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CRU Perth Tech Metals Briefing

June 2018

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in any other format without the prior written permission of CRU International Limited.

CRU International Limited’s responsibility is solely to its clients and its liability is limited to the amount of the fees

actually paid for professional services.

Although reasonable care and diligence has been used in the preparation of this presentation, we do not

guarantee the accuracy of any data, assumptions, forecasts or other forward-looking statements. We accept no

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Copyright CRU International Limited 2018. All rights reserved.

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CRU’s office locations

CRU's reputation with customers across mining, metals and fertilizers is for integrity, reliability, independence and authority.

About CRU

CRU's insights are built on a twin commitment to quality primary research and robust, transparent methodologies.

CRU invests in a global team of analysts, the key to gaining a real

understanding of critical hard-to-reach markets such as China.

CRU – big enough to deliver, a high quality service, small enough to care about all our customers.

We strive to provide customers with the best service and closest contact –

flexible, personal, responsive.

New office

I Singapore

3

4

Our value proposition

Technology Metals Capabilities

RecognitionWe have a reputation as the foremost name in metals and

minerals consulting and analysis

Independence

We are privately owned and not associated with any

producer, consumer, financial community or other

stakeholder interest in the industry

Industry knowledge

CRU’s business is mining, metals and fertilizer chemicals

and we have been active in this field for 40 years. You do

not pay us to ascend the industry learning curve

Speed of response

Through CRUA we have existing data and models that

can rapidly be customised. Our team is dedicated to single

client work

Global presence

CRU has offices in the key regions – Europe, Australia, China, Singapore, Mumbai North and South America

5

Our team has extensive experience in key areas


• General business strategy, growth and acquisitions; market entry business plan review; risk analysis; procurement strategy; government policy issues; infrastructure implications

Strategy

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Market decisions

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Valuation

• Assistance to producers, consumers, traders, public authorities for contract review, negotiation and risk assessment

Negotiation Support

6

Consulting Technology Metals Team

Rebecca Gordon

Subject Matter Experts

Head of Technology metals and Energy

CRU Consulting

(London)

Aleks Popovic

Energy Markets

(London)

Nikhil Shah

Nickel Outlook

(London)

George Heppel

Cobalt Outlook and EV

model owner

(London)

Alex Laugharne

Lithium Outlook

(New York)

Lianjiang Lu

EV model

design

(London)

Alice Yu

Cobalt /

Lithium supply

(Beijing)

Ying Dai

Cobalt /

Lithium supply

(Beijing)

Damodharan NK

Lithium

demand

(Mumbai)

Mahesh Goenka

Total Cost of

Ownership

(Singapore)

Ben Jones

Energy & Policy

Specialist

(London)

Peter Searle

Cobalt

expert

(London)

Toby Green

Graphite &

Battery Materials

(Sydney)


7

Gasoline Battery Electric Vehicles Hybrid Electric Vehicles Plug-in Hybrid Electric Vehicles

Illustrative copper intensity by passenger vehicle typeKGs per passenger vehicle

Battery electric vehicles 3-4 times more

copper intensive than ICEs!

Lithium nickel cobalt aluminum oxide battery(NCA)

1:1:1 5:3:2 8:1:1 Nickel Metal Hydride (NiMH)

Cathode composition by battery storage technology KGs per kWh

Aluminium Manganese Nickel Cobalt Lithium

“Green” technologies are commonly more metal and mineral intensive

Batteries require significant volumes of Lithium, Cobalt, Manganese and Nickel

CRU developed 3 internally consistent futures for low carbon transition….

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Policy support

Deep green: rapid innovation,

Mass ride sharing,

highly supportive policy Light green: sustained innovation

but some technology & policy

constraints

Brown: technologies and

behaviours evolve slowly, with

patchy policy support

…and robustly evaluated their impacts on metal markets!

