Scandium, Cobalt, and Water Purification: CleanTeQ HoldingsA Microcap Teaser Solution In Advance !!
(Australian stock exchange CLQ, OTC pinks CTEQF).
CleanTeQ is sure to be the answer to future teasers you will be reading about from resource gurus, To save you all the trouble of solving them, I decided to write this article.
My portfolio was grotesquely overweight in gold and silver positions, and in moments of anxiety I thought it would be a good idea to diversify and take a few positions in something other than gold mines, royalty companies, Mongolian exploration companies, and small-cap copper miners with major operations in the Democratic Republic of Congo.
Thus I made a small speculation in CleanTeQ, solely on the basis that mining titan Robert Friedland was the Chairman, and CleanTeQ was the only resource company I could find that seemed to be in a position to mine scandium, a very rare metal that sells for a couple of thousand dollars a kilo.
My due diligence was so slight that I was embarrassed to emphasize my position to the readers at Stock Gumshoe. We are supposed to study these things a little more than I did for CleanTeQ. And after entering at 50 cents, the stock promptly dropped to 35 cents or so, making me glad that I did not look foolish by publicizing my position.
As the weeks went by, I started to find more information on the company that I should have found out beforehand. This was partly accidental, partly from other Gumshoe readers, and partly from new announcements and company news that occurred after I took a position. But the findings were all very positive, and because the company is so interesting I thought it warranted its own thread apart from the hard asset thread which I moderate.
I have a full long position and high hopes. And I thank Secretsquirrel, Griffin, Larry McKenna, and several others who helped fill in the missing pieces of the puzzle.
Below are my findings, opinions, and summary on CleanTeQ Holdings:
BUSINESS MODEL CleanTeQ is a hybrid company based with three bases: scandium mining and production, cobalt mining and production, and water purification. This seems like an odd combination, but as you will see, it is not. It is a stroke of genius. And I will explain why we should care about scandium and cobalt.
(1) The company is starting production of the Syerston mine, the world’s only scandium mine;
(2) The company will also produce significant amounts of cobalt as a co-product to the scandium;
(3) The company has a large-scale water purification technology, which will target municipalities,
Industrial operations with waste water problems, and mines, which also have water problems
PROSPECTS FOR THE THREE SEGMENTS
(1) Scandium is a very rare metal that usually occurs in only small amounts that are not economical to mine. It is mostly available as a by-product and the market is opaque, usually between private parties. Scandium has very beneficial applications in aerospace, aviation, and technology, but has not been widely applied because there is not a sufficiently reliable supply of it.
(2) Cobalt is essential in many batteries. Lithium gets all the investment press, but a majority of the battery formulations need cobalt, which is rare compared to lithium. Cobalt has a similar supply situation as scandium, it is mostly a by-product and is not commonly a prime mining target in and of itself. But demand for the electric energy market is growing rapidly and cobalt demand is growing and will continue to grow accordingly. Supply chains on cobalt are iffy.
(3) Water purification is a pressing need throughout the world. Cities with lots of people, industrialized places with lots of factories, or mines with waste water, all have a real and pressing need for large scale water purification. I think most people can accept this premise of widespread demand without a lot of documentation.
HOW DO THESE SEGMENTS RELATE TO EACH OTHER ? I cannot get too technical about the water purification technology, but I will try to explain what I understand, and how it relates to the scandium and cobalt operations. They call it Continuous Flow Ionization. Ionization is not a proprietary technology per se, but CleanTeQ has developed a way to implement ionization in a continuous feed, automated loop that improves volume, improves economics, is reasonably priced for installation, and can be custom-modified to specific waste problems. It can be used in conjunction with other filtration techniques. Further, it can be modified TO EXTRACT CERTAIN SUBSTANCES from the feed waste water. This is done by modifying the resins that are used in the ionization process.
Now it so happens that CleanTeQ has developed resins that can extract scandium and cobalt from waste water. So they potentially will have commercial sources of rare metals from the by-product waste of their water purification process !
HOW CLOSE IS THE WATER THING TO REALLY HAPPENING ? It is happening. CleanTeQ has signed a memorandum of understanding with a major Chinese municipality to implement their technology. There is a joint venture, 55% Chinese/45% CleanTeQ. Once the first one is up and working, China has a mind-boggling potential for water purification. For their teeming urban centers and for their mining and industrial locations, shall we say the potential is very large ?
CleanTeQ has 100% of rest of the world. CleanTeQ is closed-mouthed about other commercial sources, but they let on that they have been in contact with the likes of GE, Dow, and other big hitters. They state a pipeline target of $100 million by 2020; I predict they will do much better.
HOW CLOSE IS THE COBALT THING TO REALLY HAPPENING ? Very close. Battery useage is soaring and is the strategic target of many governments, corporations, and environmental groups. Batteries need cobalt.
HOW CLOSE IS THE SCANDIUM THING FROM HAPPENING ? This will take a while because the applications are high tech, with long lead times, and there is only one scandium mine in the world (CleanTeQ’s newly commissioned Syerston mine). CleanTeQ intends to develop the scandium market by being a reliable source of supply, and by driving the price down.
CleanTeQ will have viable margins with scandium prices up to half of current prices.
To give you an idea, the Russians made a few MIGs with scandium/aluminum alloys. They were faster, lighter, stronger. An addition of 0.5% scandium to aviation aluminum strengthens the frame, removes the need for riveting, reduces weight, and makes repairs easier. . The Russians dropped it because of costs; and Boeing and Airbus will not use it without a reliable source of supply. But there is about to be a reliable source of supply: CleanTeQ.
WHAT ABOUT IP PROTECTION ? I believe the IP and know-how moat is sufficient. CleanTeQ holds a perpetual license from a high-level Russian research organization that provided some of the foundation technology. I am not a patent lawyer and a lot of the know-how will be proprietary, not patented. CleanTeQ has been at this for over ten years, I think the barriers to entry are sufficient.
MANAGEMENT Totally a plus. Robert Friedland is the Co-Chairman and CEO, he has 20% of the company, great credibility and clout with the Chinese, and an unbelievable track record in mining. Sam Reggall is the other co-chairman. I know little about him, other than from my observations of him on an Australian investment show that aired last week. He was impressive.
MONEY AND FINANCES I don’t think there is anything at all to worry about. Friedland must be worth billions, the Chinese are in, and the concept has enormous potential.
Sources: as I mentioned, information is scant. My sources were the CleanTeQ website, presentations and and interviews with Friedland and Reggall, and the sketchy information on the brokerage sites. Nothing you cannot find on your own.
Long CleanTeQ
This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.
Looking for Johnnnnns massive aftermarket announcement [??????], I did run in to this, which hadn’t seen, and found very interesting, from a week ago.
Clean TeQ Holdings gets government grant for wastewater treatment
21 Feb 2017
To develop an energy efficient wastewater treatment technology.
Clean TeQ Holdings gets government grant for wastewater treatment
The project is in association with Monash University
Clean TeQ Holdings (ASX:CLQ) has been awarded a grant of $632,285 from the Australian Government under the Cooperative Research Centre’s Project (CRC-P) program.
The funding is provided by the Department of Industry, Innovation and Science to develop energy efficient wastewater treatment technology using graphene oxide technology.
Graphene oxide is regarded as a new wonder material with its ability to form super-strong ultrathin 2-D matrices.
The technology development will be undertaken in association with Ionic Industries and Monash University.
Researchers at Monash University have developed a method of producing graphene oxide which is suitable for the production of water and wastewater filtration products.
Clean TeQ has already commercialised its Continuous Ionic Filtration (CIF®) technology which is used for water and wastewater filtration.
