Why Batteries Are The Biggest Thing In Africa

Written by Jason Simpkins
Posted February 17, 2017 at 8:44PM

For two decades now, all of Africa’s most important mining executives, investors, and analysts have gathered annually in Cape Town, South Africa at one of the industry’s biggest forums.

This year, from Feb. 6 to Feb. 9, more than 6,000 delegates attended, including representatives from Ivanhoe, Rio Tinto, Anglo American, De Beers, RoxGold, Uranium One, Newport, Newcrest, Freeport McMoRan, and more.

And what was the main point of discussion this year?

Batteries.

Lithium battery demand has almost single-handedly resuscitated global industrial mining.

As you’re no doubt aware metals prices collapsed completely in the wake of the 2008 financial crisis. To this day, industrial demand remains relatively stagnant in mature markets. And China and India — the cornerstones of the emerging BRICS — have seen their once-rapid growth cool to a crawl.

Well, it’s battery demand, more than anything else, that’s brought metals like copper, nickel, and zinc back from the brink. More importantly (to investors anyway) it’s awakened investors to new markets for previously unheralded metals like lithium and carbon.

Lithium, of course, made the most noteworthy jump — surging from $6,000 per tonne to $21,000 per tonne in just a matter of months. The metal made headlines and fortunes alike.

Nickel, meanwhile, is up 35% over the past year, and cobalt prices have doubled.

What these metals have in common is that they’re all key components in certain types of batteries.

Tesla, for instance, uses nickel-cobalt-aluminum batteries for its electric cars, while GM uses nickel-manganese-cobalt. Chinese manufacturers now also favor a nickel-manganese-cobalt blend, after traditionally leaning on lithium-ion-phosphate.

And that’s why Andrew Grant, a data analyst at Bloomberg New Energy Finance, stood up in front of the Investing in African Mining Indaba last week and assured everyone that the battery revolution is real.

Soaring prices of lithium, cobalt, and carbon are not a bubble. They are underpinned both by rapid growth in electric vehicle sales and tight supplies.

According to Grant’s analysis, electric vehicles are expected to make up 35% of the automotive market by 2040. Just as importantly, long-range electric cars will cost less than $22,000 by that time.

Prices for used EVs have dropped 15% over the past year, and the price of used plug-in hybrids is down 5%. By comparison, the price of used gasoline-powered cars has fallen just 1% over the same period.

Again this all goes back to batteries, which have seen a huge reduction in cost. The cost of lithium-ion batteries has fallen by 65% since 2010, reaching $350 per kWh in 2015. Citing Bloomberg surveys, Grant predicted the cost would be just $109 per kWh by 2030.

In addition to being cheaper, these batteries are also more efficient. New and second-generation plug-in models can go farther on a single charge than their predecessors. And this is key.

A year ago, most hybrid and electric vehicles got just 80 to 100 miles per charge, but the incoming generation has doubled that. The Nissan Leaf, Chevy Bolt, and the Tesla Model 3 all have a 200-mile range. And some others, like Audi's R8 e-tron, are up near 300 miles of range.

These technological advancements have accelerated sales. Furthermore, they’ve demonstrated a significant competitive advantage for car companies. It’s a race to build the best battery. The manufacturer with the most efficient — the most cost effective and potent — battery wins.

At the same time, auto demand has completely recovered from its crisis-level depths. Both 2015 and 2016 set records for U.S. sales. Electric vehicle sales surged 35% last year and 70% in January 2017.

US EV Sales

Hence, the doubling of cobalt and tripling of lithium prices.

And if you missed out on those, don’t worry. There’s another key battery component that’s on a similar trajectory right now.

We’ve been talking about pure carbon for weeks, and this is why. It makes up 80% of lithium-ion batteries.

Pure carbon demand is expected to double this year, from 80,000 tonnes in 2016 to 160,000 tonnes.

The Gigafactory battery plant that Elon Musk opened last year will consume 115,000 tonnes of the metal annually — all by itself. And by 2020, demand is projected to reach a towering 360,000 tonnes.

rsdp-pure-carbon-demand

The ultimate result of this demand growth will be a price surge that dwarfs what we’ve seen in lithium and cobalt.

The only reason no one’s really talking about it is because China has such a commanding stranglehold on the industry.

In fact, if you combine the output of every other pure carbon producer (a list that includes India, Brazil, Turkey, Canada, North Korea, Mexico, Russia, Norway, and Zimbabwe) you get just half of what China produces.

Of course, that’s something we’ve remedied by finding a loophole.

We’ve found one of the few, maybe the only, pure carbon mine that’s currently open for investment.

It’s located in Sweden of all places. It’s brand-new and it produces pure carbon of a quality not seen anywhere else in the world. The quality level is so high that it comes right out of the ground in flakes that are at 95% purity or higher. By comparison, approximately 70% of Chinese production is fine or amorphous graphite while just 30% is flake.

This is absolutely huge, because, up until two years ago, there hadn’t been a single new non-Chinese mine since the 1980s.

It’s pretty much the only way to get in on this market right now. (There’s no “Pure Carbon ETF.”)

For that reason, we’ve gone all out, putting together a special report.

It focuses on all things pure carbon, including this company that absolutely no one else is talking about right now.

So, if you’d like to find out more, if you’d like to get in on a boom that is going to dwarf the magnificent runs we’ve seen from lithium producers, you should check that report out by clicking here.

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Jason Simpkins

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Jason Simpkins is a seven-year veteran of the financial publishing industry, where he's served as a reporter, analyst, investment strategist and prognosticator. He's written more than 1,000 articles pertaining to personal finance and macroeconomics. Simpkins also served as the chief investment analyst for a trading service that focused exclusively on high-flying energy stocks. For more on Jason, check out his editor's page. 

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