9

CRU designed and maintains one of the most sophisticated EV adoption models globally


• CRU’s coverage of battery materials

is underpinned by an excellent

knowledge of the technological, cost

and policy developments of this new

industry

• Our EV forecasting model maps out

the entire global fleet of vehicles, and

converts this back to GW/h of

Lithium-Ion Battery demand

• These GW/h can be converted into

raw materials demand using a series

of inputs to describe intensity in use

Battery Materials

(Co, Ni, Li)Aluminium

Non-metal

Materials

Carbon Steel AHSS Copper Electrical Steel

Demand for Different Materials

Materials

Characteristics

Manufacturing

Capabilities

AvailabilityPrice / Quality

Trade-off

OEM Strategy

Policy

Carbon

Emission Cost

EV Policy Oil Prices

Material Selection

Macro

Consumer

Preferences

Electricity

Generation

LT Car Demand

Growth

Volume/type of cars on

road

(EVs, Hybrids,

ICE, fuel cell)

Technology

Autonomous

Cars

Car Sharing

Large & rising market share for EVs across both green scenarios by 2030…

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…increased ride sharing weakens vehicle sales growth in deep green world

Global vehicle sales by power

train, brown

Million


train, deep green

Million

2017 2020 2025 2030 2035

Petrol DieselHybrid Plug-in hybridsBEV Fuel cell

2017 2020 2025 2030 2035



train, light green

Million

2017 2020 2025 2030 2035


Power demand continues to grow across all scenarios…

112017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Coal - brown Renewables - brown Coal - light green

Renewables - light green Coal - deep green Renewables - deep green

Demand'16

Incomeeffect

Efficiencygain

EVdemand

Basecase '30

Demand'16

Incomeeffect

Efficiencygain

EVdemand

Basecase '30

Demand'16

Incomeeffect

Efficiencygain

EVdemand

Basecase '30

Electricity demand growth by scenario, 2016-2030

TWh

Electricity by generation technology, 2016-2030

% global market

Copper and lithium demand markedly higher in greener futures…

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2017 2020 2023 2026 2029 2032 2035 2017 2020 2023 2026 2029 2032 2035

2017 2020 2023 2026 2029 2032 2035

…but coal demand expected to be hit*

Global copper demand by scenario

Million tonnes

Global thermal coal demand by scenario

Million tonnes

Global lithium demand by scenario

Thousand tonnes (lithium carbonate equivalent)

*Global demand insights are distinct from the impact on seaborne market

2017 2020 2023 2026 2029 2032 2035

Global iron ore demand by scenario

Million tonnes

Agenda


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1. The electric vehicle paradigm shift: the impact of auto sector transformation on

commodity markets - George Heppel

2. Making the Grade: How Battery Specifications Lead to Tightness in Lithium,

Graphite and Nickel Sulphate - Toby Green

3. The year of cobalt: analysing the disconnect between market fundamentals and

cobalt prices - George Heppel

The electric vehicle paradigm shift

George Heppel, Editor

June 2018













Legal Notice

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Through its extensive analysis base, CRU already covers many facets of the battery metals industry.

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The battery metals market outlook pulls together our knowledge from these sector to give a comprehensive

overview of long-term demand implications from the electric vehicle sector.

Cobalt Market Outlook

Nickel Market Outlook

Lithium Market Outlook

Manganese Market Outlook

Graphite Electrodes Market Outlook

Precious Metals Market Outlook

Battery-

related

consultancy

projects

CRU Battery Metals

Market Outlook 2018

CRU xEV

production

model

The key questions we answer…

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1. How many vehicles are there going to be on the road in the future – and where?

2. How many of these vehicles will be petrol, diesel, hybrid, electric, fuel cells etc?

3. What will the commodity demand be for these vehicles?

How our modelling system works

Vehicle Demand:

Population demographics,

economic drivers, fuel

prices, congestion indices…

Drivetrain Demand:

Total Cost of Ownership

(TCO) simulation

Commodity Demand:

Battery chemistry trends,

battery size, manufacturing

yield losses…

Policy

Carbon Emission

Costs

EV Policy Oil Prices

Vehicle Demand

• LDVs

• HDVs

• Buses

Drivetrain Demand

• Petrol

• Diesel

• HEVs (petrol and diesel)

• PHEVs (petrol and diesel)

• BEVs

• FCEVs

• PFCEVs

Commodity Demand

• Nickel

• Cobalt

• Lithium

• Manganese

• Graphite

• PGMs

Macroeconomics

Consumer

Preferences

Electricity

Generation

Long Term Car

Demand Growth

Population

GDP GrowthInvestment and

Infrastructure

Taxation policies

Technology

Autonomous Car

Development

Car Sharing

Development Battery Chemistry

Battery Efficiency

What is included in the report

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Full Report:

• Regional breakdown of LDV, HDV and Bus demand, 2015-2040

• Regional breakdown of drivetrain types (petrol, diesel, HEV, PHEV, BEV, Fuel Cells etc), 2015-2040:

• Commodity demand from the automotive sector, 2015-2040:

• Cobalt

• Nickel

• Lithium

• Manganese

• Graphite

• PGMs

• Others (tba)

How many vehicles will there be on the road?

