Electric Vehicle Growth Creates East-Asian Battery Mineral Boom

The popularity of EV is expected to create two- or three-fold increases in demand for battery minerals over the next decade

The dramatic rise of electric vehicles (EV) is creating a surge in business for companies mining battery minerals, especially for companies operating in Indonesia, one of the world’s top producers of battery minerals.

Bolt Metals Corporation (CSE:BOLT) (OTCQB:PCRCF) (XFRA:NXFE) (BOLT Profile), one of the companies working in Indonesia, recently announced a name change as it rebrands itself a leading resource developer in this growing market. Other companies in the surging market include BHP Group Limited (NYSE:BHP), which has major nickel-production facilities in Australia and sells 75% of its nickel into battery-supply chains. Freeport-McMoRan Inc. (NYSE:FCX) has a large operation in Indonesia producing copper, another key battery component. The world’s largest producer of lithium, Sociedad Quimica y Minera (NYSE:SQM) is working to establish a focus on socially responsible mining. VALE S.A. (NYSE:VALE), one of the world’s largest nickel producers, recently launched a new strategy for safe expansion of its mining operations.

Electric Vehicles Drive Battery Metal Market

The last decade saw several big trends in technology. One of the most dramatic was the rise of the electric vehicle. A pipe dream of green technologists at the start of the decade, these cars made big leaps forward. By 2018, global EV sales had reached 2 million units, and that number is expected to double to 4 million in 2020. In addition, the once-lofty price of these vehicles is falling, and their battery packs could be cheaper than equivalent combustion-engine models as early as 2022.

This momentum is causing huge growth in the market for the metals used in EV batteries. CRU Mobility and Energy Futures has predicted that the EV market will need around 1.3 million tons of nickel each year by 2030, compared with 600,000 tons in 2018. Cobalt is facing a similar rise in demand, with experts predicting a 332% increase in global supply from its 2017 levels, to 314,000 tons per annum.

Changing Brands for a Changing Market

This changing market is driving changes in the companies working in the industry. This is reflected in the changing strategies and branding of mining companies such as Bolt Metals Corp. (CSE:BOLT) (OTCQB:PCRCF) (XFRA:NXFE), which is going through a significant rebranding that included a name change from Pacific Rim Cobalt Corp.

To outsiders, name changes like this can look like little more than window dressing. But for observant investors, and for those on the inside of these changes, they often represent significant shifts in focus. While Bolt Metals isn’t dividing or merging with another company, its name change reflects a steady shift in line with global markets.

“Rebranding the company is an important step in our emergence as a resource developer in Asia’s expanding electric vehicle supply chain,” said Bolt Metals CEO Ranjeet Sundher. “The company remains focused on acquiring and developing production-grade, battery-metal projects within the Asia Pacific region, while employing a vertically integrated ‘mineral‐to‐market’ strategy to leverage these assets to their fullest.”

Bolt Metals has been moving away from its initial position as a cobalt producer and into a broader position as a battery-cathode material supplier. BOLT’s Cyclops mining project in northern Indonesia reflects this, providing a rich source of cobalt and nickel.

But it’s the mine’s location, as much as its resources, that is creates potential for the Cyclops project, a new direction for Bolts Metals and a reflection of bigger changes in the EV market.

Indonesia: The New Electric Vehicle Hub?

Indonesia is richly supplied with the mineral resources that the EV industry needs. This includes 25% of the world’s nickel reserves as well as other metals such as cobalt. These are crucial metals in the production of EV batteries and, therefore, in the entire supply chain for these vehicles.

Bolt Metals’ Cyclops mining operation is designed to tap into these rich resources. Throughout 2019, the company has been carrying out surveys and test drilling, as well as assessing existing records on the mineral resources at a site in Papua Province, on the north coast of Indonesia. This intense research has confirmed the presence of significant high-quality deposits near ground surface at the site. As Bolt Metals moves forward with plans for extraction, testing and processing, the company does so secure in the knowledge that the minerals are not only present but easily accessible.

