Bankers have gone AWOL in the race to build more lithium mines
MELBOURNE – After clinching a deal with a Chinese battery maker in 2016, James Brown figured bankers would be eager to fund his new lithium mine. Altura Mining was racing to ship the raw material from Australia to the world’s biggest electric vehicle market as demand was surging.
Instead, while lithium prices kept rising, Brown spent a Christmas holiday cold-calling lenders and jetted around the globe to raise the money. Eventually, Minneapolis-based Castlelake, a private equity firm, helped arrange $110-million in bonds. But there was a catch: an interest rate as high as 15%, or almost double what banks normally charge for more conventional mining ventures.
“We’d been trying banks we’d known for years,” said Brown, Altura’s MD, who previously spent 22 years with coal producer New Hope Corp. “They said: Guys we love it, we just don’t have a mandate (for lithium). If you came to us with coal, gold or iron-ore, you’d have no worries.”
Despite bullish forecasts for global demand -- especially with accelerating production of electric vehicles -- lithium may have a funding problem. Banks are wary, citing everything from the industry’s poor track record on delivering earlier projects to a lack of insight into a small, opaque market. Without more investment, supplies of the commodity could remain tight, sustaining a boom that already has seen prices triple since 2015.
Lithium companies will need to invest about $12-billion to increase output fivefold by 2025 and keep pace with the world’s growing appetite for batteries, according to Galaxy Resources, an Australian producer seeking to build further operations in Argentina and Canada. Developers say that, so far, projects aren’t getting financed fast enough to achieve that leap.
Battery producers and automakers “have absolutely no clue on how long it takes to be able to put a mining project into operation,” said Guy Bourassa, CEO of Nemaska Lithium, which spent about 18 months piecing together a complex C$1.1-billion funding program for a mine and processing plant in Quebec. “There will be a big problem -- it’s going to be an impediment” to raising supply, he said.
An “inability to access traditional funds has delayed the development of the sector,” said Richard Seville, CEO of Brisbane-based Orocobre, which began lithium sales in 2015 from northern Argentina, and experienced difficulty boosting output. “These projects aren’t easy -- so the banks just don’t want to go there.”
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