You're listening to The Whole Truth, a Resources Rising Stars podcast.
Hello and welcome back to The Whole Truth podcast. I'm Paul Armstrong. We take a good look at lithium in this episode of the podcast. We talked to Mr. Lithium, Ken Brinsden. He's the managing director of PMET. The company owns one of the great lithium resources of the world in Canada. Ken takes us through where they're at with this project and why he believes this could turn out to be one of the big monsters of the lithium industry when people look back on it in 10-20 years' time. This is not just another little development. This is huge by any standard.
And it comes at a perfect time because lithium prices have been rising sharply. And that's the point at which we start this conversation, because when we last spoke to Ken about a year ago, lithium prices were down and out. He told us they were going to recover, and we all know what's happened since. It puts a different color around what Ken says might happen over the next 12-24 months. As I said, he's Mr. Lithium. He's very connected in this space. He speaks to the big players in China, Europe, North America all the time. He has some fascinating insights, and he also explains why his company's project is so well placed to capitalize.
Ken, welcome back. When we spoke about a year ago on the podcast, I think lithium prices were down and out, and you told us that they were going to recover. One of the things you said that would be the key drivers was this battery energy and storage, which you said would be the hot new thing. We look at where we're at today. I think at the time many people would have thought, 'Well, he would say that, wouldn't he? He's running a lithium company.' And now we look at it today, you've been proved pretty right.
Yeah, we were shouting from the rooftops about the changes that were emerging in the market, and stationary energy storage was a big source of demand, and we could see that unfolding. We could see the behavior changing from key suppliers and those demand subsets starting to emerge. And yeah, thankfully that's what's come to pass. It's meant that the market has rebalanced much, much faster than most analysts were expecting, and the price is suitably responding. Did you know today, Paul, 40% of lithium-ion battery demand is now coming from stationary energy storage? Nobody would have imagined that even just 18 months ago.
But there's more, because Paul, the other one that nobody is now talking about, and we should be again shouting it from the rooftops, another big source of demand is diesel replacement. The concept that EV trucks... Exactly. Trucks, mid-size commercials, lorries. They are huge, and they are now very, very economic because the cells are cheaper. So that's the next one that we need to be talking about.
And in your previous life running an iron ore company, you're well familiar with big trucks in the Pilbara and what's required. Can you see the day coming where those diesel trucks are replaced by battery-powered trucks?
Absolutely, Paul. And the bit that people underestimate is how quickly the technology is emerging to support exactly that aim. Larger battery packs and faster charging translates to successful battery-operated trucks, whether you're operating in the underground environment or in open pit environments. We're now into the megawatt charging scale. Nobody would have imagined that, not even just 3 years ago. So they represent big changes, and that's why the world is going to move on and the world is going to electrify.
Now, battery-powered boats are also being spoken of.
Yep. This is all part of the same thematic. What was considered hard to abate in the fossil fuel world is getting easier and easier because the technology continues to improve. This is what people underestimate about ultimately the scale in lithium demand. Because the cells become cheaper, the application of the technology is easier to deploy, things like faster charging. They all translate to faster adoption, and that's why we're all going to continue to be surprised by demand.
So, where does this leave the price? Obviously, as we said at the outset here, the price has surged since you were last on the podcast, and it's been a great few months for lithium. Is this a temporary spike? Is it a dead cat bounce, or is it sustainable?
No, no, no. It's probably something that sits somewhere in between. What was required to grow lithium raw material supply in the face of that emerging demand I've just described is a lot more raw material supply. Now, what that means is that every player in the market has to go to all four corners of the globe to support supply growth that's easily 30% plus. You know, last year battery growth was 49%. The implication is that you pretty much needed 45% plus growth in lithium raw materials. To make that happen, costs go up because you go to lower grades, you go to areas that are harder to recover, typically more logistics, more remote. That all translates to higher cost, and that's why the world is underestimating the average cost base in lithium raw material supply, and that's why we can be more confident about price. Now, that doesn't mean that volatility goes away. I don't mean to say that. But can we expect the long run price to be higher than what people quote today? I think the answer is absolutely yes.
So, where does this leave PMET's project here in Canada? I mean, your talk around this project from the outset was always that it would provide an alternative to sort of ultimately to Chinese supplies. You would feed the North American battery groups and European groups. Is that still the plan?
Yep, absolutely. That's first prize, Paul. And a project like ours that's got the combination of scale, grade, low cost, and actually arguably diversified product flow means that we can help underwrite Western-facing supply chains. So that's first prize, but that doesn't mean that we can't compete.