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China India North America

Western Europe Other

[Global LDV demand], [Million]

Global LDV demand to peak in early-2030s

due to population and congestion

HDV Bus

[Global vehicle demand], [Million]

HDV market will see continuous growth over

forecast period

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Long-term xEV uptake will ultimately be due to COST BENEFITS…

North America TCO in 2030, in ‘000 2010$North America TCO in 2017, in ‘000 2010$

ICE - Petrol BEV FCEV

Net Car Price Lifetime Fuel Lifetime Maintenance Subsidy

ICE - Petrol BEV FCEV

Net Car Price Lifetime Fuel Lifetime Maintenance Subsidy

201

5

201

7

201

9

202

1

202

3

202

5

202

7

202

9

203

1

203

3

203

5

203

7

203

9

204

1

204

3

204

5

Post China new EV policyPre China new EV policy

…however, POLICY will be the main driver in the short-term – especially in China.

xEV penetration rate in China LDV market• China’s 2-Credit Policy: announced in September

2017, introduced in April 2018

• Manufacturers must sell a certain proportion of xEV

vehicles, rated according to a credit system

+• China’s Battery Manufacturing Legislation:

announced late last year

• Battery manufacturers must create batteries with a

minimum charge density, scale, maximum price, etc.

=

Large expected sales of high-

performance electric vehicles

in China.

2017 2022 2027 2032 2037 2042

China new NEV policy possible scenario:

rapid hybridisation

China LDV Sales, mn units

China new NEV policy possible

scenario: BEV dominates

2017 2022 2027 2032 2037 2042

Plug-in fuelcell

Fuel cell

Batteryelectric

Plug-inhybrid

Hybrid

Diesel

Petrol

China LDV Sales, mn units

The Chinese xEV market: two competing scenarios

Contrasting different regions in our analysis

24

ICE PETROL ICE DIESEL HEV PETROL

PHEV PETROL BEV FCEV

North American LDV DemandLDV demand, mn units

ICE PETROL ICE DIESEL HEV PETROLPHEV PETROL BEV FCEV

Indian LDV DemandLDV demand, mn units

25

There are A LOT of competing chemistries and technologies in development…

● First Li-ion battery was launched by Sony in 1991 - LCO cathode;

● Matsushita invented LTO in 1993, Lithium iron phosphate (LFP) was invented in 1995.

● It takes between 10 & 20 years to commercialize a new material in the battery industry.

Source: Avicenne Energy 2017

CATHODE

ANODE

ELECTROLYTE

SEPARATORS

2000 2005 2010 2015 2020 2025 2030

LCO

Graphite

Hard Carbon

LiPF6 + Org.

solvents

Polyolefin

NMC/NCA

LMO

LFP

LiNiMMO2

High Voltage

5v Spinel

LiNiPO4. 5V

LiCoPO4. 5V

LiMnPO4. 4V

Sulfur Air

Li4Ti6O12

Soft Carbon

C/Alloy Composite

Li Metal

Non Si Alloys Si Alloys

LiPF6 Free

Electrolyte

Gel-Polymer

Electrolyte5v Electrolyte

Polyolefin + Ceramic

CoatingCellulose

Non-Woven

Polymer

MembraneSolid Electrolyte

…however, we believe that established chemistries are here to stay.

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• Nickel-cobalt chemistries are here to

stay.

• LFP will recede very fast due to new

Chinese legislation on minimum

battery charge densities.

• NCA will maintain steady market

share as Tesla faces new competition

from big auto.

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

LFP LMO NCA NiMHNMC111 NMC532 NMC622 NMC811

cathode market share in the xEV market, kWh

How will NMC 811 affect commodity demand?

