Lithium Demand to Exceed Supply, Requiring Over $100 Billion Investment by 2030

The rapid growth of electric vehicle adoption is poised to drive lithium demand to unprecedented levels by 2030, requiring massive investment in new mines and processing facilities. According to forecasts, automaker EV targets and government policies banning new internal combustion engine (ICE) car sales could propel lithium demand to 5.3 million tonnes by 2030, more than 5 times today's production of 915,000 tonnes. Meeting this "high case" scenario would necessitate lithium industry investment exceeding $116 billion by the end of the decade, over double the $54 billion required under more conservative demand growth assumptions.

The bullish projections for 2030 lithium demand stem from automakers like GM, Mercedes, and Tesla aiming for 100% EV sales by 2030-2035. They also factor in EV sales penetration increasing to 82.5% globally, accelerated by policies like the EU and China prohibiting new ICE sales. To satisfy potential 2030 requirements, lithium supply would need to expand nearly 6x from today's levels. Even if all current projects come online, an additional 1.8 million tonnes of new production capacity would be required.

Recognising these supply needs, automakers are investing directly in mines and processing, with over $5.6 billion deployed so far by companies like GM, Tesla, CATL, and BYD. New policies like the IRA's $7,500 EV tax credit in the US will further stoke lithium demand, while providing tax incentives for domestic production. With this massive growth on the horizon, investors have a critical window to finance expansions before 2030. Any delays could prevent automakers and governments from meeting climate and EV adoption goals.

Where is the Money Going to Come From?

Here are some potential sources for the plus $100 billion in investment that may be needed in the lithium industry by 2030:

• Automakers - Brands like GM, Mercedes, Tesla, CATL, and BYD have already invested over $6 billion directly into lithium mining and processing projects, and are likely to invest billions more to secure future supply.
• Mining Companies - Major mining firms will need to invest heavily in expanding existing lithium mines and building new ones to boost production capacity. Companies like Albemarle, SQM, Livent, etc. are likely sources.
• Junior Miners - Junior mining companies focused on lithium will need capital to develop new projects. Equity financing or partnerships with major firms are likely financing routes.
• Private Equity - PE firms are increasingly investing in battery metals projects. Reports suggest over $5 billion has already been invested in the lithium supply chain. More is likely.
• Government Funding - Government grants, loans, and incentives could help fund some capacity growth. For example, the US Department of Energy (DOE) has already provided a $700 million loan for Ioneer's Rhyolite Ridge lithium project alone.
• Debt Financing - Companies will raise significant capital via debt markets and bank loans. For example, lithium producer Allkem recently secured a $1.25 billion loan facility.
• Strategic Investors - Auto parts suppliers, battery makers, tech companies may make strategic investments to secure lithium access. For example, LG Energy Solution recently invested in Li-Cycle.

So in summary, funding will likely come from across the lithium supply chain, but automakers, miners, and private investors are expected to provide the bulk of the capital needed.

How does your Lithium Stock Benefit?

This increasing demand and need for massive investment in lithium production could significantly benefit public companies in the lithium industry in several ways:

• Revenue Growth - With lithium prices already high and forecast to remain strong, lithium producers like Albemarle, SQM, Livent, etc. should see revenues and profits grow as demand increases.
• Rising Share Prices - Lithium stocks have outperformed the market recently and may continue to rise as investors see the potential for massive growth in the industry. Lithium companies could become takeover targets.
• More Funding Opportunities - Lithium companies will have greater access to capital as investors and lenders look to deploy money in the space. This provides funding for expansions.
• Accelerated Expansions - With more investment capital available, lithium companies can fast-track plans to increase production capacity and capitalise on growing demand.
• De-Risking Projects - Increased investor interest allows lithium companies to spread risk across more projects and partners. This improves the chances of projects succeeding.
• Vertical Integration - Some lithium producers may pursue further integration into downstream processing to capture more of the profits from battery materials.

Overall, lithium companies are poised to benefit from surging demand, especially those well-positioned to boost production. However, not all companies will be winners, as funding and capacity growth will be highly competitive.

Companies to Watch

Li-FT Power‍

Li-FT is a mineral exploration company focused on acquiring and developing lithium pegmatite projects in Canada. Their flagship Yellowknife Lithium Project in Northwest Territories contains 13 lithium pegmatite dykes near infrastructure and they have initiated a 45,000 meter drill program in 2023 to define resources. Li-FT also has the early-stage Cali Project in Northwest Territories within a historic lithium pegmatite belt and drilling is planned once permits are received. In Quebec, Li-FT has three large exploration properties near the Whabouchi deposit where 10 targets have been generated and initial drilling of two targets will occur in summer 2023 with more exploration planned for 2024. Overall, Li-FT is advancing a portfolio of Canadian lithium assets through systematic exploration and drilling.

American Lithium‍

American Lithium is developing large-scale lithium projects in Nevada and Peru as well as one of the world's biggest uranium projects, with the goal of playing a major role in the transition to sustainable energy. The company's core assets are the advanced-stage TLC lithium project in Nevada and Falchani lithium project in Peru, which have robust preliminary economic assessments. American Lithium also owns the Macusani uranium project in Peru, which has seen significant historical development. With assets at various stages of pre-feasibility and feasibility studies, American Lithium is positioned to be a major player in lithium and uranium mining.‍

Frontier Lithium‍

Frontier Lithium is a preproduction company focused on becoming a major domestic supplier of lithium in North America for the electric vehicle and energy storage markets. Its flagship PAK lithium project in Ontario contains the highest grade lithium resource in North America and is the second largest by size at over 27,000 hectares. The project has delineated two premium spodumene-bearing lithium deposits, PAK and Spark, as well as two other discoveries, Bolt and Pennock. A 2023 pre-feasibility study forecasts a 24-year project life with a post-tax NPV of $1.74 billion and 24.1% IRR based on producing spodumene concentrates and downstream lithium hydroxide. The project has significant potential for further exploration and resource expansion.

Neometals

Neometals is an emerging sustainable battery materials company that has developed proprietary technologies to produce battery materials like nickel, cobalt, lithium, and vanadium from recycled lithium-ion batteries and steelmaking by-products. Through joint ventures, Neometals is commercializing LIB recycling operations, vanadium recovery from steel slag, and lithium chemicals production. These technologies aim to promote circular economic principles by recovering valuable battery materials from waste streams and reducing reliance on conventional mining. Neometals is actively developing and scaling up these operations through partnerships in Europe and North America.