As lithium prices drop, private equity investors hunt for deals
25/11/2019 12:00
(Repeats Friday story with no changes to text)
By Ernest Scheyder
Nov 22 (Reuters) - Private equity groups and other investors
have grown emboldened by the lithium industry's malaise, forging
plans to invest billions of dollars in mining projects to
develop the electric vehicle battery metal.
A more than 50 percent drop in lithium prices since 2018 has
unnerved industry executives, fueling cuts to capital spending
and halting expansions. Shares in major lithium producers have
dropped as a result, exacerbating retail investor
anxiety. urn:newsml:reuters.com:*:nL2N27R1IB
But Carlyle Group CG.O -backed Traxys and other
nontraditional investors and lenders say they sense a buying
opportunity, as electric vehicles grow in popularity and fossil
fuels are phased out in a rising number of countries.
"Now is the time to invest," said Erez Ichilov, managing
director of Traxys Projects, which earlier this month launched a
$2 billion fund with metals financier the Pallinghurst Group to
invest across the electric vehicle supply chain. "When you look
at how under-invested this value chain is, $2 billion is not a
lot."
The Pallinghurst-Traxys Battery Materials fund plans to
focus on lithium projects, as well as copper and graphite, in
developed economies to reduce risk, Ichilov told an industry
conference earlier this month.
That and a recent spate of other deals should help bridge
what analysts forecast will be an under-investment by the
lithium industry in coming years.
"Mining needs a lot more capital than it has been getting,"
said Sam Jaffe of Cairn Energy Research Advisors, who estimates
more than $100 billion needs to be invested in the battery
minerals supply space, including for materials like lithium,
nickel and graphite.
Texas-based private equity firm Centaurus Capital took up
half of ioneer Ltd's INR.AX A$40 million ($27 million) stock
offering in late November, a tacit bet that the company's Nevada
lithium project will see strong demand in coming years. The
offering was backed by Goldman Sachs Group Inc GS.N and
Australian private wealth business Ord Minnett.
Centaurus did not respond to a request for comment.
Czech utility CEZ CEZP.PR is finalizing a deal to convert
a 2 million euro ($2.2 million) loan into majority control over
European Metals Holdings Ltd's EMHE.L Cinovec lithium and tin
project, which it says is the largest lithium deposit in Europe,
an unusual arrangement for a utility. urn:newsml:reuters.com:*:nL8N2801TV
Commodities trader Transamine Trading SA earlier this year
said it would lend Canadian miner CAT Strategic Metals Group
CAT.CD nearly C$10 million ($7.5 million) for the Kamativi
Tailings Lithium Project in Zimbabwe.
Transamine did not respond to a request for comment.
"With strong projected demand ahead, the industry is still
underserved from investments in the space," said Ernie Ortiz,
president of Lithium Royalty Corp, an affiliate of Waratah
Capital Advisors, which earlier this year invested A$8.1 million
($5.5 million) for a 2.5 percent royalty in Core Lithium Ltd's
CXO.AX Canadian lithium project.
Ichilov, the Traxys investor, said his fund plans to move
fast.
"We want to make significant moves in 2020," he said. "We're
big believers in the energy transition. It's a tectonic shift."
($1 = 1.4736 Australian dollars)
($1 = 1.3288 Canadian dollars)
($1 = 0.9067 euros)
(Reporting by Ernest Scheyder, Editing by Rosalba O'Brien)
((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
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