27

Base Cobalt demand

+5% NMC 811

+10% NMC 811

+20% NMC 811

+40% NMC 811

Cobalt demand will be significantly affected by an

accelerated shift to NMC 811…cobalt demand in xEV LDVs, tonnes

Base Nickel demand

+5% NMC 811

+10% NMC 811

+20% NMC 811

+40% NMC 811

…however, nickel demand is less affected due to the

higher charge density of NMC 811.nickel demand in xEV LDVs, tonnes

Making the Grade: How battery specifications lead to tightness in Lithium, Graphite and Nickel Sulphate

CRU Consulting

Toby Green

June 2018

Tech Metals Briefing, Perth













Legal Notice

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Reminder of the wave beyond the horizon: Battery metals in the long term

30

CRU Tech Metals Briefing – Perth, June 2018

CRU Analysis

2025: the medium term horizon

All figures in this presentation show the period before major LIB growth begins in earnest.

CRU’s latest calculations see total vehicle demand peaking in 2034 (N.B. ride-sharing, car-sharing, autonomous vehicles and social developments)

Disruption in selected commodities: demand growth from EVs as a share of total, 2017-2025

31= 2025 battery demand less 2017 battery demand over total 2025 demand, %

Note that total S&D figures do not take into account all-important quality considerations.


0% 10% 20% 30% 40% 50% 60% 70%

Class 1 Manganese

Natural Graphite

Class 1 Nickel

Cobalt

HPA

Lithium

Sections

1. Lithium

2. Nickel Sulphate

3. Natural Graphite

4. High Purity Alumina (HPA)

32

Lithium & Battery Metals Conference, Perth, March 2018CRU Tech Metals Briefing – Perth, June 2018

2015 2020 2025

EV Other Battery Glass & Ceramics Others

LITHIUM: Mined supply outstrips demand in the short-term but rebalances by 2025

33

• Market broadly in balance in 2017

• Periods of oversupply (up to 13%) in the short-term, mostly rebalancing by 2025

• Australia to remain the dominant supplier (since 2017); China to overtake Chile

Short-term oversupply leading to mid-term balance.

2015 2020 2025

Supply Demand

Charts show Lithium Carbonate Equivalent (LCE) basis

325% 319%


34

• Lithium carbonate still the primary intermediate, but hydroxide gaining ground (+9% processing by 2020)


Spodumene supply vs proc. cap., kt LCE LiOH processing capacity, kt LCE

2017 2018 2019 2020

China Australia USA

Chile Argentina Canada

Japan

Lithium carbonate proc. Cap., kt LCE

2017 2018 2019 2020

China Chile Argentina

USA Canada Korea

LITHIUM: The fuller supply chain places a cap on the end use market surplus…

…more investment is required today to prevent operational stockpiles.

LITHIUM: The effect of midstream constraints is to support prices

35

• Lack of timely processing capacity investment (carbonate) will create stockpiles and support prices

• Prices may show volatility in the medium term

Short-term oversupply leading to mid-term balance.

2015 2020 2025

Lithium carbonate, 98.5% Lithium hydroxide, 56.5%

Price


LITHIUM: Latest news

36

• A large amount of research is currently being undertaken into LFP-LTO

• Its low charge density makes it unsuitable for most LDV applications, but the combination of fast charging

and long lifetime makes LFP-LTO a strong contender for BEV buses

• CRU estimates that LFP-LTO batteries typically contain around 0.25kg/kWh of lithium, compared to

0.10kg/kWh for traditional LFP

• However, the small end use sector (even assuming 50% e-Bus market share by 2030) → a 1.5% total

Lithium increase

• SQM posts 10% increase in Q1 revenue

• Continues to prioritise Li production despite >15% increase in fertiliser prices

• Nutrien agreed to sell its ‘A’ shares in SQM to Tianqi for $4Bn; sale expected to be completed by Q4 2018

• Chinese gov’t has warned Chilean regulators that blocking this sale would negatively affect relations

• Fun fact: researchers in China recycle LiCoO2 batteries using grape-seeds, which contain catechins (a

reductant) – 92% Co and 99% Li recovered!


Sections

1. Lithium

2. Nickel Sulphate

3. Natural Graphite


37


NICKEL SULPHATE: Class 1 and the shrinking surplus

38

Possibility of squeeze in availability of battery-appropriate forms of nickel.

Class 1 Ni demand vs supply, kt Ni

2000 2005 2010 2017 2022 2025 2030 2035

Stainless Other Batteries Batteries %

Nickel demand by application, kt Ni


2010 2015 2020 2025 2030

Battery demand Other non-stainless demand

Class 1 production

Post-2022, Class 1 nickel supply and non-battery demand flatlined (outside CRU forecasts); long-term demand from batteries shown.

