Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
South African precious metals miner Sibanye-Stillwater (JSE: SSW) (NYSE: SBSW) has taken a 50% stake in ioneer Ltd’s (ASX: INR) lithium-boron project in Nevada for $490 million.
The deal is one of the largest ever in the US lithium market and comes amid rising concerns that, without more investment, demand for the metal could far outstrip supply and delay efforts to combat climate change.
It marks Sibanye’s third battery metal investment this year, following its acquisition of a 30% interest in the Keliber lithium mine in Finland and the purchase of a nickel processing plant in Normandy from France’s Eramet.
The companies said they will form a joint venture to develop the Rhyolite Ridge lithium mine, roughly 355 km (220 miles) north of Las Vegas.
Deal is one of the largest ever in the US lithium market and comes amid rising concerns of an imminent supply shortage
Ioneer will remain the project’s operator and tap Sibanye’s experience as the world’s largest miner of platinum group metals (PGMs) to develop the mine, which also has a large supply of boron, used in soaps and other consumer goods.
Sibanye-Stillwater has agreed to subscribe for strategic placement of new ordinary shares in ioneer equal to 7.1% of the Australian miner’s ordinary share capital post placement, for about $70 million.
Both miners noted will start working on secure debt financing to fund the remainder of the $850 million project. Full financing and necessary permits are expected by the end of next year, the miners said, and the project is expected to begin production by the end of 2024.
The deal includes ioneer’s right to expand operations to a nearby lithium deposit, in which case Sibanye will have the option to pay $50 million to secure a 50% stake in that project.
Rhyolite Ridge is an advanced stage, large and long-life lithium project located close to Tesla’s Gigafactory and relatively nearby ports in California.
“Rhyolite Ridge is a world-class lithium project and we recognize its strategic value, with the potential to become the largest lithium mine in the US,” Sibanye-Stillwater chief executive Neal Froneman said in a statement.
Once operational, the Nevada mine is set to produce 22,00 tonnes of lithium hydroxide, the type used in most Tesla batteries.
“This transaction is the most significant yet for Sibanye-Stillwater in green/battery metals and in line with the strategy of acquiring assets with proximity to end-user markets,” BMO Capital Markets analyst Raj Ray said in a note to investors.
“With close to ~95% of Sibanye-Stillwater’s value concentrated in the PGM business,” Ray wrote, “the increasing diversification into the green energy/battery metals space provides a strategic growth area for the company.”
The planned mine is expected to boost local lithium supply to US carmakers and battery producers. In June, ioneer signed an agreement to supply lithium carbonate to a unit of South Korean battery maker Ecopro. But the mine has faced opposition from some conservationists because of the presence of the rare Tiehm’s Buckwheat flower on its site.