The CIF® technology works by capturing charged ions in contaminated water and wastewater streams and producing clean water for reuse.
The use of graphene oxide adsorbents in Clean TeQ ‘s process will allow the capture of non-ionic species and thereby extend the range of waters than can be successfully treated.
The water and wastewater treatment market is growing rapidly and is expected to reach US$54 billion per annum by 2020.
Freshwater scarcity is driving the uptake of new technology in many developing areas around the world.
The new project is scheduled to commence in March 2017.
Clean TeQ is well funded with cash at bank of $15.47 million as at 31 December 2016.
The company’s share price has increased more than 85% in the past six months, last trading at $0.745.
http://www.asx.com.au/asx/statistics/todayAnns.do
*scroll to CLQ
You have to go to ‘announcemens’ (left hand column) then input CLQ
found it
Clean TeQ forms strategic partnership with leading Chinese conglomerate, Pengxin Mining, to fast track development of the Syerston Nickel-Cobalt-Scandium Project in Australia
Mr Jiang Zhaobai, Chairman of Pengxin Group, to be appointed Co-Chairman, alongside Mr Robert Friedland
Pengxin Mining to make an initial investment of A$81 million in Clean TeQ and assist to facilitate Chinese project-debt financing for the Syerston Project
Melbourne, Australia – Robert Friedland, Co-Chairman of Clean TeQ Holdings Limited (CLQ:ASX; CTEQF:OTCQX), and Sam Riggall, Co-Chairman and CEO, today announced the formation of a strategic partnership with Pengxin International Mining Co. Ltd. (‘Pengxin Mining’), part of the Shanghai Pengxin Group Co. Ltd (‘Pengxin Group’), to facilitate the development of the Company’s Syerston Nickel Cobalt Scandium Project in New South Wales, Australia. The Syerston Project is one of the largest accumulations of cobalt outside of Africa, and one of the largest and highest-grade scandium deposits in the world.
Pengxin Mining has agreed to make an initial private placement investment of approximately A$81 million in Clean TeQ, to be used primarily for the development of Syerston, by purchasing 92,518,888 new Clean TeQ common shares at an issue price of A$0.88 per share. The issue price represents a 17% premium to the 20-day volume-weighted- average ASX quoted price of Clean TeQ shares up to and including 28 February 2017 of A$0.75 per share.
The new common shares will be issued to Pengxin International Group Limited (‘Pengxin International’), a wholly owned indirect subsidiary of Pengxin Mining, in accordance with Clean TeQ’s annual placement capacity (the placement comprises a 19.32% increase in shares on issue) under ASX Listing Rules 7.1 and 7.1A. Following completion of the share placement Pengxin International will own approximately 16.2% of the Company. Settlement of the placement will be completed by the end of March 2017.
28 February 2017
Pengxin Mining is listed on Shanghai Stock Exchange and is the owner and operator of the Shituru Copper Project in Katanga Province, Democratic Republic of Congo. Pengxin Mining is a subsidiary of the Pengxin Group, which has more than 40 subsidiary companies, either wholly-owned or largely-owned, with total assets over 20 billion RMB.
Following completion of the private placement, Mr. Jiang Zhaobai, Chairman of Pengxin Group, will be invited to join the Clean TeQ board as Non-Executive Co-Chairman, alongside existing Co-Chairman Robert Friedland. Pengxin Mining will also have the right to appoint a second nominee to join the Clean TeQ board as a Non-Executive Director. Sam Riggall, Clean TeQ’s Executive Co-Chairman and CEO, will assume the role of Managing Director.
Pengxin Group Chairman Mr Jiang Zhaobai stated, “Energy storage represents one of the fastest growing markets in China. New and reliable sources of raw materials for electric-vehicle batteries and utility-scale energy storage systems must be developed as soon as possible. The Syerston Project is a strategically important source of those critical materials – nickel and cobalt sulphate. We look forward to working with Clean TeQ to support the rapid development of the Syerston Project and their business more generally.”
Clean TeQ Co-Chairman Mr Robert Friedland commented, “We are delighted to be entering into this strategic partnership with Pengxin Mining. The Pengxin Group is a well- respected and successful group of diversified businesses operating across China and overseas. Having access to Pengxin Group’s extensive global networks provides the Company with significantly enhanced financial, commercial and technical opportunities. The placement proceeds will provide Clean TeQ with the funding to maintain a fast-track schedule for the development of the Syerston Project.”
Pengxin Mining to assist in the procurement of Chinese project financing for Syerston
In addition to the share placement, Pengxin Mining has also agreed to use its best endeavours to assist the Company to procure Chinese project financiers to participate in the financing of the Syerston Project for a significant proportion of the capital cost of the Project. As previously advised, Clean TeQ is currently in discussions with a number of potential debt providers, both in Australia and off-shore, to secure a project debt package for the Syerston Project.
Mr Riggall commented, “We are delighted to have Pengxin Mining join our register. As the largest and fastest growing market in the world for electric vehicles and energy storage systems, China presents a huge opportunity for raw material suppliers. We foresee significant demand for cobalt and nickel sulphate in China over coming years
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and look forward to leveraging our relationship with Pengxin Group to maximise value for our shareholders.”
In addition to the private placement, the parties have agreed to utilise Pengxin Group’s extensive business network in China to deliver certain strategic benefits in the areas of marketing and offtake (for nickel, cobalt and scandium) and water treatment (the Pengxin Group is the largest shareholder in Shanghai-listed Heilongjiang Interchina Water Treatment Co Ltd, one of China’s largest publicly-traded water treatment companies).
Recognising the significant investment to be made by Pengxin International, and subject to any necessary regulatory approvals, Clean TeQ has agreed to provide Pengxin Mining with a right to participate, on a pro rata basis, in future equity raisings by the Company over the next three years. That right will continue while Pengxin Mining holds at least ten percent of the fully diluted capital of the Company.
Pengxin International has also provided a standstill commitment, whereby it shall not, without Clean TeQ Board approval, acquire or otherwise create a relevant interest in shares that would increase its ownership above 28% of the issued shares in the Company in the absence of a control transaction for the Company proposed by a party unrelated to Pengxin Mining.
Pengxin Mining’s investment to help fast track development of the Syerston Project
The $81 million subscription proceeds will be primarily applied towards the development of the Syerston Project including:
Completion of the Syerston Nickel/Cobalt/Scandium Project Definitive Feasibility Study (‘DFS’);
The Syerston optimisation study which is being run in parallel with the DFS. The optimisation study is reviewing the potential to implement the Project on an accelerated schedule. The optimisation study will assess the impact on the timeframe to first production if commitments for early works and long lead items are made in the second half of 2017, prior to the completion of the DFS; and
Providing funding to give the Company the capacity to start early works, including the commencement of detailed engineering and asset purchases, required to move the project into the implementation phase in the second half of 2017, and to push ahead with the development of the Project on an accelerated schedule.
The DFS is progressing well and is on track for completion in Q4, 2017.
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Piloting and test work
As part of the DFS activities the Company re-commissioned its Resin-in-Pulp (‘RiP®’) pilot plant at ALS Metallurgy in Perth. The purpose of the pilot campaign was to generate samples of high purity nickel and cobalt sulphate eluate solution for further testing to confirm the flow sheet design for the refinery section of the processing plant and to provide samples of nickel sulphate and cobalt sulphate for potential offtake customers.
The pilot campaign successfully processed a bulk sample of approximately 20 tonnes of Syerston ore to produce a batch of high purity nickel and cobalt sulphate eluate solution. This solution is currently being further refined into samples of high purity nickel sulphate and cobalt sulphate (see Figure 1 below) which will be sent to potential offtake customers in the first quarter of 2017 for product testing.