The richness of Indonesia’s mineral deposits isn’t the only reason for the country’s growing prominence in the EV supply chain. Its location on the edge of the Pacific gives Indonesia a direct nautical transport route to Japan, a major player in developing new technology, and even more critically to China. China is developing its own battery industry, becoming a leader in the production of power cells for all sorts of products. This makes both countries hugely significant markets for EV minerals, one to which Indonesia can easily cater.

The Indonesian government is making the most of these advantages to actively foster its EV industry. In August last year, Indonesian president Joko Widodo signed a decree setting out the government’s support for Indonesian EV production. This support includes reduced tariffs for companies importing equipment for EV production, thereby making it easier for the industry to grow. New regulations are creating a profitable space for companies such as Bolt Metals.

Feeding the Chinese Battery Market

While domestic EV is critical to Indonesia’s strategy, that doesn’t mean that the country is turning its back on the Chinese market. On the contrary, major Chinese companies are following a similar path to Bolts Metal, investing in the Indonesian mineral industry to ensure the supplies they need for battery production.

It would be hard to overstate the significance of China in the global battery market. According to research by Benchmark Mineral Intelligence, out of 115 lithium-ion-battery megafactories around the world, 88 are in China. The country has positioned itself as a critical nexus in the global technology supply chain, and while China’s power has previously been most obvious in consumer electronics, it has also played an important part in the rise of EV, as reflected in deals such as the that between Tesla and Chinese battery maker Contemporary Amperex Technology Co Ltd.

For companies operating in Indonesia, such as Bolt Metals, this means a double opportunity in EV exists. On the one hand, there’s a chance to become involved in the foundation of an integrated EV market within Indonesia, in which minerals can be delivered quickly and easily to a fast-growing market. In addition, there is an opportunity to become involved in exporting to China, perhaps the largest market for these minerals in the world.

With rich mineral deposits and two substantial markets, Bolt Metals and other battery-mineral companies in Indonesia are anticipating a bright future.

A Critical Industry

Since before the industrial revolution, mining has been a critical industry in many parts of the world. The rise of portable electronic goods and EV have made battery-mineral mines particularly important, and many companies have seized the opportunity to establish a presence in the space.

Working in various chemical business lines, Sociedad Quimica y Minera (NYSE:SQM) has a presence in 115 countries and over $2 billion in sales. One of its key lines is the production of lithium, a critical mineral for EV production. The largest, lowest-cost producer in the lithium market, SQM is an important player in the battery supply chain. It’s also a company that takes its wider responsibilities seriously. It recently had its certificate of responsible conduct renewed by the Chilean Chemical Industry Association’s Responsible Care Commission, reflecting its sound working practices in sometimes dangerous industries.

Headquartered in Melbourne, BHP Group Limited (NYSE:BHP) is another large, diverse resource company, working in minerals, gas and oil. Its Nickel West arm mines, concentrates, smelts, and refines nickel in western Australia. Over 75% of its nickel goes towards the production of batteries. The company is currently building a plant to produce nickel sulphate, for use in the lithium-ion batteries that power EVs. Demand for mineral resources created a healthy 2019 for the company, which saw its attributable profit rise by 39%.

One of the world’s largest mining companies, VALE S.A. (NYSE:VALE) produced 244.6 metric tons of nickel in 2018. Its nickel is extracted from mines in Brazil, Canada, New Caledonia, and Indonesia, the latter providing it with access to the same profitable markets as Bolt Metals. The company faced a challenging year in 2019, thanks to an accident at one of its mining operations, and this has given it a renewed focus. In December, Vale announced a strategy for safe growth over the next few years, which will help in balancing profits with safe, lasting expansion.

Freeport-McMoRan Inc. (NYSE:FCX) also mines in Indonesia, where it has access to one of the world’s largest copper and gold deposits. Copper’s extensive use in renewable energy and EV means that the company’s three Indonesian mines could become another major source of resources for Indonesia’s EV developments, as well as the EV battery industry around Asia and the Pacific.

With EV rising dramatically in popularity, mineral producers are going to be kept busy supplying a growing battery industry, creating a more sustainable future for transport.

Category: Electric Vehicles, Featured, General Update, Green, News