Full charge - sparks fly in African battery metal M&A

Data InsightDealspeak 7 June

Full charge - sparks fly in African battery metal M&A

Dealmaking in the African battery-metals sector is generating sparks as anticipation builds for a broad take-up of electric vehicle (EV) technology.

The plug can't be pulled on Africa's reliance on the internal combustion engine anytime soon. However, the continent's mines and miners are a key cable in the charging station of battery metals. Over half of the world's known supply of cobalt is situated in the Democratic Republic of Congo, while Zimbabwe is home to significant lithium resources.

Strong demand for green energy metals like lithium lies behind a number of recent deals. For example, earlier this year, Bikita Minerals, which owns the Bikita lithium mine in Zimbabwe, was acquired by Sinomine Resource Group of China for USD 180m.

Another deal with a similar profile was last year's USD 422m (EUR 373.4m) acquisition of the Arcadia Lithium project in Zimbabwe by lithium-ion battery metal material producer, Zhejiang Huayou Cobalt. This deal helped the African mining sector record a total deal value of EUR 6.625bn in 2021, its highest since 2012, according to Dealogic data.

It's not either/ore

M&A isn't just being driven by overseas demand for African miners. Sibanye Stillwater [JSE:SSW] and other local players have also been growing their own shoots in the green metals space. Last year, Sibanye announced a EUR 30m phased equity investment in Finnish lithium hydroxide company Keliber to acquire around 30%.

Since then, Sibanye has also finalized a USD 70m investment in lithium-boron supplier Ioneer for USD 70m. It has also announced a joint venture (JV) with Ioneer to develop the Rhyolite Ridge Lithium-Boron project in Nevada, USA. Sibanye will provide capital of USD 450m to earn a 50% interest in the JV.

Falling flat?

Although the long-term trend appears clear, a recent research report by Goldman Sachs has suggested that the bull market for the battery metals sector could be running out of charge. A glut in capital spends, which started in the late 2010's, has created a premature supply of battery metals, which is ahead of the anticipated demand, it stated.

According to the report, lithium prices could wilt from the current average of around USD 54,000/t to around USD 16,000/t in 2023. The report also forecasts downward pressure on the cobalt price although the decline is expected to be more modest than lithium.

The road ahead might be bumpy, but in the longer term, it is clear that the sun is only starting to rise for African participation in the green metal sector.

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