The Future for Lithium is Bright
EXPERT OPINION ARTICLE BY:
Ernie Ortiz
President and CEO
LITHIUM ROYALTY CORP.
A new form of transportation arrived, and prices for the vehicle declined by more than 50%. The advent of new manufacturing methods allowed for the build time of this new automotive machine to drop to 93 minutes from 12 hours – an important attribute to promote mass market affordability.
The transportation in question is the Ford Model T, which revolutionized the global mobility market a century ago and shares many parallels to the revolution we are witnessing today, as electric vehicles rapidly capture a significant share of global transportation. Similar to the events over 100 years ago, the electric vehicle era represents a new paradigm not only for transportation, but also for manufacturing (20 moving parts in an EV compared to over 100x that in an internal combustion engine) and supply chains.
In our view, a critical component to the electric vehicle supply chain is the battery. Within the battery, lithium is the enabling agent.
Lithium’s distinguishing features lie in its position as the lightest metal on the periodic table, coupled with its remarkable electrochemical potential, making it perfectly suited for light weight battery applications such as electric vehicles. Other battery alternatives may use different elements, but none combines the energy density, weight advantages and scale benefits of lithium-ion technologies.
The physical properties of lithium have already driven the proliferation of many consumer devices such as laptop computers and cell phones. Continued investment in the lithium-ion battery supply chain has transferred this affordability to the automotive sector and will soon lead to expansion into the broader mobility market, including airplanes and helicopters. BloombergNEF estimates the cost of batteries has declined from US$1,391/kWh in 2010 to just US$139/kWh in 2023, and we believe that costs will continue to decline over time.
These momentous changes in the global energy transition are dynamic. Not surprisingly, they also lead to volatility for the materials powering this revolution, such as lithium. Spot lithium prices declined by over 80% in 2023. Despite this, even at the recent lows in pricing, prices were three times the level of a decade ago and were 30-50% higher than prices just five years ago. The year to year volatility is unlikely to dissipate in the near term, but the long-term trajectory for both lithium pricing and demand remains steadily upward. Albemarle, the leading global lithium producer, forecasts 28% growth in lithium demand in 2024. With demand projected to rise from 1million t/y in 2023 to 3.3 million t/y by 2030, the industry must substantially ramp up supply to meet future requirements. A new lithium mine tends to have a commercial capacity of 20,000-25,000 t/y, suggesting that 100 new mines are needed to service anticipated demand. Lithium Royalty Corp. (LRC) estimates that over US$50 billion of capital will be needed to finance this anticipated growth.
Similar to the changes the transportation industry witnessed a century ago, there are new forms of mobility that are gaining ground and creating new industries and supply chains. The economics of scale, brought on by the changes seen a century ago, resemble the current scenario where declining battery prices are making the electrification of transportation affordable to the masses. In this time of transformation, volatility and opportunity, we believe that the lithium era is upon us, positioning lithium as the premier metal for investment exposure across all the various battery metals. LRC sits at the centre of this global energy transition by financing the new paradigm in mobility. LRC’s story is just beginning.
About Ernie Ortiz
Ernie is the Director, President and the Chief Executive Officer of the Lithium Royalty Corp. He managed the origination, structuring, and execution of our royalties which involved cross-border negotiations with parties in Argentina, Australia, Brazil, China, Serbia, Finland, the United Kingdom, Canada and the United States. Ernie has visited many of the world’s lithium deposits, as well as several of the chemical and battery plants that service the EV industry. Ernie is a regular presenter at industry and investor conferences, including Fastmarkets and LME Week.
Prior to LRC, Ernie was an Analyst at Tide Point Capital Management, a hedge fund based in Greenwich, Connecticut that specialized in lithium, battery materials and speciality chemicals.
Prior to Tide Point Capital, Ernie was a senior associate at Credit Suisse based in New York City, where he led research and diligence on lithium. In 2014, Ernie led the Credit Suisse team in publishing one of the seminal lithium primers that helped companies in the space raise capital based on its in-depth analysis of the industry.
Ernie sits on the London Metal Exchange Lithium Advisory Committee and serves as a Director on the board of Sinova Global Inc. Ernie is a CFA charter holder and holds a Bachelor of Arts in Economics from the University of Chicago.
About Lithium Royalty Corp.
LRC is a lithium-focused royalty company with a globally diversified portfolio of 35 revenue royalties on mineral properties around the world that supply and are expected to supply raw materials to support the electrification of transportation and decarbonization of the global economy. Our portfolio is focused on high-grade and low-cost mineral projects that are primarily located in Australia, Canada, South America and the United States. LRC is a signatory to the Principles for Responsible Investment; the integration of ESG factors and sustainable mining are considerations in our investment analysis and royalty acquisitions.
Image by AscentXmedia at iStock, courtesy of Lithium Royalty Corp.
