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The EV future is here and already boosting earnings for miners

23rd February 2018

By: Bloomberg

  

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MELBOURNE – The booming electric vehicle revolution is flowing through to the bottom line of a growing list of global miners, who are reaping higher profits from rising demand for battery raw materials.

Orocobre reported Friday that net income rose 11% in the December half and forecast lithium prices to gain about a quarter this half. The supplier, with an operation in Argentina, follows miners from the US to Australia, including FMC and Mineral Resources, in posting earnings gains on firming prices and higher volumes.

“All of the international producers will have had increases in their contract pricing for this year’s deliveries,” Orocobre CEO Richard Seville said in a phone interview. The outlook for further price gains is strong as rivals add higher-cost supply to meet accelerating demand, he said.

Prices of key ingredient lithium are continuing to gain on tight markets and as auto makers including Daimler AG to Ford Motor Co. set out ambitious plans to expand EV production. Average global lithium carbonate prices jumped 9 percent last month, according to Benchmark Mineral Intelligence data.

The lithium industry is also beginning to showcase stronger earnings as miners, including Albemarle and Sociedad Quimica y Minera de Chile, look to bolster production, according to Seville. “They are all delivering profit growth in this sector.”

Philadelphia-based FMC, a top five producer, said this month annual revenue from the battery material jumped about a third in 2017. Albemarle and SQM, the No. 1 and No. 2 suppliers last year, are scheduled to report earnings next week.

Brisbane-based Orocobre is partnering with Toyota Group’s trading unit on plans to construct a processing plant in Japan, and is also seeking to expand its Olaroz operation in Argentina. “We’ll see ourselves stepping up a little bit in the next financial year,” Seville said.

Perth-based Mineral Resources said this month first-half net income jumped 16%, boosted by exports of lithium raw materials. Earnings from the company’s lithium division will become its biggest cash generator in fiscal 2019, overtaking the mining services business, according to Deutsche Bank AG forecasts.

Galaxy Resources, which reports in March, boosted quarterly earnings from its Mt. Cattlin mine by almost 60% in the final three months of 2017, filings show. Neometals, a partner in an Australian mine with Mineral Resources and China’s top producer Ganfeng Lithium, is also scheduled to detail profits next month.

The outlook is strong for the entire battery minerals sector, including graphite and cobalt, Mineral Resources MD Chris Ellison said on an earnings call this month. Lithium is well positioned with fast rising demand and a potentially weaker-than-expected supply response, he said.

“If you look at what’s required over the next 50 years, 60 years, and have a look at the known lithium on the planet, I don’t think it’s as much as everyone understands it to be,” he said.

Edited by Bloomberg

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