Beyond Lithium and Cobalt

Perspectives on two other “energy metals”

More correctly, this should be entitled “Besides Lithium and Cobalt.”

Huge amounts of media attention, far beyond the specialist resource sector has been paid to both lithium – because of  its central place in the emergence of a modern electric vehicle sector – and to cobalt – mostly because it is scarce and often produced in places like the Democratic Republic of the Congo (DRC).

Both lithium and cobalt have been through a boom-and-bust price trajectory: lithium got to $19,000 a ton in January of 2018, and is now selling at $8-9,000 a ton. Cobalt shot to over $100,000 a ton before dropping back to its current $30,000 a ton.

Lithium is likely to be the prime component in many of the batteries that will re-shape mobility in the decades to come, so it is understandable that it gets attention. Cobalt is, indeed rare, and is produced in the DRC, but it is also a by product of nickel, silver and copper in various locations. Long uneconomic deposits have been re-evaluated for both metals, and some will become new sources of material going forward: all the dry laterite nickel projects in Western Australia, and there are a lot of them, which have enough cobalt in the ore, will spend money to separate the nickel and produce cobalt.  The mining industry has a history of eliminating shortfalls in supply, if they are seen ahead. Supplies of lithium and cobalt will most probably follow this pattern

But these two metals, important as they are, do not tell the whole story of the raw materials for an “electric future.”

This article will give some background, on two other “energy metals” that have gotten relatively less attention, but which may represent interesting investment opportunities for those who want to be part of the evolving low carbon technology. Both of these metals are currently widely used as alloy materials in the steel industry. In both cases the vast bulk of the current (2018) demand for these elements is and will be for improving steel quality. The battery applications have the potential to offer a whole new set of uses, hence a whole new demand structure, for what are well established production.


The first metal to talk about is vanadium.

Vanadium is primarily used to strengthen steel. An addition of 0.2% by weight of vanadium improves the structural strength of a ton of steel by up to 20%.  Steel mills in Europe and North America make most of their construction steel with alloys – either vanadium or niobium – to meet specifications for government imposed standards. Up until recently, China -which produces half of the steel in the world – did not have equivalent requirements for construction steel, such as rebar steel, used in re-enforced concrete structures.

But a number of structural collapses in China has made the government take note, and standard have been tightened, although exemptions have been allowed.

On the supply side, China has traditionally produced a lot of vanadium by re-processing steel slag, which is a very dirty process. To meet clean air standards, this has been discouraged.

So what is the energy aspect of vanadium?

Renewable power – particularly from solar and wind – is notoriously not available on demand, like with combustion power plants. The power comes when nature dictates, not when the grid needs it.

The solution is energy storage. But the technology for “grid scale” power storage is still developing. In 2017 it was estimated that 96% of the “energy storage” plants were pumped power systems, which pumped water up hill when power costs were low, and let it run downhill again to generate hydropower when demand peaked.  Unfortunately, the topography that allows this is not all that common, so only a small amount of global renewable power can be stored.

Tesla got a lot of publicity in late 2018 by constructing a “buffer storage plant” in Australia, which took in wind and solar electricity, when produced in excess of current demand, and would provide it when it was needed.

Essentially the Tesla plant was a giant bank of small lithium batteries, all linked together, which could store power for up to four hours.

While this plant is now operating (and got Elon Musk a lot of press coverage), the use of lithium for static storage is widely considered to be a sub-optimal solution. The lithium batteries have a relatively small number of cycles (charge and discharge) so will need to be constantly replaced. The high energy density for weight of lithium, so useful in mobile applications, is of no value for a stationary plant, and the heat issues for lithium batteries mean that the plant consumes a lot of power for cooling.

A far superior technology for grid scale energy storage, called “Redox Flow” batteries exists, and vanadium makes up the core of that “Flow” approach. An electrolyte, which is mainly vanadium suspended in a fluid, stores the input power.  The vanadium electrolyte can hold the charge much longer than lithium can. In addition, the number of cycles for the vanadium electrolyte is measured in years, or even decades. Redox flow plants just starting operation in South Africa expect the vanadium electrolyte to be replaced in about twenty years.

The Redox Flow technology involves machinery, which make it heavy, and so unsuitable for mobile operation. But it is ideally suited for stationary grid scale energy storage.

In 2016 90%  of the 80,000 ton annual global demand for vanadium was for steel alloying.  By 2030, according to estimates, the total vanadium steel alloy demand from China alone will grow by over 50%, and the potential battery demand will add a further 36,000 tons of demand, so a total annual demand of over 200,000 tons a year.  When one factors in the supply drop from the decline in vanadium production from slag,  mines will need to almost triple their output to meet this demand.

Various mining companies are in the vanadium space. Among the large ones, Glencore both produces vanadium at one of their mines in South Africa, and also is the leading trader in the material. Moving down the size scale, Lago Resources has a significant producing mine in Brazil that has an exceptionally rich vanadium deposit.

