EVs need to move mainstream to drive transition minerals

May 22, 2024 – 3.02pm

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An Australian boom in transition minerals – the graphite, lithium, nickel and cobalt that go into the batteries that power electric vehicles – is tethered to one basic market reality: the retail price of electric cars.

When an electric vehicle (and a base model Tesla is still as much as $43,000) can compete at the same price point as an entry-level internal combustion engine Kia, Toyota or an MG at a much lower price, then Australia’s future as a key supplier of transition minerals will be secured.

MinRes’s Wodgina lithium operation: a drop in the price of entry-level EVs will clear the way for a minerals bonanza.

“At the luxury end, you will always find people that can and will spend $150,000 on an electric vehicle – price is not so much an issue for them,” says Joshua Thurlow, chief executive lithium at diversified miner Mineral Resources (MinRes).

“But at the entry level, there are a lot of people who want to move into an EV, but the price isn’t there yet,” he says. “That said, we’re already seeing China produce very cheap electric vehicles – and we’re talking really cheap; under $US10,000.

“As that continues, I think we’re going to see demand skyrocket.”

Until then, it is likely to be a volatile ride for Australia’s transition minerals industry, subject to the vagaries of an immature market and opaque supply and demand dynamics, he says.

Joshua Thurlow, chief executive lithium at diversified miner Mineral Resources (MinRes).

Indonesia is a prime example. Its rise to prominence as the dominant force in the global nickel industry, capitalising on Chinese investment and ingenuity, has caused an oversupply of low-cost nickel.

“While lithium volatility has tended to be cyclical, nickel volatility has been structural,” Thurlow says. “You’ve got a new entrant in the market, being Indonesia, flooding that market.

”For Australia’s nickel producers it’s an uneven playing field because they are competing with a producing jurisdiction that doesn’t have the same regulatory requirements that we have here in Western Australia,” he says.

While the local industry may find it difficult to compete on price now, Thurlow believes Australia’s solid regulatory underpinning, and its skills, will serve transition minerals over the long term.

“What we have in Western Australia – and this is why we love this jurisdiction – is a fantastic regulatory framework, which means we have the most ethically produced minerals in the world,” he says.

“We have an excellent framework for environmental protection and a great social licence because of the way we have to do, and want to do, business over here. We also have great regulators who are supportive, but want to make sure we do the right thing too.”

Add to that fantastic geology and some of the best developed hard rock lithium and nickel mining skillsets in the world and, he says, Australia is positioned as a transition minerals powerhouse.

Andrew Strongman, Westpac institutional bank’s head of mining & metals, says that given the strength of the Australian mining industry, the bank is supporting companies like Mineral Resources as the economy transitions to net zero.

“But we need to consider associated risks and opportunities differently. This means thinking about what we can do, and how we need to do it, to be able to flex and enable that support, while ensuring that we do this within risk appetite.”

In an industry where demand is so influenced by the policy and regulations around electric vehicles, Strongman says the operating environment for those making investment decisions – both resources companies and lenders – can be challenging at the best of times.

“If the world were to move more aggressively towards EV adoption tomorrow, we’re likely going to see another inflection of battery mineral prices driven by potential supply shortages,” he says.

“Supply simply cannot just be turned on – lead times are seven to 10 years for new projects. It’s challenging for companies that are trying to commit hundreds of millions, sometimes billions of dollars for new projects to raise equity, secure offtakes and obtain the necessary financing from government or the bank markets.”

Government support via policies, Strongman says, is critical to providing the market conditions essential to develop and grow the transition minerals opportunity.

“This is why we are seeing government agencies that are very active in supporting the industry right across Australia,” says Strongman.

“Policymakers understand the challenges of developing alternative supply chains of transition minerals and are taking a longer-term view.

“For financiers it’s a question of balancing the intent and policies of government with overall market dynamics, price outlooks and ultimately risk. We want to support companies for the long term, and this can be achieved with sound risk management and strategy.”

In the meantime, while the path to mass EV adoption will have its ups and downs, it can only benefit Australia’s transition minerals industry in the long run.

Strongman sees strong parallels between the development of the electric vehicle and the mobile phone.

“I remember a time when mobile phones were big, expensive and no one wanted to buy one,” he says. “But then Apple comes along, they’re now sub-$1000, with great usability – and seemingly everyone has at least one!

“The adoption of EVs is rapidly changing but only time will tell how fast. It’s an exciting opportunity for Australia’s mining industry.”

To learn more, please visit Australia’s transition minerals: Digging in deep for the next stage.