• Operational Cutbacks and Market Response- Is scaling back operations and reducing its contractor base due to a significant decline in lithium prices
• Impact of Global Market Dynamics- The oversupply of lithium,  decreased demand for electric vehicles, increased tariffs on EVs from China
• Need for Government Policy Re-evaluation - Government must reconsider its taxation strategies and operational support

Harare- Bikita Minerals has made the strategic decision to reduce its contractor base as it scales back output in response to challenging lithium market conditions.

The DMS plant is set to be shut down in October 2024, prompting the company to advise its contractors to adjust operations to align with revised production needs. Contractors including KINSEY, Hocean, and KW ceased operations as of September 30, 2024, while Auxin has been instructed to decrease production and withdraw personnel and equipment to accommodate reduced tonnages.

The company has indicated that it will announce resumption dates at a later time, though no immediate plans are in sight.

This decision comes after careful consideration of both national and global lithium market dynamics. Lithium prices have experienced a significant decline, falling by 22% since the beginning of the year, 55% year-on-year, and an alarming 99% from their previous peak.

This price crash has compelled major producers worldwide to either slow down production or halt new projects altogether. The oversupply of lithium relative to decreasing demand for electric vehicles (EVs)—the primary application for lithium—has driven carbonate prices down by 21% this year, following an 80% plunge in 2023.

Further exacerbating the bearish sentiment in the market, the European Union has implemented a 9% tariff on Tesla EVs produced in China, introducing additional trade barriers against China-based EV manufacturers that range from 36.3% to 17%.

Concurrently, the U.S. has quadrupled duties on Chinese EVs to 100%, impacting the cost structure for battery producers dependent on Chinese input materials.

Historically, lithium reached an all-time high of US$805,000 per tonne in December 2022, but it is currently trading around US$9,940, reflecting a staggering 99% decrease. In light of these conditions, Bikita is planning a substantial investment of between $400 million and $500 million in a new lithium smelter, aimed at enhancing local processing capabilities despite the sharp fall in global metal prices over the next 3 to 5 years. This investment will also facilitate closer integration of technology with the battery industry.

However, this is not an immediate action; the company has approached this investment with caution. Global lithium supply is projected to increase by nearly 50% this year, as Chile aims to double its output over the next decade, and China's quest for battery metals drives expansion projects across Africa. This oversupply suggests that market conditions will remain challenging for the foreseeable future.

At the same time, the Zimbabwean government is imposing significant tax burdens on local producers. Bikita reports that it pays 9% of the gross value of minerals before any production is shipped.

A Special Capital Gains Tax of 20% is levied on entities acquiring mining titles or interests, payable in U.S. dollars or other foreign currencies. Additionally, a 1% levy is imposed on the sale or export of lithium and other minerals, while royalties on lithium range from 2% to 5%, all amid sharply declining prices.

Zimbabwe ranks seventh globally in lithium reserves and first in Africa, with expectations that the lithium sector could contribute to a $12 billion industry in 2023.

However, revenues fell short of the $500 million target due to poor prices. Instead of formulating strategies to achieve this target, the government has focused on increasing taxes, further burdening an industry already grappling with high electricity costs and export surrender portions.

Lithium is considered a pillar mineral for Zimbabwe's economic growth, yet its relative abundance in Africa is often underestimated. Projects such as the Manono project in the Democratic Republic of the Congo (DRC), which has a capacity equivalent to all mines in Zimbabwe combined, and emerging projects in Mali are significantly cheaper to operate than those in Zimbabwe.

Moreover, while lithium batteries dominate the EV industry, they come with drawbacks and face competition from more sustainable alternatives that could lead to significant divestments in lithium. Lithium-ion batteries, commonly used in EVs, are difficult to recycle and require substantial amounts of energy and water for extraction. In contrast, sodium presents a more sustainable solution.

It is cheaper to source and less water-intensive to extract, requiring 682 times more water to extract one tonne of lithium compared to one tonne of sodium.

Recycling lithium-ion batteries consumes more energy and resources than producing new ones, which explains the low recycling rates. The traditional evaporation methods used for lithium extraction, particularly in countries like Chile, lead to high water consumption and potential environmental contamination. Water scarcity due to mining activities could threaten the livelihoods of indigenous communities.

Given these challenges, the viability of alternatives to lithium-ion batteries is gaining attention. Sodium-ion batteries have emerged as a potential substitute, utilizing sodium instead of lithium.

They consist of four main components: anode, cathode, electrolyte, and separator. Sodium's natural abundance results in lower extraction costs, and these batteries can incorporate cheaper materials, such as aluminum foils instead of copper.

Nonetheless, sodium batteries face hurdles, particularly their lower energy density, which poses challenges for EV manufacturers reliant on longer vehicle ranges. While lithium batteries have energy densities ranging from 150-220 Wh/kg, sodium batteries fall between 140-160 Wh/kg.

Additionally, sodium batteries currently have a charging cycle lifespan of around 5,000 charges, compared to 8,000-10,000 for lithium-iron phosphate batteries. However, recent advancements have shown potential for achieving 6,000 cycles using alternative electrode materials.

China's HiNa battery technology firm launched a 100 kWh energy storage power station in 2019, showcasing the feasibility of sodium batteries for large-scale applications. The firm has also piloted sodium battery-powered electric vehicles.

Lithium-sulfur batteries present another alternative, boasting a higher energy density and the capability to move more electrons. They have been shown to have nine times the energy density of traditional lithium-ion batteries.

The ongoing decline in lithium prices, coupled with rising operating costs, poses a risk to production levels and overall returns. This may accelerate the emergence of alternative technologies, potentially leaving Zimbabwe at a disadvantage if it does not adapt swiftly.

As global lithium prices plummeted to $13,798 per tonne during the first half of 2024, down from $55,159 per tonne in the same period of 2023, the pressures on Zimbabwe's lithium sector are evident. Consequently, the country's lithium exports decreased from $189.5 million in the first half of 2023 to $185.4 million in the same timeframe of 2024.

Despite this decline, Zimbabwe still aims to achieve $500 million in lithium revenues. However, aspirations for the sector may be hindered by high operating costs, including expensive electricity, frequent blackouts, and elevated tax rates.

Therefore, while Bikita Minerals pilots a challenging lithium market, the broader implications for Zimbabwe’s lithium sector are significant. The government must reconsider its approach to taxation and operational support, fostering an environment conducive to sustainable growth in a sector poised to play a pivotal role in the country's economic future.

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