Fitch Solutions Country Risk and Industry Research expects to see an increase in lithium development projects in Africa, particularly from Chinese firms, with investment buoyed by expectations for lithium to resist the downwards trend of most nonferrous metals in the second half of the year amid strong demand.
Fitch Solutions estimates that, currently, there are nine lithium mining projects in development in Africa – in Zimbabwe, Namibia, Mali, Ghana and the Democratic Republic of Congo (DRC) – which is still small relative to the number of projects being developed in the Americas, Australia and Europe.
Zimbabwe is expected to remain the largest lithium producer on the continent in the near term, with production growth underpinned by the Arcadia lithium project and government support.
Fitch Solutions adds that the advancement of the Karibib project in Namibia could benefit environmental, social and corporate governance-focused European battery manufacturers.
Meanwhile, it points out that political instability in Mali is likely to pose risks to project development.
It further notes that continued success at AVZ Mineral’s $454-million Manono project, in the DRC, will add upside to the development of the domestic lithium sector.
Fitch Solutions says projects in countries with lower levels of country risk, such as Ghana, will be more likely to attract financing from risk-averse investors.
The unit expects to see an increase in lithium developments in Africa, amid its bullish outlook for a sustained recovery in prices.
It highlights that lithium is a critical raw material necessary for the transition to a green economy.
Efforts to diversity lithium sources will attract foreign investment into Africa in the coming years as major economies look to secure lithium for their battery supply chains, Fitch Solutions posits.
The unit expects that the Americas will remain a significant producer of lithium in the coming years, with strong production from Argentina and Chile and considerable upside in Canada. It says that the Americas will remain steadfast in the global race to develop and produce critical raw materials and will demonstrate very strong growth over the coming decade.
The continent is expected to capitalise on its considerable resources.
In terms of resources, the lithium triangle, consisting of Argentina, Bolivia and Chile, alone accounts for 56% of the world's known lithium resources, and Fitch Solutions expects this dominance to continue as it will take considerable time for the others to catch up despite accelerating exploration.
Owing to the profitable nature of brine extraction in the lithium triangle, Fitch Solutions expects significant investor interest in the area in the coming years, leading to project development and rising production, although challenges relating to resource nationalism and community opposition are expected to rise.
Canadian firms are also expected to benefit from a supportive regulatory environment, targeted State-backed investments into infrastructure, and the rapid growth of battery and electric vehicle manufacturing investment in Quebec and Ontario.