Fitch tips lithium M&A activity to increase

Covalent

Fitch Solutions expects lithium companies will accelerate mergers and acquisitions (M&A) activity in the coming years to diversify future supply.

“Given the low level of consolidation in the sector and as leading players aim to consolidate their portfolio in order to have access to a more diversified and steady source of lithium, we expect M&A activity to pick up strongly in the sector in the coming years,” Fitch Solutions stated.

“The number of M&A deals seen in 2021 so far is just a start.”

In April, lithium miners Galaxy Resources and Orocobre announced a $US3.1 billion ($3.9 billion) merger.

Fitch Solutions has identified 124 lithium operations globally with 101 companies owning the operations in its ‘Lithium Global Competitive Landscape And New Project Pipeline’ report.

The report found that lithium miners are not concentrated with most projects owned by junior exploration companies.

“The very large majority of new projects is owned by one miner only, and almost always by junior miners, which raises significant funding risks,” Fitch Solutions stated.

“The large number of junior exploration miners owning just one project also suggests harsh competition to attract funding and investment from larger peers.”

Australia, Canada and Argentina are the three countries expected to benefit most from the lithium boom, Fitch Solutions found.

The majority of lithium companies are headquartered in Australia (34 per cent) and Canada (32 per cent).

Fitch Solutions anticipates lithium projects will continue to come online due to limited market supply and growing demand.

POSCO’s $US240 million investment in a 30 per cent stake of First Quantum Minerals’ Ravensthorpe nickel mine last week also supports its battery material business.

The Western Australian Government has championed POSCO and First Quantum’s memorandum of understanding to produce materials, including nickel sulphate for lithium-ion batteries.

Global demand for lithium-ion batteries is expected to increase tenfold by 2030 due to electric vehicle demand.

“Proactively engaging with global producers of battery minerals and materials is a priority for the McGowan Government and a key component of our Future Battery Industry Strategy,” Western Australia Mines and Petroleum Minister Bill Johnston said.

“We are committed to growing WA into a world-leading exporter of battery minerals, materials and technologies.

“Our focus right now is attracting investment in the next step of the battery value chain – pre cursor cathode manufacturing.”

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.