Why Venture Funds Continue to Buy Lithium Assets

Jeff Siegel

Written By Jeff Siegel

Posted November 27, 2023

Lithium prices continue to plummet as EV sales slow.

While demand remains strong for EVs, higher material costs alongside the burden of auto loan rates clocking in between 5% and 7% are showing just how important low interest rates have been for the sector. 

Now, we’re sitting on an oversupply of lithium, and some analysts predict it’ll take another 4 years to plow through it.  I don’t think it'll take that long, as lower-priced models coming to market next year, coupled with a stabilization of interest rates, should at least slow the bleeding. 

Make no mistake:  the long-term outlook for EV growth and lithium markets in general remain positive.  In fact, Kinterra Capital, the Canadian private equity firm recently launched by the founders of Waterton Global Resource Management (with $1.75 billion in assets under management), announced the oversubscription of its battery metals mining fund at $565 million.

This is more than a half billion dollars focused solely on critical mineral assets for battery development. 

The primary minerals Kinterra will focus on include:

  • Nickel
  • Lithium
  • Copper
  • Cobalt
  • Manganese
  • Graphite

It should be noted, however, that applications are not monopolized by electric vehicles, and also include energy storage, transmission, and power generation. 

The fund has already invested in three assets with a significant near term pipeline, including Canon Resources’ nickel projects in Australia, another nickel processing plant in Canada, and the White Pine North copper development project in Michigan. 

Here’s what Kinterra co-founder Cheryl Brandon had to say …

The structural underinvestment in critical minerals over the past decade has resulted in severely discounted valuations for excellent assets and created a massive need for capital investment, as countries transition to more sustainable energy sources.

While the masses decry sinking lithium prices and a slow-down in EV sales, the smart money is scooping up undervalued assets that will support the continued development of electric vehicles. 

They’re playing the long game, and we are, too. 

A silver lining, by the way, is with these falling lithium prices comes the reduction in battery costs, which has enabled EV makers such as Tesla (NASDAQ: TSLA), Hyundai (OTCBB: HYMTF), GM (NYSE: GM), and Ford (NYSE: F) to lower retail pricing.  And indeed, prices will continue to fall, thanks in part to lower battery costs. 

This year, lithium-ion battery pack prices hit a record low of $139 per kWh.  This is a 14% drop over 2022 numbers. And according to Bloomberg, battery pack prices are expected to fall to $113 per kWh in 2025 and $80 per kWh in 2030.  This is not trivial, as lower pricing will instigate higher sales.  And that will enable the rapid depletion of any oversupplies of lithium we have now. 

I remain bullish on the EV sector, and as we head into the new year, I will continue to be on the lookout for any undervalued lithium, copper, and nickel assets. 

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