Africa's Emerging Lithium Mining Industry: A Future Powerhouse in Global Markets

According to research by CRU, lithium extraction in Africa is saging, but it's coming from an interesting source. It's Africa's old tin mines. Let's get the detail. Thomas Matthews, Battery Materials Analyst at CRU joins me to talk about this very important story, Thomas. In particular, I think for us as a continent, because we are constantly told that the bulk of our metals are mined by the big boys, there's never a time when you get consistent coverage of what the small guy is doing. So just perhaps give us top line, some of the key things that you have unearthed in this research. Yeah, thank you Godfrey, it's great to be talking to you. So as you mentioned, we're talking about lithium today, and lithium is a key component in lithium ion batteries. And so it's used in things like mobile phones, laptops, but increasingly it's also being used in electric vehicles and energy storage systems as part of the green energy transition. And what we've seen over the past two years is that demand for lithium ion batteries is really booming. And for a period, supply was unable to keep up with the demand. And that caused raw material shortages and caused prices to skyrocket. And they reach levels about six times of where they're at today. And obviously, when you have a period of elevated pricing, that encourages miners to increase their output. And this is exactly what we saw last year. So in 2023, we saw the African exports of lithium increased over five times. And actually, the amount of material that came out of Africa would have been enough to produce the batteries in up to two million electric vehicles. And now this African lithium is coming from, partly from industrial sources. Many of these operations are located in Zimbabwe. But also, as you mentioned, from artisanal and small scale mining too. And in fact, we estimate that around two thirds of lithium output from Africa last year was from these sources. And again, Zimbabwe is a big player in that. But actually, we've seen increasing volumes coming out of Nigeria, and even smaller volumes coming out of a wide variety of African countries. So Mali, Rwanda, Mozambique, among others. And essentially, this material is mostly handpicked. And from that handpicked ore, that can either be sold directly. And this is what we would call direct shipping ore. Or it can be upgraded, we can increase the lithium content and increase the value. And this is what we would call concentrates. Yeah. And you're saying in your research, there's only one source for this lithium. It's China. I mean, the vast majority of processing of the raw materials is done in China. Yes. So let's talk a little bit about how the Chinese are doing this. Yeah, sure. So initially, like I mentioned, we have the industrial operations. And also China is a big player in investing in these. We have some Western involvement, but not a great deal. But when we talk about the artisanal supply as well, this is, I would say, almost entirely Chinese invested. So initially, what we were seeing was Chinese intermediates buying these handpicked concentrates, and potentially also offering equipment so that individual miners can upgrade their lithium content and increase the value of the product. And that can be using things like mills and crushers or separation equipment. But what we're seeing now, which is quite unique, is that there is a transition towards more investment and more formalization of this artisanal sector. We've seen that there have been several concentrators built and some that are still currently under construction in the Nigerian states of Kaduna and Nasarawa. And we've also seen the same thing in Namibia and elsewhere. Yeah. So I actually wanted to understand in what form this lithium is reaching China or leaving Africa. Because as you know, with the coming in of the Africa Continental Free Trade Area, there's been a lot of noise around Africa, not just exporting raw materials, but processing those raw materials and making sure that when we do export, we get maximum value. Just give us a quick description, if you can, of how this material is reaching China and what form it is reaching China, and to what extent we should perhaps be seeing more value add before it leaves African shores. So the material that's leaving Africa is a combination of that direct shipping ore, which I mentioned, which contains around one to two percent lithium oxide, or the slightly higher grade material, which has experienced some kind of concentration, which is the concentrates. But again, these are lower lithium contents than you would expect to buy in China or Australia, for example. So the material that's leaving Africa is still relatively lower grade. And then upon arrival in South China, it's then undergoing upgrading and increasing the value there and then ultimately being turned into lithium chemicals, which is the highest value product. Yeah. We are contradicting ourselves as Africans because this is a story that has been going on for more than a decade. I can tell you that we certainly will pick it up with some of the authorities. Before you go, a quick take on the fundamentals behind lithium at the moment, because as you noted in your research, we did reach record highs. That was in what, 2022? Where are we now and what's the outlook like? Sure. So because of the high prices that we saw a couple of years ago, there was lots of investment into new supply, and a fair amount of that was from Africa. I mean, the difference between the amount of demand and the amount of supply last year was essentially equivalent to what was coming out of Africa. So you could consider Africa the market maker. On the demand side of things, we're kind of seeing softer demand than we expected. There have been kind of rollbacks of EV subsidies, there's ongoing trade wars, and also the fundamental chemistry of these batteries is changing and also reducing the amount of lithium that we need. So currently, the market's gone into a bit of a downturn. And we would expect that to persist maybe for the next three to five years. But moving past that, that's when we would really expect demand to take off again, and lithium prices to increase significantly. Absolutely. Yeah, I thought you'd talk about those wars. Now I remember, of course, the EU and China at loggerheads, and of course, the US as well, slapping tariffs on Chinese electric vehicles. This story involves us, but we are not involved to the extent that we should be. Maybe a story to pick up on another day. Thomas, thank you very much for your time and for your insights. Thomas Matthews, Batteries Materials Analyst at CRU.

CNBC Africa is joined by Thomas Matthews, Battery Materials Analyst, CRU for this discussion. 

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