Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Anglo American (LON: AAL) said on Friday is actively looking for lithium off-take deals as demand from customers, particularly those tied to the electric vehicles (EVs) sector, continues to rise.
The company, which already produces key battery metals including copper and nickel, said buyers are asking for more types of the metals considered key for the world’s transition to a greener economy.
“We don’t have a lithium mine and we don’t trade it, but we are on the lookout for lithium,” Paul Ward, head of marketing for base metals, said on the sidelines of the CRU World Copper Conference Asia in Shanghai this week.
Anglo American has been expanding into commodities beyond base and precious metals. It bought the Woodsmith fertilizers mine in 2020, after previous owner Sirius Minerals struggled to raise funding.
Woodsmith has the world’s largest known deposit of polyhalite, a naturally-occurring mineral containing nutrients including potassium, calcium, magnesium and sulphur, which is marketed as POLY4.
Anglo, whose market capitalization currently sits at £30.36 billion ($37.7bn), bought Woodsmith for £405 million ($527m at the time). The acquisition drove the mining giant to book a $1.7 billion writedown in February.
The company’s strategy to jump on the battery metals wagon seems less risky. Anglo is planning to provide debt financing for brown-field or green-field projects, with the objective of getting a hold of off-take material for those metals, Ward said, according to Reuters.
“It’s a very competitive market, but [one] we’re very engaged in and then we put resources and investment behind it to find the right opportunity,” he said.
“If there are opportunities to secure lithium that’s already been mined, that we feel comfortable with, and that is in the right form that we can sell directly to our customers, then that’s also of interest,” he said.
While EV sales are growing faster than any other major car category, big industry names including General Motors, Ford and Tesla, have recently announced they would delay spending because of slower sales.
Data compiled by HSBC shows carmakers are, for the first time, having to offer deals on EVs in order to shift vehicles that previously had months-long waiting lists.
Lithium demand from the EV sector exceeded supply in 2022 for the second year in a row, despite the 180% increase in production since 2017, according to data from the International Energy Agency.
Global demand for 60% of lithium, 30% of cobalt and 10% of nickel produced last year came from EV battery makers, the IEA said.
The agency said EV sales totalled 10 million in 2022 and is expecting the figure to rise to 14 million this year.
