From high-end smartphones to electric cars, the demand for lithium is outstripping the ability to extract it from the earth. Nigeria’s large metal deposit provides an opportunity to cash in on the world’s hottest mineral.
Driven by battery demand, lithium increased by 10.81 per cent in the first half of this year, making it the best-performing commodity and one of only two that recorded a positive return — the other being gold, according to an analysis by U.S. Global Investors, Inc., a fund manager with millions of dollars in assets under management.
“Every other commodity that we follow lost ground during the six months as global manufacturing activity receded and China’s economy, historically a major demand engine, delivered a disappointing rebound after ending three years of pandemic lock-downs,” Frank Holmes, CEO of U.S. Global Investors, said in an investor note.
Nigeria can get into an industry still considered mainly on the ground floor. Discoveries of lithium deposits in Plateau, Oyo and Kaduna states allow the country to craft better policies than it did with other minerals like gold.
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Before the announcement by Thor Explorations Ltd that initial drilling results from its search for lithium in Oyo State had returned significant potential, Kian Smith Trade & Co, a Nigerian mining company, in 2018 announced that it had discovered 15,000 tonnes of lithium ore – commercial quantities – in the country.
Last month, a Chinese firm, Landmark Lithium Mining Company, said it was building a lithium factory in Nasarawa State that would produce about 3000 tonnes of lithium per day at an estimated cost of $100 million.
Last year, The Nigerian government said high-grade lithium discovered in the country had been attracting foreign investors. Abdulrazaq Garba, director-general of the Nigerian Geological Survey Agency, told journalists in Abuja that a national mapping programme had yielded high-grade lithium.
“High grade in the sense that the standard worldwide for even exploration and mining starts from 0.4 per cent lithium oxide, but when we started exploration and mining, we saw one per cent up to 13 per cent lithium oxide content,” he said.
“Another advantage of Nigerian lithium is that it is hard rock lithium, which investors look for worldwide. We even had discussions with some private companies with mining licences in Nigeria. They conducted tests on the lithium, and we also collaborated with Canada on that, too,” he added.
He said a track of mineralisation of almost two to 10km was discovered close to Abuja, adding that resource evaluation was conducted on the area, and anomalous gold, lead, and silver were discovered with Tungsten, an additive for steel production.
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Experts say lithium demand has risen in the past six months because of the the need for batteries. The lightweight metal, the top performer in 2021 and 2022, is a critical component of the electric vehicle (E.V.) sales booms.
First-quarter EV sales worldwide rose to 14 million vehicles, indicating a promising year for the metal. According to the International Energy Agency (IEA), the Paris-based think tank that crafts Europe’s energy policies, this would mark a robust 35 per cent increase from 2022, raising the global electric sales share to about 18 per cent.
Analysts estimate that global lithium production was 737,000 tonnes in 2022, with expectations for 2023 production at 964,000 tonnes and 1.17 million tonnes in 2024.
A Forbes review notes that eight U.S. publicly traded lithium stocks grossed $93 billion in market capitalisation in the first half of 2023, an over 4,000 per cent increase over three years compared to the sector.
Another upside is that the list of publicly traded lithium companies is short, giving investors limited options for buying lithium stocks.
Top producers
Currently, Australia, Chile, and China are the three biggest lithium suppliers. These countries are consolidating their positions in the market with intelligent policies.
Chile, for example, recently clarified mining rules with a new public-private partnership model, leading to more than 50 companies from around the world jostling to negotiate lithium deals in a country representing 30 per cent of global lithium production.
This has resulted in positive outcomes. Tesla’s production in China rose nearly 20 per cent in July, aiding in the company’s record-breaking quarterly sales. The company delivered 93,680 cars from its Shanghai factory in June, a significant increase from the 78,906 units in the same month last year and 77,695 vehicles in May.
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Other car companies are rapidly shifting from combustion engine models to EVs and hybrids, boosting demand for lithium. Lamborghini, for instance, announced last year that it plans to invest at least 1.8 billion euros ($2 billion) to create a hybrid line-up by 2024 and to introduce its fully electric model by the end of the decade. The Volkswagen-owned company reported that its final gas-burning models are now sold out for the remainder of production, according to a note in a mining publication.
The Nigerian government has identified lithium as a strategic mineral and has issued small-scale and large-scale licences to commercial operations. There are also different permits for purchase and export and several incentives, including tax breaks, to encourage companies to invest in the lithium mining industry.
Under Nigerian law, foreign companies are prohibited from mining or buying lithium or other minerals unless they incorporate a local company.