Are the Europeans and North Americans closing the gap on China?
Yeah, they are. There is more investment going into the supply chain. So no two ways about it. Battery facilities in North America and Europe, cathode making facilities. It's clearly not the scale of China today, but they're getting there. And I guess projects like ours, we would argue, are only going to help in underwriting that future investment.
So do you think China's market share, whether the market happens to be EVs or battery energy storage or ultimately trucks, do you think China's market share has peaked in a percentage sense?
There's a reasonable chance that that might be the case, but in any case, the pie is growing. Their nominal volume probably certainly hasn't increased, but their percentage of the total pie has pretty much peaked. And the fear amongst Western, for example, battery manufacturers or even car manufacturers, that they cannot be in the end overly reliant on that sort of China-centric supply chain. So that does inspire them to work on the alternatives, and we're actively involved in that.
So do they have the technology to close the gap further?
In part. There's no doubt the Chinese are leaders. Maybe another way to look at it, Paul, is to say a level of pragmatism is starting to emerge in the West that says it's not just all about cost. And also, why don't we co-invest with China? So to my mind, that represents a pretty pragmatic solution in the Western world. Why don't we let China invest in local production, for which by the way, I'd suggest they've got some serious appetite, and take advantage of their operating expertise and their technology to support more Western-facing supply chains.
Now, PMET has as one of its biggest shareholders, Volkswagen. Well, that raises the question, why would Volkswagen want to be a shareholder in your company?
Yeah, you know, it's the first time that Volkswagen Group has invested directly in a mining company. Hard to believe, but that's what's happened. And the inspiration is because they are seriously intent on investing in North America. So, they're investing in car-making facilities, they're investing in mining companies like us, battery-making facilities in Ontario in Canada, and it's all part of supporting growth in North American markets.
So not a case so much of Volkswagen wanting to have an integrated vertical supply chain for lithium and batteries, more a case of they want exposure to North America?
It's both. It's both. And they haven't given up on EVs. And in fact, electrification as a theme. So, let me share a little anecdote with you. They're building the Scout car facility in South Carolina, a new brand or actually the relaunch of an old brand, but a sexy-looking retro Ute and SUV. And their electrification methodology is to flip basically the hybrid on its head. It's no longer an electric motor wedged between a petrol motor and the wheels. It's fundamentally an EV with a little motor, sorry, gasoline engine charging the battery. And to me, that's such a sensible solution for people that have range anxiety, you can support electrification, but with the reversal of the logic in a hybridization method, this is actually the future of hybridization and another reason why we're underestimating the size of batteries going into hybrids.
So, shareholders in PMET would be saying, how does my company get more exposure to this? What's the plan here to cut us a slice of this pie?
Yeah, well, we're continuing to push the project about as hard and as fast as we can. The team's doing an excellent job there, and we have made really good progress. We're now into the final mine authorization process with an expectation that the mine will be authorized in the second half of next year. So, yeah, in essence, the light is at the end of the tunnel for one of the premier projects globally to be developed.
Are you still expecting that it would be the fourth, I think you used to say, the fourth biggest spodumene producer in the world?
Yeah, something like that. Expectation that it would be top five at the very least. So, yeah, that's the objective, and the resource is there.
So, let's cut to the chase here. Who will be your customer? Is it the North American battery makers or those who make parts for the batteries, or actually would you sell it to China? Or all of the above?
Yeah, it could be all of the above. But at the very least, one of our first customers is PowerCo, the battery company of VW. And clearly they want more product. So, we welcome more conversation about that. But there'll be others for sure. So, we continue with our strategic engagement. Actually, we do that everywhere in lithium, in cesium, in tantalum. And our expectation is we'll have more participation in our business because people are genuinely focused on what it's going to take to get the next round of raw material supply growth in the market.
Now, let's look at your timetable. What are the key catalysts here from an investor's perspective? And where does that culminate in a go-ahead of FID?
Yeah, we're really keen to demonstrate the merits in the whole body. So, I think most shareholders are familiar with the concept that we have a record-breaking cesium resource in the ground. Perhaps I'll come back to cesium in a bit more detail. We're a top five tantalite resource for tantalum globally. And I think most people know the merits in our scale and grade in lithium. So, this year is a defining moment in flushing out the economic merit in those co-product opportunities. We expect to refresh our feasibility study and in parallel publish the expanded scoping study for the overall project inclusive of everything, lithium, cesium, and tantalum. So, we're targeting an October release for all of that information. And I want to say that I'm confident it will demonstrate the significant merit in our project and how it's differentiated from your average lithium project.