Pending completion of the DFS, the Company will be undertaking a range of activities to secure the financing required for the development of the Syerston Nickel/Cobalt/Scandium Project, including progressing a range of options in relation to off take finance, project-level financing and debt financing.
Figure 1: Separation and purification of nickel and cobalt sulphate solution at ALS in Perth
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About Pengxin Group
Founded in 1988, Pengxin Group has grown into one of the largest private-owned holding groups in China and an employer of more than 4,000 people.
Pengxin Group is a private Chinese conglomerate with a diversified business scope including mining, real estate development, urban infrastructure construction (including water treatment), high-tech investment and investment in industry and commerce. Pengxin Group has more than 40 subsidiary companies, either wholly-owned or largely-owned, with total assets over 20 billion RMB
As one of the earliest private groups in China to attempt internationalization, diversification and professional management, Pengxin Group has invested over US$1 billion overseas in the last decade, and gradually grown its four main business segments into domestic industry leaders.
Metals & Mining – The group controls Pengxin Mining (600490.SH), which has been listed on the Shanghai stock exchange since 2003. Pengxin Mining owns and operates the Shituru copper mine in Democratic Republic of Congo, which is located in an area with a long history of copper mining and smelting as well as existing infrastructure to support significant industrial activities. Asing a hydrometallurgical processing plant to produce copper cathode, Shituru’s annual throughput is 36,000 tons.
Property Development – Since its establishment, Pengxin Real Estate, a subsidiary of Pengxin Group, has developed a number of large scale projects in Shanghai such as Chuang Shi Ji Garden, Oding Palace Villa, City Classic and Bundfield, with the total developed area amounting to over two and half million square meters.
Infrastructure – Adopting a financing mode of Build operate Toll (‘BOT’), Pengxin Group has invested 3.3 billion RMB in the development of the Shanghai Suburban Ring Road (A30) NorthSection,whichwascompletedandputintooperationinlate2004. PengxinGrouphas also delivered over 2 billion RMB worth of other projects operated on a BOT model including the Shanghai Long-distance Bus Terminal and the Nanhui Sports Center.
Industry and Commerce – Pengxin Group is also actively investing in expansion into new commercial opportunities. Shanghai Yangpu International Home Textiles Park, Business Headquarters Base, Nanjing Water City and International Mart in Wuhan are just some of the projects being currently under construction at the moment, with the total developed area amounting to over one and half million square meters.
Technology – The Pengxin Group is actively engaged in the research and development of high-tech projects. MPI technology, developed by Shanghai Longlin Communications Technology Co., Ltd., a Pengxin Group company, is a new generation video network which will revolutionize the vast information consuming market by realizing the potential of 3-in-1 network broadcasting, television and telephone.
Agriculture – Pengxin Group, through its subsidiary Pengxin New Zealand Farm Group, is the owner of a number of significant dairy farming operations in New Zealand.
For more details about Pengxin Group see http://www.peng-xin.com.cn/eng/default.aspx.
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About Clean TeQ Holdings Limited
Based in Melbourne, Clean TeQ (CLQ:ASX; CTEQF:OTCQX), using its proprietary Clean-iX® continuous ion exchange technology, is a leader in metals recovery and industrial water treatment.
About the Syerston Project – Clean TeQ is the 100% owner of the Syerston Project, located in New South Wales. The Syerston Project is one of the largest and highest grade scandium deposits in the world and one of the highest grade and largest nickel and cobalt deposit outside of Africa.
Looks very encouraging to say the least.
What’s your take hn?
Long CLQ.
There you have the 20% dilution, didn’t somebody post some info from their broker about a looming dilution a few days ago? This is only partial financing for syerston, this new chinese partner is supposed to help them get the rest of the money they need. It seems they are in full acceleration mode trying to get syerston up and running, doing feasibility studies and optimization studies side by side, and using this money to order all the stuff they need to turn rock to money.
We’ll see if the new equity hurts or helps the stock price.
It may help rather than hurt. Adds a lot of credibility to the project, wouldn’t you say ?
It was good to see that the shares were bought at $0.88au. Good floor price.
It’s an inside price and the Chinese aren’t going to sell their stock.
When do they ever ?
hedy, I agree, if the inside price for the Chinese is 88 cents Australian or about 66 cents US, and retail nobodies like us can buy for 70 or 72 cents, we are doing OK. It is not that big a difference.
…Meant to say “surprised if the dilution DOESN’T send the stock higher.”
I see the dilution as relatively neutral. They bring plenty to the table, for my 20%, including money. It doesn’t concern me in any way, and I definitely see the wisdom of the Chinese partnerships.
$CTEQF $CLQ Pengxin deal…looking briefly I will be surprised if the “dilution” sends the stock higher. For 16% of the company, they are going to get capital, contacts, infrastructure know-how, and tons of projects from Pengxin affiliates.
It is not a sale of stock per se. It is a strategic partnership with a private Chinese
conglomerate that is in real estate, technology, mining, real estate, and infrastructure development.
The only thing I don’t like about it is that I would have preferred an American company did the deal.
One interesting fact is that Pengxin has some important mining interests in DRC.
There is no telling how much business CleanTeQ is going to get from this partner.
And it is likely they will get business in ALL FOUR SEGMENTS of CleanTeQ activities: Cobalt sales and mining, scandium sales and mining, water purification,
and mineral extraction.
I am pretty sure you can count on the benefit exceeding the 16% of the equity that is being given over.
One reader exclaimed: “Thje Chinese are in !”
The correct interpretation is: “CleanTeQ is in with the Chinese !”
Something else. Until the announcement, that is until yesterday, CleanTeQ’s official position was “No timetable is announced (for construction of the mine) but it will take three years from the time a decision is made”.
Does anyone now doubt that the decision has been made, and in fact has probably been decided for a matter of months ?
$CTEQF $CLQ Pengxin deal…I have no inside information, but I think this type of Chinese “dilution” needs to be considered in a different light than we normally see
when discussing typical stock exchange transactions.
The Chinese are buying a big seat on the board and an equity stake. The money is going to accelerate the development of the Syerston mine. So CleanTeQ holders do not need to take on any debt, and the stock issued to Pengxin is not going to come onto the open market. The fact is that we can expect the Chinese to hold the stock forever, it will not be dumped for a paper profit. It will be kept in the vaults at Pengxin, and I predict that their 16% stock equity interest will never see the light of day.
Furthermore, CleanTeQ revenue from cobalt and scandium will be accelerated because Syerston will be selling the stuff sooner. One stated prupose of the deal was to accelerate the development of the mine. In essence, accelerated mine development will reduce the costs of building the mine.
This is exactly what we saw with PVG. They incurred higher expenses to get open earlier, but will have month s of additional sales to offset the expense.
HN: Interested to know why you say ” The fact is that we can expect the Chinese to hold the stock forever, it will not be dumped for a paper profit. It will be kept in the vaults at Pengxin”
Just for my education. Thanks
The Chijese are making a strategic national acquisition. They see the company as an important strategic asset. They are in it for the long term.
Look, the CHAIRMAN of Pengxin has joined the board as an equal to Friedland. Why do you think this is ? So they can make a trading profit ?
Also the deal mentions that, in case of a dilutive event, Pengxin has the right to expand its ownership to maintain a position equal to its proportionate position prior to the dilutive event. This is long term thinking and a similar clause was in the Zijin Mining agreement with PVG. And when PVG issued more stock, guess what…Zijin ponied up more cash and maintained its proportionate position.
These Chinese companies are not private companies they way we think of them. They are state vehicles and will not make acquisitions like this without approval of the official Chinese establishment. Hell, they ARE the Chinese establishment. They have a long-term strategy and in this case, they see CleanTeQ as a piece of it.
Alan, tell you what. Just let me know if you ever see a filing for a Chinese holder reducing its stake in a public corporation, on which they have taken a major equity and board position.
When someone takes a position like this, with a Board seat let alone a Co-Chairman, they are in it for the long run. It is announced as a STRATEGIC PARTNERSHIP.
Zijin is not flipping its position on PVG. Pengxin is not having its chairman sit on a board with Robert Friedland so they can make momentum trades and scalp CleanTeQ stock.
They are not retired execs and plumbers looking to make a buck here and there.
Ok…so for my education…Chinese investments, taking a board seat, are because they believe in the project long term…got it. Makes sense.
Today’s painful result of CleanTeQ 16% dilution:
Stock rose almost 3% as of 3:30 p.m..
This is not a private Chinese individual. It is a major private Chinese corporate conglomerate. It is CHINA.
Hen: It was a simple question for my education….chill. Just entered at 85 oz
alanh…everything calm here !
— EV Company News For The Month Of February 2017 —
Summary
Global EV sales for January 2017 – A weak start to 2017, let down by China.
EV market news – The Economist magazine wrote: “Electric cars are set to arrive far more speedily than anticipated.”
EV company news – BYD sales plummet in January, and BMW takes the global 1 spot for now.
http://seekingalpha.com/article/4050730-ev-company-news-month-february-2017?app=1&uprof=46&isDirectRoadblock=true
x post
$CLQ (long)
3-1-2017 trading stats
CLQ SP at AUD 0.93 (up 5.68% from prior trading day
Volume: nearly 6 million shares changed hands (ASX and Chi-X combined)
$CTEQF, CLQ.ASX – CleanTeq Water website is now UP: http://www.cleanteqwater.com/ 🙂
Long Cleanteq and Gummune! 🙂
CleanTeQ Water website…Thanks, Ben. Wow. I’m impressed.
The website is dated 2017 so it has been under development for a while and went live concurrent with the announcement of strategic partnership with Pengxin.
You have to be in awe of their timing, strategy, preparation, and management.
CleanTeQ Water list offices in Australia, Hong Kong, Beijing, South America, and Africa. This has been in the works for some time.
The stated applications and technical capabilities are likewise impressive. Plenty of technical details for those interested.
Friedland summed it up.
“Elon came to me because we have a nickel sulphate and cobalt sulphate operation in Australia, not the Congo,” he said. “And Elon said ‘I’ve got the world’s biggest battery factory, so I want to buy your nickel and your cobalt at the current metal price for 10 years, because I’m the biggest buyer.’ “
So we told Elon Musk, you know, Elon, that’s interesting. We’ll think about it. And then two months later we went back to him and said “Elon, you’re totally screwed. The Germans are building a gigafactory twice as big as yours, the Chinese are building four of them bigger than yours, the Japanese are building two and the Koreans are building one. So unless you’re willing to pay to buy our cobalt and our nickel at whatever the price may be in the future, you’re not going to be able to build any batteries in your own gigafactory and your whole company is going out of business, and we’re going to make money shorting your stock.”
Increasingly, media and investor speculation on the potential for supply chain constraints to materially restrict Tesla and other EV manufacturer’s ambitions is rising in terms of frequency.
Provocative, but prob true. May ‘put’ Tesla.
Careful. RF said “UNLESS you are willing to pay market price, THEN you will not be able to get material, and THEN [you will not be able to produce batteries in your factory] and [I will short your company]”.
Tesla may just have to buy cobalt and nickel at market prices.
The takeaway for me is that a high-profile, growing company is knocking on CleanTeQ’s door to buy cobalt.
Friedland just indicated that he has at least 9 likely customers for the cobalt (and nickel) production from Syerston, and that he is not going to hedge the production by locking in prices right now.
I am not familiar with the nickel market at all. But I can easily imagine that CleanTeQ will get lots of sales in nickel, because cobalt buyers who also need nickel will want to be important with respect to the cobalt supply; and they will give nickel business over to CleanTeQ to build up their influence with a reliable cobalt supplier.
If I had two commodities to sell, one of which was scarce and in high demand, I would favor customers who were buying both commodities.
Long CleanTeQ.
I think that is shrewd of him. Short stack has a winning hand here, playing it right is the only way to get the biggest stack. Long $CleanTeQ
9 customers? Where did you read that Hendrix?
In the quote, Friedland said that in addition to the Tesla factory (1), major battery plants were being built in Germany (2), four in China
(3,4,5,6), two in Japan (7,8) and one in Korea (9).
Also…he said “unless you buy our cobalt AND our nickel at prevailing market prices…”
When Friedland speaks, Hendrixnuzzles listens.
HN – Thanks for all the info here. My same adjuster that recommended taking some profits on Ivanhoe sent me this today:
We too are sensing that the cobalt markets are going to start to get a lot more attention and have begun building a speculative position in a company called Ardea Resources (ARL-au) for the optionality the play offers to a rising cobalt price.
On an apples to apples comparison, it is 1/10th of the market cap of Robert Friedland’s Clean Teq Holdings but the deposit is 8x larger (although, half the grade). Admittedly there’s a “Friedland premium” being built into their share price but I think there’s a good chance the Aussies catch wind of this new company and start to close that gap.
Have a look and let me know if it’s of interest to you – please note this is NOT an “investment” – this is a “trade”
So I am putting a small amount of money in this one and we’ll see how it goes
Sincerely hope Ardea is a big winner for you. It is completely within the scope of the thread and discussion of it is welcome even though I am not interested.
For me, one cobalt investment is enough and CleanTeQ is it, even though it occurred by accident. Other readers may want more exposure to cobalt and Ardea might be a great opportunity.
HN thank you for bring CTEQF to our attention, but what caught my interest is the water. Those of us in developed countries don’t always realize how precious water is in the third world countries. I think RF sees the value of CleanTeQs’ technology for making water. I’m almost willing to bet that RF already has places picked out to build CleanTeQ plants to dispense water. Those areas have or could have mines but need more water. How better to make a profit than giving water away to create good will and then building a mine to for profit. What’s even better is that the profits from CTEQF will pay for the water plants. This is just such a win-win and the timing is perfect
I re-entere4d ecobalt last August and have doubled since then and this is just the beginning. All the comments as to demand you can find in the links I’ve posted here and in the http://www.stockgumshoe.com/2016/07/microblog-storage-of-electricity-batteries-big-image/.
$CTEQF, $ECSIF, long and building
$CLQ $CTEQF CleanTeQ…new Co-Chairman Jiang Zhaobai…54 year old Chinese billionaire
http://www.wealthx.com/articles/2015/zhaobai-jiang/
CLQ up 8+% today in AU.
0.99 AU
https://www.caesarsreport.com/reports/clean-teq-advanced-stage-nickel-cobalt-project-could-draw-a-lot-of-attention-in-2017/
$CLQ.AX (long)
Earlier today, a Hot Copper member posted his following assessment of “equivalent values” for the cobalt, nickel, and scandium deposits at CleanTeQ’s Syerston property:
“I’ve been looking through CLQ’s numbers and trying to get my head around the value of the resource in terms of something I can understand (Cu and Au equivalent).
Whilst Co is the sector in vogue at present, the deposit has three valuable components. I’d be keen for feedback on these numbers.
Assuming the latest spot prices:
Co US$23.25lb
Ni US$4.85lb
Au US$1,235 oz (or US$39.70 g)
Cu US$2.69 lb
Sc US$4,200kg (or US$1,909lb)
I work out that the Co component of the deposit is the equivalent to:
0.86% Cu, or
1.33 g/t Au
The Ni component of the deposit is the equivalent to:
1.11% Cu
1.77 g/t Au
Combined the NiCo deposit is the equivalent to:
a Cu deposit grading 1.97% Cu, or
a Au deposit grading 3.1g/t
This is a very good eq. grade considering the size and shallowness of the deposit.
Things get a little crazy, however, when plugging in the Sc. The issue with Sc, however, is that the market is incredibly small and demand needs to be created to sell the output. Sc currently sells for US $1,909 /lb (source: metalprices.com) or 709x that of Cu.
The Sc component of the deposit (at a grade of 419ppm), ignoring the NiCo component is the equivalent of:
a Cu deposit grading 30% Cu, or
a Au deposit grading 45g/t
Based on the uncertainty of Sc I think it could/ should be discounted materially from any valuation. However, the NiCo component alone makes for a very good deposit and when applying this across the many other (Ni)Co hopefuls I can assess the value of these deposits in a ‘language’ I can understand.”
I have not checked the poster’s math, but will follow his comment on Hot Copper to see if other HC members find fault with his numbers.
The scandium analysts have to be circumspect because the market is undeveloped. The cobalt analysts are careful because the mine is not built. The water analysts discount the mining because it is the foreign ground for them, and the company not have even a dedicated water website until ten minutes ago. And the tech/chemists who might understand the extraction technology are few and far between.
It is hard to recognize how the elements work together, but once you see the relationships
clearly it becomes a very exciting situation.
The company will be underestimated for a while. Good for accumulating a position.
$CLQ.AX (long)
A highly-respected Hot Copper member (Bomber78) reported tonight that, in an Allan Kohler interview, CLQ management said the (Syerston) Scandium (resource) is worth equivalent to a 17,000,000 ounce gold deposit grading 22 gpt with cash costs of $400 oz.. Importantly, he added that was in reference to a “Scandium only” mine. Now as a “byproduct,” cash costs are virtually nothing after a $20 million “add on” to extract the Scandium.
can that be right? isn’t that 20 billion dollars of scandium? don’t tease me man.
can someone use that guys numbers to put a dollar value on the total deposit?
It’s impossible because there is too much uncertainty on the future commodity prices, heck you can’t even do an NPV calculation because nobody knows what interest rates to use.
But the numbers are huge. Plenty of room for error when the market cap you are looking at is under $400 million.
The cobalt estimate by the guy on Hot Copper is the type of estimate you are going to get; althgough he ignores the scandium as being too “iffy” for a valuation. There will be tons of assumptions and variables whether you try to do cobalt or scandium, but you will get a number. A very large number.
The scan/alu alloys are real. I have seen pictures of advanced products made with it, and those old Russian MIGs were pretty good. Samples from the Syerson location made with CleanTeQ processing are in the hands of those who need to test it. Aerospace
companies will be lining up the same way for scandium that battery guys will be lining up for cobalt and nickel.
BTL…the Hot Copper guy, being a conservative tough-minded mining type, shows why the stock will be undervalued. He looks at scandium only…gives NOTHING for the cobalt…NOTHING for the nickel…NOTHING for the water purification…NOTHING for the other mineral extraction potential. Good for us. I’m a buyer.
BTL…this illustrates why CleanTeQ will be undervalued for a while. Frankly it is somewhat advantageous, if we are correct about the assessment of the different business sectors; it will give us a good period of time to accumulate
a position.
I am not sure how the perception and volatility of the stock price will be affected by the partial viewpoints. It may be that cobalt demand and pricing will have an overly dramatic effect for a while. If this is true, I would think that dips in price will present good opportunities because the scandium and water purification segments will get “thrown out” and discounted, while speculators are focused on the cobalt.
$CLQ (long)
For Renbycage: As I read Bomber78’s post (cited above), the reported calculated value of the Scandium deposit is the equivalent of 17,000.000 ounces of gold. At a spot price of $1,235 per ounce of gold, that equals approximately $21 billion (USD). [Bear in mind that we are relying on double hearsay – i.e., Bomber78’s summarization/representation of the contents of Allan Kohler’s interview of CLQ management]/
His reference to a $20 million dollar “add on” to extract the Scandium ostensibly refers to the cost of constructing the “continuous flow ionization plant” (at times simplistically referred to as water purification plant) that will be used to extract Scandium (and other elements).
For previous relevant posts, I recommend using a control F word search of Page 1 of this thread, targeting the word “extract.”
I would defer to a Gummie with greater expertise with numbers to double check the math calculations and tally up a total estimated value of the deposit – but that may not be possible until completion of the pending DFS expected in 4Q17.
thanks btl. I’m skeptical on the scandium numbers. But my impression is that Friedland wants to create a robust scandium market by bringing the cost of it down to $1000/kg [4X lower than todays price], and a reliable cheap source of it, so manufacturers can feel comfortable they can count on it. And that if the market requires it, he can supply all the scandium it needs, by increasing production. However even using a scandium model at $2000/kg, I read in a report that syerston can rev up another 10 mil a year revenue from scandium sales, that is in another universe from the concept of a 21 billion dollar deposit. So I guess right now, we know they are getting close to money pouring in from all directions, but putting numbers on it is pretty speculative.
I’m just projecting, but lets say with their own mine, and their own efficient extraction process, they can produce all the scandium you can eat for $1000/kg. And all the other scandium producers, used to $4000/kg, can’t do a profit at that price. Can they corner the market? Maybe they sell WAAAYYY more scandium then anyone knows, and that 10 mil a year is just a lowball projection based upon a very small existing market.
this actually supports my thesis
http://investingnews.com/daily/resource-investing/critical-metals-investing/scandium-investing/scandium-production-the-problem-and-the-opportunity/
Wouldn’t it be funny if this 270 mil market cap company, is sitting on lets say 5-10 billion dollars worth of almost free scandium. Once the potential becomes more obvious, which could take a couple of years, how would you re-valuate this company. The present PEA doesn’t include ANYTHING for scandium, its all based on nickel/cobalt..
And a PEA price of $12 Co! No wonder the Chinese snapped up a large slice. With a 28% ceiling the Chinese can buy another 65m shares on market.
From what I have seen, PEAs from Friedland’s companies use conservative figures, and they should be reviewed in that light.
I am scrambling to get as much as I can stomach under 80 cents. The scandium will take a while but I thing the water purification business will blast off
at any time. Take a look at the website for Cleanteqwater, provided by Ben.
$CLQ.ASX, $CTEQF – The CleanTeq water link is at the bottom left of http://www.cleanteq.com/
http://www.cleanteqwater.com/
Thank you BTL, HN and Gummies. 🙂
Hen: I know Cleanteq is a mixed bag, but re the water purification youre putting a high value on…..youd do well to look at $CLIR . They have a way to kill pollution from old coal furnaces and make them legal again. They have practically had to give the stuff away to convince anyone it works. Its finally starting to get traction, but its been a long hard grind. Industry is very conservative about change to existing methods. Id bet it takes Cleanteq a looooong time to get revenue.
you know I luv ya….just saying.
AH-You could be right. The beauty of CLQ is that it so many different paths to hitting a home run.
CleanTeQ and diversification…generally speaking, I do not like “diversification” of focus in the companies I select for investment or speculation. I want clear, understandable plans, laser-like focus on specific businesses and ideas, and strong indications that the ideas will succeed.
CleanTeQ is an exception. This is because of the strong relationship between the different business elements. It also appears to me that Friedland and Zhaobai have sufficient management skills, capital, and vision to execute successful operations in several fields at once.
The observable elements of the Pengxin deal support this supposition. In one stroke, after careful planning and negotiation, CleanTeQ Water has obtained capital, contacts, and a strong base for expansion in China.
I think the water division will do extremely well, with blue skies growth potential. The China market is the fastest growing market in the world for water purification. The government just raised standards of what can be released back into the ground, and many of the plants are having trouble meeting those new requirements. Cleanteq provides what may be the lowest cost solution to this problem, one can simply build a low cost cleanteq system on top of their old system. And China isn’t the only market, they have offices in like 5 other countries. No shortage of toxicity in this world, cleanteq works on ground toxicity as well, but doesn’t seem to be a focus YET. Also, in some cases, their system recovers valuables from the sludges and tailings they move their magic ionized resins thru, literally turning shit to gold. Its the combination of 1. they low cost solution 2. they high margin business 3. they in fast growing niche 4. they have esoteric alchemical technology that literally turns toxic water to money and shit to gold. And because of their capability to do mega-sized projects, this is not a business that needs to build up in small increments. A few big projects, and the stock price could triple. They now have, what looks to me, as very strong chinese partnerships, and a demonstration project…. it just makes sense that if chinese water purification plants need to upgrade their infrastructure to meet new regulations, and adding a cleanteq system as kind of an extension to the automatic car wash that finishes the job…… Shit, they probably set their magnet knob to the right setting, they put in hiroshima mud, and in one vat they get uranium, and the other rice.
Yes all looking very very positive.
Nicely put – Shit, they probably set their magnet knob to the right setting, they put in hiroshima mud, and in one vat they get uranium, and the other rice – like something out of a 50’s sifi film….funny!
Long CLQ of course…..
The first setting will be at the Syerston plant. They will get cobalt out of one circuit, nickel in the second, and scandium from the third.
CleanTeQ Water…of course, you may be right about the time needed to build an order pipeline. But assuming the technology actually works, I think the booking of orders will be relatively fast. The reason is the personal influence and power of Friedland and the Chinese strategic partner.
Friedand’s clout and credibility is high in the mining business is very high (in most circles), and he has major projects that by themselves could generate seed orders of considerable magnitude.
Zhaobai, through Pengxin, similarly has many points of influential contact and only needs to express his desires for orders to start coming in CleanTeQ’s direction.
Both entrepreneurs are essentially private operators.
We see their public face in Ivanhoe, CleanTeQ, and Pengxin, But Friedland also has huge amounts of financial power in various private entities, and the political and financial connections of Zhaobai, while speculative, are in my opinion likely to be quite extensive.
The proof will be there shortly enough in the form of
news releases.
I have no problem at all with anyone I know being skeptical or doubtful of an Australian penny stock that no one has ever heard of, or of being less enthusiastic about it as an investment.
HN – I have no problem at all with anyone who is fascinated by the DJ 30, the Nifty Fifty or even the S&P 500. Problem is, I would fall asleep before the first dividend check arrived.
Ha ! But sometimes, we need a good night’s sound sleep after the excitement of watching our microcap stocks on a roller coaster.
Hi Alan, CLIR may be good but the base is towards coal, which is too narrow for my taste.
And here was me thinking Trump wants to get the coal miners back to work. How better than to make all those furnaces start burning again, but with much less air pollution. But Im sure the CLIR thing will also work with oil fired furnaces….just not such a good economic argument yet.
I wasnt seriously suggesting anyone invests in CLIR (NP). I used it as an example of how difficult it is to get new ideas adopted by conservative industries.
AH…re: Coal and CLIR…if one believes coal is coming back, then there are plenty of exceedingly cheap direct investments one can make in coal. They are not for me…once burned, twice shy…but one can get hugely levered prices on the primary producers, whose prices are lower than whale excrement.
My guess is that they will play it by ear as they go along. They can accumulate scandium if they wish since they are not depending on sales of it. They could just stockpile it, and wait for prices to go up or offtake agreements to be finalized. In the meantime, they can use the cobalt and nickel sales to pay the bills.
On the other hand they will listen to offers of long-term commitments and may hedge some of the production on a future fixed price to a large client like Airbus. This would guarantee them “X” amount of offtake and income; while it would leave a substantial upside exposure to price increases, depending on the size of the fixed offtake versus the production capacity.
$ECSIF – eCobalt Provides Operations and Corporate Update
“Over the last several months, significant progress has been made on the ICP as the Company moves closer to completing a NI 43‐101 compliant Feasibility Study (the “Feasibility Study”). The ICP is comprised of the Mine and Mill located in Salmon, Idaho and the Cobalt Production Facility (the “CPF”) located on a rail head in southern Idaho. Based on the January 5, 2017 revised Preliminary Economic Assessment report, the CAPEX required to develop the project is US$147 million, resulting in an post‐tax NPV of US$113 million (discounted at 8.5%) and a post‐tax IRR of 24%, using base case price of $19.50 per pound cobalt sulfate. ”
http://www.ecobalt.com/news/news-releases/ecobalt-provides-operations-and-corporate-update
ECSIF long and building
x post
Wonder how Elon is sleeping knowing the Chinese have shown their hand for the largest and highest grade Co deposit in the world outside of Africa. Not too mention the largest and highest grade scandium resource in the world. Will he go back to Robert or will the Chinese take the lot?
CLQ/CTEQF – its just beginning.
Elon has plenty else to worry about besides the future price of cobalt.
I wish him and Tesla well, but I have no opinion as to the viability of the company long-term.
Hi everybody! It’s been a while 🙂
I’m curious on your take on Scandium International (SCY.TO)?
Here’s also an report from John Kaiser adressing Cleanteq and Scandium INternational:
https://youtu.be/SP0aH3iTVDA
Welcome back!
Interesting video, Kaiser was one of the first people I came across regards metals/mines/investing and remembered as someone noteworthy.
This only confirms what most if not some think here, now waiting on hn to watch and comment further……
Kaiser seems like a credible guy. His focus is on the discovery aspects and news of the mining explorers and developers. Since his orientation is mining, his comments on CleanTeQ are given in the context of valuation for the known and expected mineral aspects…in the case of CleanTeQ, he relates the current valuation strictly to the cobalt/scandium aspects of the Syerston project.
This is a fair and respectable approach for a mining analyst. However, as I have noted, the approach tends to undervalue CleanTeQ since it explicitly discounts the potential value of the water purification business and the proprietary mineral extraction technology.
Hence my conviction that the company will be undervalued consistently and its potential will not be quickly realized by qualified experts and analysts who are familiar with some, but not all, of the business sectors addressed by CleanTeQ.
Kaiser, CleanTeQ, SCY…Kaiser drops some interesting comments, don’t know his sources.
He states that CleanTeQ will need to raise $700 million for Syerston, but doesn’t think this will be a problem. He also notes that CleanTeQ almost has enough to fund the SCY project; not that they are interested in doing this, or in acquiring SCY, he just notes the amount of money they have would be sufficient to pursue these strategies.
Thanks for the summary and great viewpoints. Yes, I’ve followed Kaiser for some time, and he very often covers companies that are not that known…and therefore often undervalued in the market.
Child Labor Revelation Prompts Apple to Make Supplier Policy Change7
http://fortune.com/2017/03/03/apple-cobalt-child-labor/
(you have to copy the link below and drop into browser for it to open)
https://www.ft.com/content/8c94a2f6-fdcd-11e6-8d8e-a5e3738f9ae4
CLQ soaring on good volume. Looks like the cat is still in the bag in the US for CTEQF. for how much longer?
I don’t know how perfectly correlated these two listings are, maybe someone can explain that. Do they ever diverge for more than short term? CLQ is up over 13% the last 5 days, CTEQF is up 2% in last 4 days. Even if we get the 6% they got today in aus, we’re still short changed 5%. Are $/aus exchange rates part of what diverges these?
Renb: Im sure exchange rates play a big part. I v much imagine that US trading has little or no effect on the base CLQ.AX sp. The ‘delay/difference’ your seeing would otherwise be an opportunity for someone to buy a million shares at a discount and sell when the US market plays catchup to reflect the Oz changes. ie someone is prob being lazy about updating the published info, but the broker will have an accurate price translation..
Yes and we also have to live with the bid/ask spreads of an OTC market maker. They are in a position to arbitrage differences, we are not. I think the lag will be to our detriment as long as the company is
somewhat unknown in the US. But the shoe could go onto the other foot if demand in the US goes up.
So true. I placed a Limit order for 20,000 shares of CTEQF @.75 AON (All Or None) to eliminate partial fills, and multiple commissions, with T.D. Ameritrade on Friday. The stock traded at 0.735 between noon and 1:30 P.M. and was never filled. Any suggestions on how to avoid this type of situation would be appreciated. Thank you in advance for your suggestions.
1. Try smaller market orders and see if the price stays stable.
2. Try 20,000 without all or none. Usually you will get most of it fillef.
I would not be surprised if are going to be continued liquidity problems on the buy side in this stock. The US market is still minuscule compared to the Australian, and we are buying a security that represents one share of a stock on the Australian exchange through second and third parties.
This situation is usually enough to discourage me from participating, but I judge the rewards to outweigh the transaction “friction” in this case.
The best solution, if the stock is going to be a big position or actively traded, would be to find a way to buy and sell CLQ on the Australian exchange.
HN: Buying on OZ is v easy via IB and the trading cost is negligable extra. There are two potential down sides: You have to contend with the US$/OZ$ exchange rate movements….you need a market subscription to see the realtime price movements for entry/exit.
I would appreciate some interpretation. What do you mean by “Buying on OZ” and “via IB”? Are suggesting buying on the ABX? Thank you.
OZ=Australian stock exchange
IB=Interactive brokers
Thank you!
Given my bullish outlook on commodities, I am not worried about holding Australian assets or Asutralian dollars.
https://www.ft.com/content/8c94a2f6-fdcd-11e6-8d8e-a5e3738f9ae4
The FT article in full: including correction up date.
Electric cars: China’s battle for the battery market
Beijing invests billions to try to squeeze out Japanese and South Korean rivals
by: Henry Sanderson, Tom Hancock and Leo Lewis
The headquarters of CATL, China’s fastest growing battery maker, lie on the edge of the city of Ningde, a stone’s throw from ponds where farmers raise carp and a street of cheap noodle restaurants and vehicle repair shops frequented by migrant workers. Inside the vast factory, battery parts move silently on automated conveyor belts. Signs on the walls encourage workers not to waste materials or time, or indulge in “unnecessary bending” for their own safety.
Sample the FT’s top stories for a week
The plant looks like lots of others dotted across the country. But with a valuation of $11.5bn, Contemporary Amperex Technology Ltd, to give it its full name, is anything but mundane. It is set to become China’s Panasonic — a national champion — and a key part of Beijing’s ambitious plan to remake the global battery market and exploit rising demand for electric cars.
“We want to become a leading enterprise, like the front carriage of a train, driving an entire supply chain,” says Neill Yang, CATL’s marketing director. His office overlooks cranes and cement mixers, which are building a dormitory and offices to house 20,000 workers.
CATL, which had capacity to produce 7.6 gigawatt hours of batteries last year according to Goldman Sachs, says that by 2020 it plans to produce more than the gigafactory, the Tesla Motors and Panasonic joint venture that opened in Nevada in January and is expected to be the largest producer in the US. That would potentially make it the biggest battery factory in the world.
Backed by aggressive government policies —ranging from subsidies for electric vehicles to restrictions on foreign rivals — China’s battery companies are beginning to dominate an industry which has been led for three decades by South Korean and Japanese manufacturers such as Panasonic, which makes the battery cells for Tesla cars.
Beijing last week called for companies to double electric vehicle battery capacity by 2020 and encouraged them to invest in factories overseas. As carmakers invest more heavily in electric vehicles the lithium-ion battery will be a key technology for at least the next decade, creating a market Goldman Sachs estimates will be worth $40bn by 2025 and dominated by China.
“It will not be easy to surpass Japanese and South Korean companies,” says Mr Yang. “But we think over the next 10 years, there may only be 10 lithium battery producers left, with the top three taking 60 per cent of the market.”
Since 2012 China has spent billions of renminbi subsiding its electric carmakers, turning Shenzhen-based BYD, in which Warren Buffett’s Berkshire Hathaway has a stake of about 10 per cent, into the world’s largest electric car and bus maker with a market capitalisation of $18.7bn. As well as boosting supply China is also creating demand: by 2020 it predicts 5m electric vehicles will be on its roads, from 1m today.
Analysis
Electric carmakers on battery alert after funds stockpile cobalt
Race to secure supplies of key material used in lithium-ion batteries
China’s approach has echoes of the one it took on solar power a decade ago. It dominated the industry by lowering costs and driving prices down by 70 per cent and could do the same for batteries, says Gordon Orr, former Asia chairman of McKinsey. That would make electric cars more competitive — batteries account for up to half the total vehicle cost — but it could also mean a drastic loss of market share for manufacturers in the rest of Asia, the US and Europe.
“We know how [solar] panned out. China got the net result it wanted but in the process [there was] billions of dollars of value destruction,” Mr Orr says. “I do see the characteristics of heading down that same path, and whether it’s CATL or others who win at the end is impossible to predict.”
In every device
Lithium-ion batteries revolutionised the consumer electronics market after Sony commercialised them in 1981. From the Walkman to the iPhone they form a central part of the gadgets in everyday life. Now they are set to play an equally big role in transportation, helping to reduce the dependence on oil.
Since the 1980s battery production for the electronics industry has been dominated by companies in South Korea and Japan. But China has caught up. In 2013 it outpaced Korea as the world’s largest supplier of lithium batteries for all electronic devices, according to Goldman. A year later that lead increased as China’s electric vehicle market took off. In 2016 507,000 battery electric and plug-in hybrid vehicles were sold in China, an increase of 50 per cent over the previous 12 months.
While Panasonic is the world’s largest supplier of electric vehicle batteries globally, China’s BYD and CATL were just behind, according to figures collated by Bernstein, the research group.
“The Japanese invent it, the Koreans look to expand and build it out and the Chinese end up dominating it as that’s where the market ultimately is,” says Duncan Goodwin, head of global resources equities for fund manager Barings. “We are going to see a significant step up in manufacturing capacity driven by China and Chinese demand.”
If Chinese battery companies deliver on their targets they will have capacity to produce 121 GWh of batteries by 2020, according to Bloomberg New Energy Finance. That compares with a target of 35 GWh for Tesla’s gigafactory when it reaches full capacity next year. A single GWh would power 40,000 electric cars to each travel 100km.
“The Chinese are massively building up their capacity to get a stranglehold on this market,” says Simon Moores, head of Benchmark Mineral Intelligence in London.
