The International Energy Agency (IEA) is forecasting a significant shift in the automotive industry: by the end of the decade, one in every five cars on the road in the US and Europe will be electric.
In China, the transition is expected to be even more rapid, with one in three family sedans and SUVs being battery-powered.
"The continued momentum behind electric cars is clear in our data, although it is stronger in some markets than others," said IEA Executive Director Fatih Birol.
"Rather than tapering off, the global EV revolution appears to be gearing up for a new phase of growth. The wave of investment in battery manufacturing suggests the EV supply chain is advancing to meet automakers’ ambitious plans for expansion."
Powering the revolution
Yet against this backdrop, interest has been waning in the companies mining and refining the battery metals powering this EV revolution.
Analysts suggest this trend is driven by shorter-term price fluctuations of the metals rather than reflective of long-term demand trends.
They also point out that Western legislation such as the Inflation Act (US) and Critical Raw Material Act (EU) are expected to promote and support the sustainable supply of EV-critical metals and, by extension, loosen China’s grip on the market.
Historically, sectors such as battery metals that have become overbought often swing to being heavily oversold, presenting opportunities for the contrarian investor – particularly, in this instance, for those with a deep understanding of the EV supply chain.
One such opportunity lies with Giyani Metals Corp (TSX-V:EMM, OTC:CATPF), a mining company based in Botswana.
Essential raw material
Giyani owns the K.Hill Project in the southern part of the country, which boasts an indicated resource of 8.6 million tonnes and an inferred resource of 6.1 million tonnes of manganese oxide (MnO). Giyani is developing a battery-grade manganese project in Botswana which will first produce high-purity manganese sulphate monohydrate (HPMSM).
This is an essential raw material used in the majority of lithium-ion batteries, including those that power electric vehicles.
Botswana, known for its mining-friendly policies, offers advantages such as access to infrastructure and a skilled workforce.
The country's favorable location allows for the shipment of production to major car component manufacturing hubs worldwide.
K.Hill itself is an at-surface, low-impurity, long-life deposit with the potential for expansion.
Initially, it is expected to produce 80,000 tonnes of HPMSM annually when it begins production in 2027, with an initial capital expenditure of $283 million.
Long-term growth drivers
The project’s long-term viability is bolstered by the aforementioned efforts by the EU and the US to secure critical minerals from reliable jurisdictions outside China.
Meanwhile, the supply deficit for manganese is expected to be 1.5 million tonnes by 2030, created by the growing demand from the EV market.
What differentiates K.Hill is its ultra-low carbon footprint, which is expected to be best-in-class thanks to its proprietary production process.
A key milestone for the business will be the completion of a demonstration plant capable of producing 600kg of HPMSM per day which is expected to be up and running in the fourth quarter of this year.
This facility will provide potential customers, known as ‘off-takers,’ with sample material for testing, ensuring Giyani can deliver a credible, saleable product consistently.
Demonstration plant key to success
Securing off-takers is crucial for Giyani, as it strengthens the company’s position in obtaining debt financing for the full-sized project.
The demonstration plant was funded by $26 million of investment from South Africa’s Industrial Development Corporation (IDC) and the ARCH Sustainable Resources Fund.
CEO Danny Keating is hopeful the IDC, a large investor in the region, will eventually follow its money when it comes to constructing the full-scale operation.
“They [IDC] invest upwards of a billion dollars a year across industrial projects,” he explains.
“They have an ambition to create a [battery] value chain within Southern Africa. That's a public position. And so, we could very easily be one part of that strategy.”
As well as producing HPMSM for the commercialization phase, the demonstration plant will also help troubleshoot any potential issues, ensuring the larger-scale operation runs smoothly.
Proven processes and equipment
Giyani's approach involves using proven processes and equipment, developed to show they integrate seamlessly to create a greener method of production, rather than relying on new or untested technologies.
“When we're testing, the feedback and the data that the operating team will get from that [demonstration plant] will be of such quality that it will go directly into the design and implementation [of the full-scale plant itself],” explains CEO Keating.
“We’ll also integrate all of those learnings into the Definitive Feasibility Study (DFS). That then means that we will have the latest capital numbers, and operating costs all fresh and in-line.”
The financial projections for K.Hill are compelling. The base case scenario from the 2023 preliminary economic assessment shows a post-tax net present value (NPV) of $984 million with an internal rate of return (IRR) of 29.4% (using an 8% discount rate.
Eye-catching numbers
The 2023 updated mineral resource estimate (MRE) allows for efficient high-grade mine scheduling, projecting an average plant feed grade of 19.1% manganese oxide (MnO) in the first five years of production.
Over the 25 years, the average grade is expected to be 17.3%. In an upside scenario, the financial outlook is even more robust, with the post-tax NPV increasing to $1.5 billion and an IRR of 33% over 25 years.
Several significant milestones are on the horizon for Giyani. The off-taker qualification process will secure a customer base, leading to a final investment decision next year.
Before that, there is the small matter of completing the definitive feasibility study and securing necessary financing, setting the stage for production.
Secured funding then fires the starting pistol on the race to production with the build expected to take around 18 months.
Value-accretive milestones
Put simply, from an investor standpoint, a number of crucial, value-accretive milestones are expected over the coming months. “It is up to us to execute,” says Keating.
If you look at Giyani’s market valuation, it is just a little more than the cash raised in the recent funding round.
Analysts following the mine developer would argue that this reflects market trends and sentiment rather than the company's fundamentals. In other words, it is a contrarian investor’s dream.
However, always bear in mind that this is a risk-reward scenario, not a risk-free investment opportunity.
Securing customers, financing, and building the project, remain significant hurdles.
But as Keating points out: “We have an engineering and corporate team centered on where the action is and focused on success.”