• Battery consumption rising dramatically: 12% of total by 2025

• Huge amounts of Ni-units in ferronickel/NPI have given the perception of strong supply

• However, high purity (“Class 1”) Ni supply has remained relatively flat

NICKEL SULPHATE: Rising average costs of production for Class 1 Nickel

39

Nickel prices on the rise, and a possible bifurcation of the market (Class 1 vs Class 2).

CuNi Sulphide brownfield CuNi Sulphide newprojects

Hydromet FeNi NPI China NPI Indonesia RKEF

Full economic costs of new nickel capacity by type, ($/t Ni)

Readily processable

into NiSO4

Largely only suitable

for stainless

Qtly avg price range:

2015-2018 Q2


NICKEL SULPHATE: Ni prices on the rise, and possible bifurcation of the market, Class 1 vs Class 2

40


40LME grade: cathode/briquette/pellet, min.99.8% purity

…upside price risk increases as Class 1 production tightens.

2010 2012 2014 2016 2018 2020 2022

Nickel prices (LME), 2010-2022, nominal What does this look like by 2022, and beyond?

Li

Ni

Co

FePO

Al

Mn

LMO LFPNCA NMC 811NMC 622NMC 333

Co

st sh

are

in

active

ca

tho

de

ma

teria

l, $

/kW

h

NICKEL SULPHATE: Numerous production routes

41


Nickel sulphate

Crystallisation

Matte

Smelting

Ni sulphide concs

Sulphide ore

Hydromet

NPI

Sulphur-isation

FeNi

Smelting

Laterite ore

Roasting

Refining

Cathode BriquettesPowder / pellets

Stainless steel

NFA, alloy steel

Acid leaching

NMC/NCA Batteries

Purification Plating

Products

Processes

End uses

Roasting

Mixed sulphide precipitates (MSP)Mixed hydroxide precipitates (MHP)

Ni oxide conc

Acid leaching

Concent-ration

Other, chemical

Precursor

Cathode materials

Hydromet

Ni oxide

Less common / novel routes

to sulphate

Terr

afa

me

VNC

RNC,

Tsingshan

No-one yet?

Purification, leaching

NiMH batteries

Nickel hydroxide

Nickel wastes

Leaching, purification

Not quite exhaustive nickel

process flowsheet, focusing on

sulphate


42


Nickel sulphate

Crystallisation

Matte

Smelting

Ni sulphide concs

Sulphide ore

Hydromet

NPI

Sulphurisation

FeNi

Smelting

Laterite ore

Roasting

Refining


Stainless steel

NFA, alloy steel

Acid leaching

NMC/NCA Batteries


Products

Processes

End uses

Roasting


Ni oxide conc

Acid leaching

Concent-ration

Other, chemical

Precursor

Cathode materials

Hydromet

Ni oxide


to sulphate

Terr

afa

me

VNC

RNC,

Tsingshan

No-one yet?


NiMH batteries

Nickel hydroxide

Nickel wastes




sulphate

Eramet Sandouville


43


Nickel sulphate

Crystallisation

Matte

Smelting

Ni sulphide concs

Sulphide ore

Hydromet

NPI

Sulphurisation

FeNi

Smelting

Laterite ore

Roasting

Refining


Stainless steel

NFA, alloy steel

Acid leaching

NMC/NCA Batteries


Products

Processes

End uses

Roasting


Ni oxide conc

Acid leaching

Concent-ration

Other, chemical

Precursor

Cathode materials

Hydromet

Ni oxide


to sulphate

Terr

afa

me

VNC

RNC,

Tsingshan

No-one yet?


NiMH batteries

Nickel hydroxide

Nickel wastes




sulphate

Jinchuan / Umicore


44


Nickel sulphate

Crystallisation

Matte

Smelting

Ni sulphide concs

Sulphide ore

Hydromet

NPI

Sulphurisation

FeNi

Smelting

Laterite ore

Roasting

Refining


Stainless steel

NFA, alloy steel

Acid leaching

NMC/NCA Batteries


Products

Processes

End uses

Roasting


Ni oxide conc

Acid leaching

Concent-ration

Other, chemical

Precursor

Cathode materials

Hydromet

Ni oxide


to sulphate

Terr

afa

me

VNC

RNC,

Tsingshan

No-one yet?