A London listed company called Bushveld has a vanadium mine , also in South Africa, but also has built a Redox Flow unit in South Africa, so that Bushveld offers a mix of a resource and a technology play. In time, to make the respective value of the two businesses clearer,  Bushveld may  separate into two companies, one a miner, one a developer of energy storage facilities.  A Canadian junior miner, Prophecy Development, has one of a number of identified vanadium deposits in the state of  Nevada. The Prophecy project had a bankable feasibility study done by the previous operator, so had a much more advanced project than many competitors. Further, there is talk that as vanadium has been identified as a “strategic material” by the US Defence Department, there may be advantages to US producers.

Vanadium had its own price boom and bust between 2015-19. due less to the high tech applications, than the projected fall in domestic Chinese supply/demand balance for the metal Vanadium prices in 2012 were as low as $3.50 a pound, rose to $10 a pound in 2015 and peaked as high as cobalt at about $50 a pound, before returning to a more sustainable  $9 a pound. But the medium to longer demand picture remains unchanged, and positive.


Manganese is a much larger production material than vanadium. In 2018 the global production of manganese ore was slightly less than 19 million tons. The four main production comes from South Africa, Gabon, Brazil and Australia, although there is production in Russia, China and Canada as well.  Manganese is, in fact, the fifth most common element in the earth’s crust. But, like other common elements, commercially producible deposits are much rarer than that rating suggests. In fact, 78% of the known reserves of manganese are in South Africa, although this may reflect a long period of low prices which has not encouraged exploration for new deposits. Exploration in Brazil suggests that its ranking in the reserves of manganese could increase dramatically in years to come.

Not unlike vanadium, manganese is added to steel for increased strength, but also to retard corrosion, and improve flexibility.  About 86% of the manganese produced goes to steel alloying. In fact, while vanadium can be – to some extent – replaced by vanadium, some of the advantages that manganese offer in steel production are unique, and there is no real substitute material for manganse in steel production, which will put a floor under demand.

Like many other elements, most manganese deposits have a high content of iron in them. As iron is the primary input in steel, this presents no problem for an alloy – more iron is lost in the steel.

But about 12% of the manganese produced becomes electrolytic manganese metal (EMM), which requires a much lower iron content, as this is destined for applications, such as food production, in which the iron needs to be reduced, and, electrolytic manganese dioxide (EMD), in which it needs to be almost eliminated altogether.

Only parts of some conventional manganese deposits have low iron content areas. A few deposits have low level of inherent iron, and these will be increasingly valuable, as EMM and particularly EMD demand is set to grow in the years ahead. Currently production of EMM s about 1.8 million tons per year.

In 2018 the world demand for EMD was 400,000 tons, for battery cathode use. This material is EMM refined to the level that it is between 99.5 and 99.8% pure manganese.  This 400,000 tons of nearly pure manganese is worth $2.8 billion, more than 25 times the value of the bulk of the alloy manganese market.

The economics of high purity manganese are stark: for a ton of manganese ore, suitable for alloy use, the mine will get between $5-6 per ton. For 99.7% purity EMD, the producer will get $1.30-1.50 per POUND, or around $2800 a ton. That 400,000 tons of nearly pure manganese is worth $2.8 billion, more than 25 times the value of the bulk of the alloy manganese market.

The premium is because the use of EMD is cathodes for batteries is essential in current lithium-ion and lithium manganese batteries, but the growth in nickel-manganese-cobalt batteries, which by 2025 is estimated in a recent study by McKinsey, to make up 90% of all the EV and small application batteries.  Even with very small percentages of vanadium per battery, given battery demand is projected to grow at 32% per annum to 2030, the requirement for more EMD is set to explode over the next ten years.

For a mine that has low, or ultra low iron content in its ore, the premium price is going to reflect the cost of refining, which is very energy intensive. The less iron to remove, the less cost of refining, the more valuable the ore will be.

Only a few junior mining companies have been involved in manganese exploration. In Brazil Maxtech Ventures and Meridian Mining have high quality, low iron content manganese deposits that they are evaluating. Maxtech also has a Zambian manganese exploration program.  Another company is TSX listed Giyani Metals, which has a low iron content manganese deposit in Botswana. One irony of Giyani’s project is that the deposit was part of a larger manganese development in Botswana, but deposit Giyani holds was considered “too small” to be economic,  at the time that the low iron content was given no value. The larger deposits were all mined out, but the low iron content deposit was left untouched.

Blue Lakes Advisors SA and  the Energy Metals Sector

A number of investment banking clients of Blue Lakes Advisors SA are active in various aspects of the energy metals sector. Investors who are interested in getting involved in some part of the energy metals  space can contact the author to discuss their objectives, and the opportunities that Blue Lakes may have for them.

Michael Colligan

Partner, Blue Lakes Advisors


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