- A booming Southeast Asian market driven by consumer tastes will drive electric vehicle sales to new heights
- Pan Asia Metals aims to develop local lithium assets to supply converters in Thailand, Asia’s fourth-largest automaker.
- Low-cost manufacturing environment key to developing electric vehicle supply chain: PAM’s Paul Lock
Southeast Asia’s leading lithium advocate says electric vehicle sales now come from consumer demand rather than government subsidies, in a sign that demand projections for battery metals will not disappoint.
Including China and India, about 55% of the world’s passenger vehicles are made in the developing manufacturing economies of Southeast Asia, and 14% of global passenger vehicle sales are now electric, a rate growth forecast for this year of 36%.
Many of those countries outside China, such as Thailand and Vietnam, want materials for their future EV sectors to be sourced locally.
This puts Pan Asia Metals (ASX:PAM) in a good position to become one of the few suppliers of material to the local market from its Reung Kiet and Bang I Tum lepidolite prospects, once the fall in prices in China this year is having a paralyzing effect. the market sinks.
PAM CEO Paul Lock said the growth of the e-mobility sector in Asia is being rapidly driven by the vehicle buyer side.
Along with growing interest in electric passenger vehicles, with more than 500 models currently on the market, around 49% of sales in the scooter market, a key segment in Southeast Asia, were now electric.
“Very quickly, the driver started pushing him,” Lock said.
“And the reason is that anyone who purchases an electric vehicle begins to see their energy costs go down.
“In an ICE you have 80% losses at the wheel, in an EV, 33% losses before regenerative gains. So absolutely huge.
“In Asia there are electric taxis everywhere. So when a taxi driver in Jakarta can make money with his electric taxi, he knows it’s working. So there is the acid test.”
As the United States looks to boost its electric vehicle penetration through the Inflation Reduction Act, a law that incentivizes American automakers to produce cars locally using domestic or free trade-approved materials, Lock says producers Asians will not let their market share decline so quickly.
“In ASEAN we have 640 million people. A third of those move into the middle class or are in the middle class, and a large portion follows them,” Lock said.
“If you think about Australia’s population, let’s say 25 million, it’s literally less than 5% of Southeast Asia.
“Thailand is the largest (car) producer in Southeast Asia and the fourth largest in Asia. And most, if not all, of the big brands are represented there.
“The Chinese are moving in, so BYD, GWM and a few others are building their EV factories right now and producing, and Mercedes is producing its EQS EV there.”
In a presentation last month at the Melbourne Electric Vehicles Motor Show, Lock presented JP Morgan research showing global lithium demand would rise 4.6 times 2022 levels to 3.2 million tonnes in 2030. , 7.7 times to 5.4 million tons by 2035 and 9.4 times to 6.6 million tons by 2040.
Last week, the Bangkok Post predicted that electric vehicle sales in Thailand will increase 151% to 80,700 units in 2023.
At the same time, they are interested in increasing the proportion of their vehicles made with domestically produced batteries.
This could prove very useful for PAM, whose two prospects are among the only advanced national projects in the country.
In Reung Kiet it has 10.4Mt of mineral rich in lepidolite with 0.44% Li2O. Tests last year demonstrated that its mineralization could be amenable to ore grading to increase feed grades.
At Bang I Tum, a former tin mine, PAM has set an exploration target of 16-25Mt with 0.4-0.7% Li2O.
“The Thai government actually introduced a mining policy that supports critical metals exploration and production in the country,” Lock said.
“If we had a copper mine, a copper-lead-zinc project, they wouldn’t care at all, because they really don’t care.
“In Thailand and Malaysia it is about S-curve industries and that big increase in GDP in the future. And that’s where we’re looking.”
Grade is not king
Lepidolite has rarely been touched upon by ASX players, who have focused on spodumene-bearing pegmatites commonly found in WA.
Generally lower grade, many of the Chinese operations now at the upper end of the cost curve are lepidolite mines, capable of turning on and off as lithium carbonate prices rise and fall over and under of US$25,000/t.
