Electric Vehicles - 60% of sales by 2030?

According to an article in the AFR this morning, BHP has a much more aggressive forecast on sales of electric vehicles than 12 months ago, which led it to the bid for Oz Minerals. If BHP’s forecast turns out to be correct this will bring forward a strong demand for all electrification minerals including, copper, nickel, lithium, cobalt, graphite and rare earths.

Nickel Industries (NIC) has been forecasting a shortage of battery nickel from 2026 (see charts below).

The following is a direct quote from the AFR:

“This time last year, BHP was forecasting 25 per cent of global vehicle sales in 2030 would be electric vehicles. It now expects 60 per cent of vehicle sales in eight years will be electric, rising to 80 per cent by 2035 and 90 per cent by 2040.

Just over 4 per cent of global vehicle sales were electric in 2020 with about 87 per cent of those sales in China or Europe.

BHP now expects the proportion of electric vehicles within the global light vehicle fleet to be 45 per cent by 2035; a massive rise on the 17 per cent that BHP was forecasting as recently as February 2021.

If BHP’s upgraded electric vehicle forecasts are proved correct, a surge in demand for the metals linked to decarbonisation and electrification – copper, nickel, lithium, cobalt, graphite and rare earths – will likely emerge sooner.”

and from Nickel Industries BMO presentation (2022):

Disc: shares held in BHP and NIC

Wanted to have a closer look into the EV supply sector and those companies that are innovating in the area to extract more value or are more environmentally friendly.

I rode the last lithium boom in 2016 and did lock in some profits but also was left bagholding for years until the resurgance in 2020/21, namely PLS & GXY. I can't help but get drawn back in with the knowledge/battle wounds from last time to add some exposure to the sector in my PF

If I was to comment on the current state of the EV sector I'd say every man and his dog are looking at getting exposure here (its no secret) so I do think generally valuations are stretched but I'd like to learn about some of the innovators who could be future winners in the space so that if valuations were to pull back I know where to look and who to back.

I cant post pictures in a forum post so I'll attach my comparison table to a straw against VUL - Vulcan Energy, one with a stand out offering.

Below is a quick summary of the companies that I looked at and hope to start a conversation about these companies & others worth a look.

Pre-Revenue EV Supply Sector Comparison

Spent a bit of time looking into some of the EV supply companies on the ASX that are currently still in development but have some unique point of difference. The companies I looked at were VUL, LKE (Lithium), TLG & NVX (Battery Anodes) & QPM (Nickel). The standout for me in terms of story was VUL & valuation (risk adjusted return) QPM.

Brief overview of the company’s “story” below:

LKE – Lake Resources are using a direct lithium extraction technology (lilac) to extract the lithium from the brine and then pump the remaining solution back into the earth. Their project is located in the "lithium triangle" but rather than using the conventional salt evaporation ponds they're using a lilac technology to directly extract the lithium which has a smaller environmental footprint. They have proven that they can produce a 99.9% high purity lithium carbonate in their pilot plant but are yet to come out with their DFS (early 2022) with production scheduled for 2025.

VUL – Vulcan Energy are claiming to be the world first Zero Carbon Lithium business. Situated in Germany VUL will extract lithium brine from deep underground, the high temperature lithium brine will be used to generate power for their plant/equipment with the excess being sold into the grid. This hot geothermal brine is claimed to be Europe’s largest lithium resource. The hot brine will be transferred to Vulcan’s direct lithium extraction plant where the lithium will be extracted through “Resin column’s” before the brine is pumped back into the underground reservoir. The resin can then be flushed with water before being concentrated to produce a lithium hydroxide. This solution is then further refined & electrolysed to produce a high purity battery chemical. Commercial production is not scheduled till 2024.

NVX – Novonix have a multi face offering – Battery testing & development, Anode materials as well as an IP pipeline of battery technology. For the comp table I only focussed on their anode segment as from what I could grasp this is where substantial revenue will come from in the near future (also better suited to the comparison with TLG). The Novonix anode material business have developed a process to produce a “lower cost” graphite anode material with 500T of anode material going to Samsung later this year. NVX have a phased growth plan which ramps up from 10k T/Yr in 2023 to 40K T/Yr in 2025.

I really struggled with getting an insight into NVX in terms of hard numbers. Went back to 2019 and their presentations are full of great insight into the growth of EV’s and why their offering is superior but in terms of financials the best I could get was that cost of production would be somewhere between Japanese Synthetic and Chinese Synthetic (Presentation from 2019/20). Absolutely great management team & really compelling story but I put it in the too hard basket for now due to their current valuation. Although I chased the rabbit down the hole and came back empty handed on this one it may be worth revisiting when/if the valuation moderates and build out a simple DFC with their claimed production of 40K T/Yr by 2025.

TLG – Talga Group are a battery anode production company with mining operations in Sweden as well as a technology centre in the UK & a current pilot plant operating in Germany. Their current product is Talnode – C which is a graphite anode that can be produced in large volumes at a low cost. In the pipeline for future generations are a silicone graphene anode for higher energy density, a fast-charging battery anode & next gen solid state battery. The battery anode refinery in North Sweden will produce 19,000tpa coated anodes commencing in 2023 with feedstock coming from Taga’s Vittangi graphite project (currently going through permitting). Expansion to produce >100,000tpa are scheduled for 2025/26.

QPM – Queensland Pacific Metals are the owners of the Townsville Energy Chemicals Hug (TECH). The TECH project will produce critical chemicals for the lithium ion battery & EV sector. Ore will be imported from New Caledonia and processed in Townsville to produce nickel sulfate, cobalt sulfate, high purity alumina as well as other products (Hematite, Magnesia). The ore supply from new Caledonia is a high grade laterite source that is typically discarded (The nickel mining & processing sector was a rabbit hole but really interesting to explore). QPM have the vote of confidence in the form of binding offtakes & equity investment from LG Energy & Posco as well as some recent coverage from the local government. The QPM pilot plant has delivered these high grade battery chemicals and proven the process in sub scale form.

QPM was the most compelling offering on a risk adjusted return out of the companies I looked into. The DFS is due in early 2022 and expected to have doubled the scale of operation since PFS.

DISC – None Held