NiMH batteries

Nickel hydroxide

Nickel wastes




sulphate

Sumitomo MM

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

China Japan South Korea Belgium Australia South Africa Finland Taiwan Canada India

NICKEL SULPHATE: The Market Overview (part 2 – NiSO4, cost and price)

45

Battery grade NiSO4 production by country, kt sulphate


Cathode precursors: market consolidation in China

46

Lack of diversity in the upper midstream: supply concerns create an incentive for new entrants.


NICKEL SULPHATE : The News

47

• Tesla/Panasonic announced that their new NCA cathode chemistry has vastly reduced its cobalt content, in

exchange for higher Nickel

• NCM 811 cathodes now in mass-production for E-buses, and SK Innovation targeting some EV usage in

August. In early 2017, this progression was deemed overly optimistic. Mass adoption of NMC 811 still

anticipated to occur in early- to mid-2020s.

• LG Chem announced a goal to move to NCMA commercialisation by 2020 (Ni ~90%)

• Nickel producers (particularly laterite) still struggling to attract investors at the current Ni price


Sections

1. Lithium

2. Nickel Sulphate

3. Natural Graphite


48


NATURAL GRAPHITE: robust growth but a number of complex variables

49

• Most recent CRU forecast sees a natural graphite market in minor surplus, despite surging demand

• However, great risk to forecast if Tanzanian regulatory issues are not resolved shortly, although higher prices

would lead to lower steel re-carburisation demand, and so partially rebalance

• On the other hand, jury still out on expanded graphite story – no major breakthroughs noted

Graphite prices may surprise to the upside.

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2017 2018 2019 2020 2021 2022 2023

2017 2018 2019 2020 2021 2022 2023

Refractory & Foundry Carburisation Lubricants

Friction products Li-ion batteries Graphite shapes

Expanded graphite Carbon brushes Other uses

Natural graphite demand

CAGR 14.5%

Natural graphite market balance


NATURAL GRAPHITE: The Market Overview

50

• CRU’s forecast is predicated on a minor surplus – prices will come off recent highs and stabilise with a

healthy margin above the long-run marginal cost

• Medium-term forecast risk is skewed to the upside

Graphite prices may surprise to the upside.

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Natural graphite prices, $/t real, average grade and flake size


Graphite: total midstream market consolidation in China

51


Spheronisation & coating

CoatingPossible spherical in mid-term

No activity

100% of current spherical natural graphite is produced in China.

NATURAL GRAPHITE: The News

52

• Tanzanian government battle with Barrick Gold over sharing economic benefits is having disruptive

unintended consequences for the global graphite market

• Synthetic graphite (SG) electrode prices down from the extraordinary highs of end-2017 but still very tight;

this is coinciding with a cell manufacturer push for SG to improve charging performance


Sections

1. Lithium

2. Nickel Sulphate

3. Natural Graphite


53


HIGH PURITY ALUMINA: The Market Overview

54

• HPA expected to increase by 257% (2017-2025), driven by strong growth in demand for LIB separator coating

• Lower-quality production primarily from China; high-quality from Japan, South Korea, Taiwan and the US

• Fierce competition in the Chinese LED sector has led to low-cost, sub-4N production; there is a need for

more high quality projects to meet the coming demand

• Prices linked to chemical and physical characteristics of the product

One of the lesser known winners of the EV story

2018 2019 2020 2021 2022 2023 2024 2025

Total HPA demand by end-use sector (tonnes)

LEDs Semiconductors

Phosphor applications LIB separators

Sapphire glass

2018 2019 2020 2021 2022 2023 2024 2025

HPA demand by product quality (tonnes)

low quality medium quality high quality super high quality



55

There is a high degree of heterogeneity between HPA products

Each end-use has different tolerances and seeks different physical and chemical characteristics

HIGH PURITY ALUMINA: LIB separator quality versus traditional sapphire uses

LED Substrate LIB Separator

Primary concern

Physical properties of 99.99% HPA: - Smaller particle size

- Even size distribution

- A high specific surface area

Highest possible purity of HPA: - Impurities affect crystal growing process and lead

to defaults in wafers

- Can affect colour

Competition

Fierce among low-qual LED producers: - This section is cost-driven

- Higher-quality HPA for high performance LIBs (EVs) are

demand driven, due to fewer operators (large premiums)

