Nio, the Chinese electric vehicle manufacturer, has bought at stake at a lithium miner in Australia called Greenwing Resources for a sum of AUD$ 12 million ($7.7 million) as companies in this space keep rushing to secure this critical raw material to produce batteries for their automobiles.
According to Greenwing’s official press release concerning the transaction, the funds obtained from the share sale will be used to develop a new project in Argentina that involves the exploration of a lithium mine in the Catamarca province.
Nio (NYSE: NIO) has also secured a call option to buy a stake of 20% to 40% of Andes Litio, the company that will reportedly own rights to the San Jorge lithium project. This call option will be exercisable a year after a JORC report has been issued for the project. The exercise price may range from $40 to $80 million if the mining operation achieves certain results.
The Chinese EV maker will own 12.2% of Greenwing once the deal is settled and will have the right to appoint one member of the Board of Directors as per the company’s incorporation rules.
Greenwing expects to have a JORC report for the San Jorge mining operation in Argentina by the end of December 2023. Meanwhile, the placement deal that involves the purchase of Nio’s stake at the Australian miner is expected to be settled by year end.
Nio Aims to Secure Critical Supplies for Its Batteries
Companies in the EV space have been scrambling to secure lithium supplies for future years as the market is expected to saturate amid growing demand for the material by 2025. Lithium is used to manufacture the rechargeable batteries required to power these automobiles.
China currently controls around 70% to 80% of the world’s lithium supply chain and it appears to be aiming to keep expanding its dominance in this particular market by acquiring mining operations in countries that have vast reserves of the metal.
According to the US Geological Survey of 2021, Chile, Argentina, and Bolivia reportedly account for 60% of the global underground reserves of lithium.
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Estimates from the International Energy Agency (IEA) and Credit Suisse indicate that a shortage of lithium is coming as suppliers have experienced a sudden spike in the demand for the metal now that the world is coming to terms with climate change.
Meanwhile, other estimates point to 2023 as a critical year for EV makers as there may be only enough lithium available to produce approximately 14 million electric-powered vehicles.
These forecasts were showcased in a report from the World Economic Forum. Researchers pointed out that many buyers could be left “empty-handed” if the current growth trajectory of EV sales continue. From 2020 to 2021, the number of units sold doubled from 3.24 million to 6.75 million.
Limited Supply and Environmental Concerns Threaten the Growth of the EV Market
“There simply isn’t going to be enough lithium on the face of the planet, regardless of who expands and who delivers, it just won’t be there”, commented the Chairman of Lake Resources, Start Crow, during an interview with the Financial Times.
Lake is a mining company located in Australia that advocates for clean lithium extraction. The company uses a technology
The top executive of the lithium mining firm continued: “Car makers are starting to sense that maybe the battery makers aren’t going to be able to deliver.”
The significant amounts of water required to extract lithium is one of the most challenging areas for miners as the metal abounds in areas where the vital liquid is relatively scarce.
This has raised environmental and social concerns about the moral and ethical aspects of lithium extraction as large communities could be endangered by these operations in countries that typically struggle to provide enough water for their residents.
Moreover, pollution of water sources is another grave concern as lithium is considered significantly toxic if intake levels exceed 20 mg/L.
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