But Lock says there is little understanding of the market in the West. Compare mines at the upper end of the cost curve, some of which have grades as low as 0.1% Li2O, with Indonesia’s alluvial tin mining, which kicks in when prices for that commodity are near levels record.
Reung Kiet is closer to the 0-3-0.6% rating range of Chinese deposits that sit comfortably in the middle of the global cost curve (and are cheaper to process than third-party spodumene).
Thailand is a low-cost manufacturing environment and Lock sees additional benefits over the typical hard rock supply chain through which WA spodumene concentrate suppliers sell to chemical producers in China.
“All of our projects are located on the grid, with hydropower nearby, but in sparsely populated environments, so when I talked about strategic location, we are located next to very good infrastructure,” he said.
“We are also located close to the automotive industry.”
While lepidolite can be extracted from the ground at lower grades, the gaps in concentrate grades are becoming smaller.
“What’s really interesting is that a lot of people look at lepidolite and say it’s low quality,” Lock said. “We will produce a concentrate of 3-3.5% Li2O.
“MinRes concentrate grade at Mt Marion, their average for FY23 was 3.8% Li2O, the Pilbara is 5.25%, Greenbushes would be higher but their grades are declining.
“SC6 is a dream, it will be sort of 4-5%, so in a low-cost environment next to the infrastructure and our entire market, including inputs, lepidolite works and that is why it works in China.”
PAM has two major value-added initiatives in the works.
One is an MoU with Vietnam’s VinES, part of the VinGroup conglomerate with a hard cap of $40 billion. VinES plans to build LFP batteries in a joint venture with Gotion, capped at $5.6 billion, outside China to power its Vinfast car brand.
PAM and VinES will look to convert lithium chemicals in Vietnam to help build the supply chain locally.
In Thailand, PAM is seeking to use its concentrate to supply a chemical processing plant in an MoU with IRPC, a listed entity located within PTT, a major state-owned Thai oil and gas company. 30 billion dollar industrial zone in Rayong province.
Both are considering expanding further into the production of cathode active material, the step before battery production and assembly, with the possible help of a technical partner.
Lock said working with big local names built trust around finances and a “real path to production.”
On the mining front, a resource upgrade is expected soon at Reung Kiet with a PFS in progress, with a maiden resource in prospect at Bang I Tum.
Applications for mining licenses are also being prepared for submission later this year or early next year.
Counter the cycle
Meanwhile, PAM has also taken a countercyclical step into the Chilean brine scene at a time when nerves are growing around government policy in the South American nation.
Home to around 25% of lithium feedstock production and the second-largest producer outside Australia, concerns that Chile could nationalize lithium production in its salt lakes have stoked fears about investment in the country.
But that has created an opportunity for companies eager to go against the grain.
PAM signed binding MoUs earlier this year to acquire six lithium clay and brine licenses at the Tama-Atacama project in northern Chile, 290 km from north to south and in an area of around 1,400 km2.
Important grades of lithium have been found in the licenses, reaching up to 2200 ppm Li.
Chilean lithium production is dominated by major players SQM and Albemarle, while government copper giant Codelco has signaled its intention to expand its lithium interests, entering into talks with project owner Maricunga Lithium Power International (ASX:LPI) , which is listed on the ASX.
Lock believes commentators are wrong about Chile, as the project in the low-elevation Salar Dolores, Pintados and Belavista salt flats is considered a countercyclical play.
“The Chilean government has said that for non-strategic assets, that is, anything outside of Atacama and Maricunga, a private company can apply for a lithium mining license and can choose to invite the government if it wishes. A good example is AIM. included on the Clean Tech Lithium list,” Lock said.
“One of their most recent ads talks about politics and they have filed mining license applications. So I think the whole nationalization thing has been overblown.”
Chile’s leftist president Gabriel Boric will also face a challenge in advancing changes to his mining policy after right-wing factions won a key vote to select advisers on a proposed new constitution earlier this year.
The next presidential elections will take place in 2025.
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