be EVs.

Poirier and Bourassa focused on the excitement and expected vehicle industry shift, with Poirer noting the recent launch of General Motors Inc.’s new Volt model.

Davy, however, said that despite not receiving comparable media attention, real growth was already being seen in grid storage batteries, where industrial clients are driven by cost cutting and business requirements; he contrasted this against an as yet unconvinced general public who must make an active decision on purchasing an EV.

Graphite

Graphite also enjoyed some of the buzz from the battery space, though to a lesser extent than lithium.

One junior developer explained to IM that their company had reduced is costs as much as possible, partially by only supporting a small executive team, but they remained positive about the industry and their prospects for supplying a growing market.

Some of the positive sentiment was created by a greater interest in higher purity products by customers, which, in both graphite and lithium, means higher battery performance, longevity and efficiency, according to Stria’s Davy.

Meanwhile Focus Graphite Inc. is "basically done, we just need financing and equity," according to its vice president of corporate development, Jeff Hussey.

He also spoke of the importance of purity to spherical graphite consumers, adding that Focus’ graphite had lower costs and better performance results than synthetic alternatives.

Potash

Potash juniors, in contrast, need more than just the prospect of a growing market for their projects to reach production, which one source told IM has been priced into the stocks of agrimineral companies for many years now.

"Indeed, it will be hard for any potash juniors to enter production without the backing of a major," one potash developer told IM.

Muriate of potash (MOP) projects that do not have specific positive characteristics are unlikely to progress was the consensus by those attending from the agriminerals sector.

"High grades, impressive opex figures and well-designed mine plans are what investors should be looking for," the developer told IM.

"Once they hear a 'b’ for billion after a capex figure, they stop listening," the source said. "Scaled production and exploration may be the only viable way forward without a major."

Rare earths

Rare earths are due for an uptick in investor sentiment owing to their potential in EVs and other high tech applications, which have thus far only translated to excitement in lithium and graphite, sources told IM.

Light rare earths projects following Molycorp and Lynas Corp. have no chance of success, it was agreed, but companies with effective and cheap processing methods and a heavy rare earth favourable deposit will have greater development chances, delegates said.

With a shift towards light emitting diode (LED) lighting and related fall in phosphorescent tubing lighting use, europium may lose its crown as the top-priced rare earth, one developer told IM.

The focus of interest in the industry is now shifting to the rare earths most consumed in magnets, most of all dysprosium.

Frac sand

Silica (frac) sand, which was riding a large wave of interest until late last year, had an outlook of cautious optimism, despite the fall in oil prices that became one of the largest stories of 2014.

Victory Silica’s deputy project director, Laird Tomalty, told IM that despite the fall in oil price, frac sand companies would be protected by rising per-well consumption — which increases well yield — however, he said that this was a hard story to get across to investors.

Further to this, he imagined that fracking could displace Saudi Arabia as the "swing producer" of the oil industry, owing to each well’s smaller production volumes and faster depletion being ideal for short term production.

Although falling oil prices have been a cause for concern for oilfield mineral producers, so far, frac sand sales have held steady.