Foreign companies at bay
In 2015 in the eastern Chinese city of Nanjing, South Korea’s LG Chem opened a battery factory. The same year Samsung SDI followed suit, opening a plant in Xian in central China and declaring that it would “forge its foothold in the world’s biggest new energy vehicle market”. A year later Beijing released a list of companies allowed to supply batteries in the country. Not a single foreign company was included. Separately Beijing released draft guidelines at the end of last year that said car battery manufacturers would need to have at least 8 GWh of production capacity in China to qualify for subsidies — a target that only BYD and CATL can meet.
“China seeks to acquire world-class foreign battery technology while keeping overall Chinese ownership and control,” says Michael Dunne, head of Dunne Automotive in Hong Kong. “It has been very careful to cultivate local battery champions while using licensing procedures to hold foreign companies at bay.”
The silvery metal’s price has had a meteoric rise, but supply is also accelerating
BYD has particularly benefited from government support. Beijing has provided subsidies for electric buses using lithium-iron phosphate (LFP) batteries, a type used by BYD but not by many foreign manufacturers due to its lower power capacity. As a result BYD sold 11,000 of its e-buses last year, up from virtually zero in 2013, according to Macquarie. “The [Chinese] tailor-made the subsidy programme to make sure neither Samsung or LG Chem would get any part of it,” says one international commodity trader.
To allow electric cars to go farther on a single charge, a critical factor for batteries is their energy density. For now China lags behind Korean makers in terms of the technology to provide greater energy density, according to Bernstein analysts. The frontrunners in the market are LG Chem, Samsung SDI, SK Innovation and Panasonic “with Chinese suppliers playing catch-up,” it says.
“Because the Chinese have artificial government protection they are able to grow scale that’s bigger than the Koreans,” says Mark Newman, an analyst at Bernstein. “They are still a couple of years behind but they’re narrowing the gap due to their scale.”
Increasing the amount of power the battery can store on one charge will be crucial. But that will require continued innovation, says Varun Sivaram, a specialist in energy security at the Council on Foreign Relations.
“In electric vehicles if you keep decreasing the cost but don’t increase the performance you reach a limit — the car’s too expensive because the energy density is not high enough,” Mr Sivaram says. “My belief is that the [Chinese companies] will not ultimately win out. You will need higher energy density batteries and manufacturers who have the next generation technology will win.”
Access to raw materials
Even more than the subsidies or barriers to foreign operators, the greatest advantage for Chinese battery manufacturers over rivals such as Tesla is access to raw materials. Chinese companies have been making inroads over the past year into the lithium-ion supply chain, buying up mining assets from cobalt to lithium to help cut costs.
A BYD e5 electric vehicle on display at the Beijing International Automotive Exhibition in April 2016 © Bloomberg
This year Ganfeng Lithium, one of the country’s largest producers of the battery chemical, bought a 19.9 per cent stake in an Argentine lithium project. The deal followed on the heels of a purchase last year of a 2.1 per cent stake in Chile’s SQM, the world’s largest lithium producer, by Tianqi Lithium.
Similarly in cobalt, China Molybdenum, a mining company partially owned by a Chinese local government, paid $2.65bn last year for the Tenke mine in the Democratic Republic of Congo. The mine contains one of the world’s largest concentrations of cobalt and offers “security of supply of a critical battery material for decades to come,” according to Investec. Cobalt traders say most of Tenke’s supply is likely to go back to China, where prices have doubled since October.
Chinese companies are also likely to disrupt the battery material supply chain and drive down prices, according to analysts at HSBC. “China’s aggressive push to promote the domestic electric vehicle market will accelerate an expansion in the local ecosystem,” they said.
In Ningde CATL says it has a staff of 1,000 people working in its research and development department. The company has more than 2,000 battery-related patents and analysts at Goldman Sachs said in January they expect it to “catch up with global peers in product quality”.
National Electric Vehicle Sweden, which bought the bankrupt Saab carmaker in 2012, signed a battery supply agreement with CATL earlier this year.
“The Chinese government has a list of approved battery makers and if you don’t choose one of those you will not be allowed to apply for subsidies in the Chinese market,” Anders Bjornberg, director of R&D at NEVS, says. “CATL are also competitive with the Japanese and Koreans, it’s not that we have taken the second-best choice. It’s the best choice in China.”
Mr Yang says the company’s first aim is to serve domestic Chinese customers rather than export to the global market.
Yet CATL cannot hide its global ambitions. Mr Yang concedes the company hopes to work with Tesla, has been in contact with General Motors and its current clients include Volkswagen and BMW. In January it bought a 22 per cent stake in Finnish auto supplier Valmet Automotive. It also has an eye on building a factory in Europe. That’s “not a distant prospect,” Mr Yang says.
The rivals: Japan prepares for a fight it cannot afford to lose
When Japan looks at the global battery market in 2017 — the shifting technologies, the emerging players and the intensifying competition — it recalls the past two decades of industrial history and winces.
It has watched as its dominant position in semiconductors, TVs, white goods, mobile phones and even high speed rail has been first dented then battered by competition from South Korea, China and elsewhere. But batteries, runs the mantra from everyone in the supply chain, is a battle Japan has told itself it “cannot lose”.
As well as Beijing’s high-profile backing of its domestic battery industry, much of Japan’s urgency, say lithium experts, is driven by the assumption that the fundamental dynamics of the lithium market are poised to change: batteries are about to overtake all other industrial users of the metal as the prime source of demand. At the corporate level, say lawyers involved in recent battery supply chain deals, Japan’s determination has prompted an acceleration of asset sales, purchases and joint-venture formations.
High-performance materials companies like Ube Industries, Sumitomo and Central Glass are investing heavily in new battery production capacity around Asia. Others like Murata Manufacturing are pushing ahead with acquisitions. In July, the company is expected to complete the purchase of Sony’s battery business, before working on a supply deal with Samsung Electronics.
Japan’s sense of panic has been intensified by the Trump administration’s scuppering of the Trans-Pacific Partnership trade deal. That pact, say producers, was to have been beneficial to Japan’s
battery industry, which had already begun to invest in capacity in
Vietnam on the assumption it could then export to the US and Canada. Leo Lewis
There is going to be a giant struggle between countries and companies for manufacturing supremacy. In general, I tend to think that the dominance in manufacturing will be in China, Japan, and Korea; and in this kind of fight, margins will be sacrificed to gain market share and prices will be driven down relentlessly.
This is one reason I tend to shy away from manufacturers as stock investments., and to some degree tech companies unless they have very strong intellectual property.
In the present case, considering automobiles, batteries, transport vehicles, aerospace and aviation, and power generation, the players will all need raw materials.
No matter whether they are ultimate winners or losers in the marketplace, the makers of batteries will need raw materials.
Yep. And while in a global meltdown of some sort, many commodities will take a big hit, raw materials to batteries that will power the world should be pretty immune. And a cheap, reliable supply of scandium will lead to most aluminum parts being replaced by aluminum/scandium alloy [because stronger and lighter is almost always better than heavier and weaker, even if it is a freaken lawn chair].
.
Long Clean TeQ (OTC – CTEQF)
Sprott’s Thoughts
Why Cobalt (Not Lithium) Could Be The Battery Boom’s Big Commodity Winner
By Sam Broom
New in-depth article from Sprotts Thoughts today on Colbalt vs Lithium
http://secure.campaigner.com/csb/Public/show/f33sp–buh53-5l3ppxv4
Another strong day for CLQ in the ASX – one would expect a new substantial holder notice soon. Chinese have shown their hand.
USA will follow Australia as the world turns.
Closed at $1.06 Australian
Rick Rule is a big fan of Friedland so don’t be surprised to find Sprott with a big position. From what I know of Rick Rule, he will not promote it until he has a big position.
I’ve thought the same Hendrix…someone is buying big atm and aggressive – Sprott has crossed my mind. Watch this space