Europe's Big Reality Check On China

Written by Gerardo Del Real
Posted June 17, 2019

Northvolt, the ambitious project to establish Europe’s first homegrown gigafactory once viewed with skepticism, just received a major endorsement that brings Europe one step closer to reality.

The Northvolt project recently announced the agreement of a $1 billion equity capital raise led by Volkswagen Group and Goldman Sachs Merchant Banking Division.

The joint venture between the Volkswagen Group and Northvolt will be set up to establish a 16 GWh battery cell gigafactory in Germany.

Northvolt and Volkswagen have also announced plans to establish a second gigafactory with an intended location in Lower Saxony, Germany. 

The proposed 50/50 joint venture between Volkswagen and Northvolt envisions another 16 GWh battery cell factory.

The production facility is scheduled to start manufacturing battery cells for Volkswagen from late 2023 or early 2024 and could be increased to 24 GWh over the following years. 

Co-founder and CEO of Northvolt Peter Carlsson explained the significance of the deal:

“Today is not only a great milestone for Northvolt, it also marks a key moment for Europe that clearly shows that we are ready to compete in the coming wave of electrification, and that we will do so using battery cells which carry the lowest CO2 footprint possible,”

Though Volkswagen and Goldman are leading the charge, they are far from the only significant players lending their names and capital to the effort.

BMW Group, AMF, Folksam Group, and IMAS Foundation are also participating.

The European Investment Bank has approved in-principle a $400 (€350) million loan as a part of the total funding for Northvolt Ett. Together with additional debt being raised, the establishment of the initial 16 GWh of lithium-ion battery cell manufacturing capacity at Northvolt Ett is enabled. Building construction work will commence in August with large-scale production estimated to begin in 2021.

When I first told you about Northvolt, the project employed 12 people. That number has now grown to over 300.

The company has an operational research lab and two cell factories under construction in Sweden — Northvolt Ett in Skellefteå and Northvolt Labs in Västerås — as well as one battery systems factory in Gdańsk, Poland, already in production.

Because of the region’s clean power base, building the factory in northern Sweden will enable Northvolt to utilize 100% renewable energy within its production processes.

The development of a non-Chinese green battery value chain is critical for Europe’s future.

So how do we make money from this massive trend? By finding answers to simple questions.

Questions like, where will the raw materials come from?

It’s not just me asking. Recently, the European Commission underscored the importance of mining in Europe in one of the loudest endorsements of responsible mining projects I’ve heard in some time from the region.

Listen to what Vice President Maroš Šefčovič told the European Investment Bank (EIB) Board of Directors at a recent board meeting.

"The work is far from complete. We still have a major gap in the battery value chain: I would like to address the critical issue of access to raw materials.

"Without undertaking its own exploration, the EU will have no mining projects. This, in turn, means no refineries and, without refining capacity, the EU will continue to be in great part dependent on foreign supplies of high quality materials.

"In a nutshell: we cannot sit idle while China is taking control of all the supply. (emphasis mine)

"Our companies have the world most innovative processes and apply the highest environmental and social standards — they can make a real difference on the ground in resource-rich countries.

"But they also need more de-risking from public investors.

"Concerning battery raw materials, current EU mining production represents a very small portion of global levels: 14% for nickel, 8% for cobalt, 1% for natural graphite and lithium.

"And refining is completely missing in Europe for the latter – which means that even if we were to ramp up production for batteries — as planned — for 2023/25 and invest in extraction activities, we would still need to ship lithium to China and back for refining!

"Unless we develop our own capacity."

That’s as clear as it gets. The EU is going to get behind real companies with real projects that can provide the raw materials the region needs to break free from the dependence on China.

I explained this to you years ago and picked a company that was the clear leader amongst juniors in the space.

I was early but that same company now stands to benefit from the rush to develop this European supply chain.

It has graphite projects, lithium projects, rare earth assets, and is now developing a robust portfolio of copper, cobalt, and gold assets in a country that is also now becoming louder in its support for responsible mining.

Click here to get the research you need to take advantage of Europe's reality check and its big investment push.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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