Fierce among low-qual LED producers: - Some low-quality LED producers have been using

sub-4N products to produce wafers

- Sub-4N supply/demand generally limited to China

Form

Powder (very fine): - Excellent milling and screening equipment required

- High-qual: particle size ~0.5μm w/ even size distribution

- Medium-qual: ~0.5μm, looser size distribution restrictions

- Low-qual: particle size ~0.8μm

Pellets (few cm diameter): - Coarse powder produced, then sintered into pellet

form using heat & compacting equipment

- For artificial sapphire boules, the loose bulk density

of the HPA feedstock must be at least 2.2g/cm3

HIGH PURITY ALUMINA: The News

56

• Prices for 4N HPA in China reported to have climbed 15% in the past year; still near historic lows

• Major project Cap-Chat (Orbite, 1000-2000tpy) struggling to emerge from insolvency and to resolve ongoing

issues with calcination equipment

• Altech Chemicals, Polar Sapphire, FYI Resources, Halcyon Resources, Hill End and Collerina Cobalt all

competing to bring supply online by the early 2020s – this would cover short-term demand but more projects

or ramp-up plans are required to meet the growth expected towards 2025


The Year of Cobalt: disconnect between market fundamentals and pricesGeorge Heppel, CRU Group

June 2018













Legal Notice

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Why is the cobalt price so high?

Today I want to answer the question…

US 99.8% Co Metal, $/lb

Demand growth has certainly been strong due to increase demand from the battery sector…

60

-50

-

50

100

150

200

250

Batteries (xEV) Batteries (other) Other Chemicals Superalloys Other Metals y/y growth

Global cobalt demand, ‘000T Global cobalt y/y demand growth, %

…and will continue to grow at an accelerated pace in the long-term.

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Commodity demand from EVs, ‘000TLFP LMO NCA NiMH

NMC111 NMC532 NMC622 NMC811

2015

2016

2017

2018

20

19

2020

2021

2022

2023

2024

2025

20

26

2027

2028

2029

2030

Lithium Cobalt Nickel Manganese

Cobalt Costs Webinar

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2010 2011 2012 2013 2014 2015 2016 2017Apparent feed inventories Total useable cobalt raw materials Total domestic refined production

…resulting in a strong reduction in feed inventories in the Chinese refinery sector

Chinese domestic refined production outpaced useable cobalt raw material availability…

Supply – demand balance, t

…but supply has reacted incredibly quickly.

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2016 2017

Somika

Metal Mines

Jinchuan Group Ltd

Chemaf SPRL

CDM (Huayou)

Others

Tenke Fungurume

Glencore

DRC Mined production

(‘000 tonnes Co contained)

Chemical Metal Recycling

Global refined production

(‘000 tonnes Co contained)

Cobalt Costs Webinar

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● The DRC will continue to be the biggest supplier of cobalt, with average production costs 30% lower than rest of world

production – giving some leeway for miners to absorb addition higher royalty payments.

● Nickel mines account for the majority of marginal supply → nickel demand will be a key influencer of cobalt prices under

tight cobalt market conditions.

Future cost trends: DRC cobalt-copper mines will dominate supply

Australia OtherDRC

2022 Cobalt cash costs

180 kt

x-axis: cumulative cobalt production, kt

y-axis: pro rata cobalt cash costs, $/lb

Note: costs are pro-rata basis; cobalt production refers to contained-Co units of constrained supply.

The issue isn’t a “cobalt” shortage – it’s a “metal” shortage.

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Well-supplied chemical market

Under-supplied metal market

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Metal

Chemical

Global market balance, ‘000T

The metal market has never been as tight before as it is now.

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Metal Chemical

Metal market has

traditionally been

balanced / oversupplied

Global market balance, ‘000T

So what has caused this?

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1) Reduced output of refined material.

● Far too many metal refineries have closed or reduced output in recent years.

2) Investment.

● Purchasing metal is the main investment instrument for speculators.

3) Lack of investment in the metal sector…

● …but if the Chinese chemical sector could react that fast to increased demand, why can’t the metal

sector?

The metal refiner’s dilemma

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Metal producer:

>Buy @ $27.5/lb

>Metal trading @ $30/lb>Conversion cost: $4/lb

>Profit? NO (probably)

Sulphate producer:

>Buy @ 27.5/lb

>Sulphate trading @ $32/lb

>Conversion cost: $3/lb

>Profit? YES

Miners ask for very highpayables -$27.5/lb

The cobalt price is high – MB @

$30/lb

Lack of metal supply pushes

price up

Key notes:

1) Toll processing cost

for metal is higher

than chemical

2) