Objective Capital Rare Earth and Minor Metals Investment Summit: Vanadium & Lithium– The Metals of the Electric Revolution - Jon Hykawy

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Objective Capital Rare Earths, Speciality and Minor Metals Investment Summit
Afternoon Keynote: Vanadium & Lithium–
The Metals of the Electric Revolution
18 March 2010
by Dr Jon Hykawy, Byron Capital

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Objective Capital Rare Earth and Minor Metals Investment Summit: Vanadium & Lithium– The Metals of the Electric Revolution - Jon Hykawy

  1. 1. Investment Conferences RARE EARTHS, SPECIALITY & MINOR METALS INVESTMENT SUMMIT 1.15 – 1.40 Afternoon keynote: Vanadium & Lithium – The Metals of the Electric Revolution Dr Jon Hykawy – Clean Technologies & Materials Analyst, Byron Capital THE LONDON CHAMBER OF COMMERCE AND INDUSTRY ● THURSDAY, 18 MARCH 2010 www.ObjectiveCapitalConferences.com
  2. 2. Lithium and Vanadium The Metals of the Electric Revolution March 18, 2010 Rare Earths, Specialty and Minor Metals Summit, London
  3. 3. What is Lithium?  Li is the lightest metal, very chemically reactive  Diffuse deposits, hard to locate economical concentrations  Sourced from brines (< 0.2% concentration), ores (< 4%) or clays (< 0.5%)  Used in glass/ceramics, batteries, industrial greases, pharma and air con
  4. 4. Where Does Li Come From?  Li2CO3 is usual shipped form  Historical highest production in 2008 at 121,000 tonnes (Roskill, 2009)  Largest producer is SQM of Chile (SQM:NYSE) with 25% market share (30% of chemicals)  FMC Lithium (FMC:NYSE) and Chemetall (ROC:NYSE) are also major producers  Talison of Australia (private, IPO pending) rounds out the list (USGS, 2002)
  5. 5. Where Does Li Come From?  Brines – Li available as salt (LiCl); brines are evaporated out to raise concentration, then soda ash used to precip out Li2CO3 – Trick is, lots of other salts in brine, too – MgCl is the biggest problem; economics suggest Mg:Li must be < 8 – Right behind magnesium as a problem is sulfate  Minerals – Talison in Australia produces Li from spodumene (LiAl(SiO3)2 – More expensive than from brines if Li2CO3 is the goal, as mineral must be extracted, calcined, pulverized, treated with sulphuric acid to extract Li then treated with soluble carbonates  Hectorite Clays – Likely a lot cheaper than minerals, slightly more expensive than some brines, but cheap enough – Extracting from NaO3(Mg,Li)3Si4O10(F,OH)2, perhaps 0.35% Li content – Roasting with process chemicals, water leaching and chemical treatment
  6. 6. How Much Li is Used?  Roskill estimates 2009 demand was at 102,000 tonnes, down Ceramics/Glass Batteries from 118,000 tonnes Greases in 2008 Aluminum Prodn Air Con  Uses are largely Casting industrial with GDP- Thermoplastics type growth, and in Other Li-ion batteries for electronics with Roskill, 2008 growth at much higher rates
  7. 7. Li Demand Growth  This is what we believe the lithium industry looks like, moving forward: 2009 2010 2011 2012 2013 2014 2015 Glass 27,258 27,803 28,915 30,072 31,275 32,526 33,827 Grease 11,399 11,627 12,092 12,576 13,079 13,602 14,146 Al Prod. 5,876 5,994 6,234 6,483 6,742 7,012 7,293 Air Con 5,452 5,561 5,783 6,014 6,255 6,505 6,765 Casting 7,021 7,161 7,448 7,746 8,056 8,378 8,713 Other 19,588 19,980 20,779 21,610 22,475 23,373 24,308 Batteries 25,800 26,574 28,168 30,422 32,856 35,484 38,323 Autos 0 150 6,350 10,100 14,500 19,900 28,700 Total 102,394 104,850 115,769 125,023 135,236 146,780 162,075
  8. 8. What is Vanadium? V is an uncommon metal, chemically similar to tantalum and niobium  Produced largely as by-product  Most comes from slags (56%)  54,000 tonnes of metal produced in 2009 (USGS, 2010)  Used primarily, today, as a steel hardener and strengthening agent
  9. 9. How Much V is Produced?  V ships as pentoxide (V2O5) or ferrovanadium  Roughly 59,100 tonnes of metal produced in 2007 (USGS, 2008), dropping to  Biggest sources are South Africa, Russia, China  V is the 17th most common element on Earth (USGS, 2002)
  10. 10. Where Does V Come From?  Slags – Slag from iron or uranium processing containing vanadium pentoxide is roasted with sodium compounds, sodium vanadates leached out with water, converted to ammonium vanadate, dried and roasted to result in vanadium pentoxide – 56% of current V production is based on slag processing  Minerals – There are more than 60 known minerals containing V – Several producers mine minerals and produce V from them – Usually low-cost open-pit operations – 43% of vanadium comes from minerals  Catalysts – Spent catalysts are processed to extract V – Primarily done in Japan – 1% of annual production is from reprocessed catalysts
  11. 11. How Much V is Used?  Supply and demand fairly well balanced at around 54,000 tonnes in 2009  85% of V production used in steels  Metallurgical uses account for 92%  Highest non-metallurgical use is for catalysts in sulfuric acid and maleic anhydride production
  12. 12. V Demand Growth  Steel growth is rising rapidly; World Steel Association estimates demand fell 8.6% in 2009, but slated to rise 9.2% in 2010; Macquarie estimates steel demand up by nearly 6% per year thereafter, high grade steels by 8%  Non-metallurgical usage rising at rates of GDP  Lithium-ion battery use a potential strong driver for new demand; Li3V2(PO4)3 is the highest voltage, highest energy cathode identified for lithium-ion batteries  Grid-level storage using vanadium redox flow batteries could grow to rival any other demand, but over time
  13. 13. V in Lithium Batteries  Simple reasons for V demand in lithium battery use: Cathode Voltage (V) Energy (kWh/kg) Cost ($, relative) LiCoO2 3.7 0.518 1.00 LiMn2O4 4.0 0.400 0.04 LiFePO4 3.3 0.495 0.03 Li2FePO4F 3.6 0.414 0.08 Li3V2(PO4)3 4.8 0.624 0.40 LiVPO4F 4.1 0.492 0.84
  14. 14. V in Grid Storage  Our calculations for older technology vanadium redox batteries suggests 10 tonnes of V metal required per MWh of energy stored  Applications can easily scale to 6-10 MWh per site, so demand can ramp quickly  VRBs are already deployed in many places, including US, Japan and China
  15. 15. V Supply vs. Demand  Assuming all projects and expansions reach market: Year 2010 2011 2012 2013 2014 2015 Potential Supply (tonnes) 67,200 83,700 105,200 117,200 127,200 132,300 Metallurgical Use (tonnes) 49,572 53,538 57,821 62,446 67,442 72,838 Other Use (tonnes) 8,424 8,761 9,111 9,476 9,855 10,249 Potential Auto Use (tonnes) 118 4,637 7,303 10,492 14,369 20,748 Potential Grid Use (tonnes) 303 707 1,515 3,030 6,060 9,090 Total Use (tonnes) 58,417 67,643 75,750 85,444 97,726 112,925
  16. 16. Conclusions  Allindustrial minerals (even REEs!) have basic investment rules: – Interesting deposits are low-cost – Interesting deposits are scalable  Inexpensive lithium is marketable  Inexpensive vanadium is desirable
  17. 17. Disclaimer  Information contained herein has been drawn from sources believed to be reliable but its accuracy or completeness is not guaranteed. This is not a research report. Byron Capital Markets, a division of Byron Securities Limited (“Byron”), does not assume any responsibility or liability for these trade recommendations. From time to time, Byron and its directors, officers and other employees may maintain positions in the securities mentioned herein. The contents of this report cannot be reproduced in whole or in part without the expressed permission of Byron. This information is intended for use by qualified accredited and institutional investors only and is not intended for retail investors. This information is not intended for use by any U.S. investor.

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