00:00We have seen a lot of volatility, especially when it comes to lithium prices in the broader commodity space as
00:06well.
00:06How is your business factoring that in and what's your outlook for prices?
00:14Thanks for having me on. Yeah, it's I mean, lithium is a very small market growing very quickly.
00:21So very large rates of compound growth driven by the meteoric rise of electric vehicles, but also now battery storage
00:28as well.
00:30So we've seen these really dramatic shifts in the lithium price up and down over the last five years in
00:36particular.
00:36And that's the trajectory is now upwards again from Vulcan's perspective.
00:41So we're building lithium production in Europe for Europe using Australian lithium extraction know-how.
00:49And really our strategy is to make sure that we've built in some stability on pricing in that very volatile
00:57spot environment.
00:57So we're selling to the European automakers and battery makers focused on Europe.
01:02And we have fixed pricing mechanisms and flaws as well, such that for our first 10 years of production,
01:09about 70 percent of our production is subject to a floor or a fixed pricing mechanism.
01:18Yeah, we know that your Lionheart project is also located between Germany and France, right?
01:24When it comes to the European sentiment around broader renewables, are you seeing a shift,
01:29especially after the Ukraine war, after the Iran war?
01:36We've certainly seen a shift.
01:38I think the trend is deglobalization.
01:42The trend is localization of supply chains, particularly in critical raw materials, particularly in energy.
01:49And we cover both.
01:50So we produce lithium from deep subsurface brines, which are heated.
01:56And the byproduct of the lithium production, the lithium that we produce, is geothermal, baseload, renewable heat and power.
02:04And so we have two very critical products for the moment, which is locally produced baseload energy, renewable energy,
02:11and lithium, which is a critical raw material, obviously, for the battery supply chain in Europe.
02:17We've really seen a shift in sentiments towards the increased urgency to localize both of those supply chains.
02:25So we saw the Critical Raw Materials Act in Europe recently.
02:28We've seen a real trend towards legislation, which is encouraging that local production of lithium for batteries.
02:37And we're seeing Europe produce more and more of its own batteries as well.
02:40So that whole supply chain is really building out in Europe.
02:42That's how the sentiment has shifted.
02:44And we believe we're one of the key beneficiaries of that, obviously, producing lithium within Europe for the European battery
02:52markets.
02:53We've obviously seen a lot of momentum in Asia, but also from Asian players pushing into the European market.
03:00Do you tend to characterize this as a competition or opportunity for collaboration?
03:09I think it's definitely opportunity for collaboration.
03:11I mean, there's no doubt.
03:13Obviously, Asia, led by China, is really dominating battery markets, EV markets, EV production, battery production.
03:23And there's a tremendous amount of know-how there about how to do this at scale and cheaply.
03:27I think the pendulum has well and truly swung.
03:31So whereas European automakers would once upon a time have gone to Asia, produced in Asia with local joint ventures
03:38and sold in Asia, the pendulum has really swung the other way.
03:41So we're seeing Asian players more and more come into Europe in the battery space, in the electric vehicle space,
03:46investing in local joint ventures, local production.
03:50I think the deal is if you want to sell in Europe, you have to make in Europe and you
03:55have to have a deal with a local company, a local manufacturer and share that know-how.
04:01So I think there's tremendous opportunity for collaboration there.
04:04Indeed, we're already seeing this in the space with a number of companies, including BYD and CATL and one of
04:10our off-take partners as well, LG Energy Solution.
04:14So there's a lot of Asian players moving into Europe, producing locally.
04:18And ultimately, that means more customers for us to buy lithium.
04:21So we are, again, I think, well-positioned from that perspective.
04:25How much volatility do you expect when it comes to lithium pricing and the decision to add that price stability
04:32mechanism, how much risk comes along with that in contracts?
04:40Well, I think we're really going to continue to see that volatility.
04:43I mean, as the lithium market matures, we would hope that the swings would start to get less violence.
04:48But really, it's a market that's gone from about 100,000 tons a year to nearly 2 million tons a
04:55year in the space of less than a decade.
04:58So massive rates of compound growth.
05:00And that compound growth will continue, certainly in the next five to 10 years and probably beyond as well with
05:06robotics as well coming into play.
05:08So we see the volatility continuing.
05:11From our perspective, we obviously have to do project financing to build these projects.
05:17And therefore, we have to make sure that the banks who lend to us to build this project are satisfied
05:25with the downside risk.
05:28And hence, we try to remove as much of the downside risk as possible with those stability mechanisms in there.
05:33So for future projects, I think we will look at taking more risk on the spot markets.
05:38But at the moment, it's really it's all about providing stability and confidence to investors to fund these new project
05:45bills.
05:45So that's why we opted for that sort of that more stability mechanism in there.
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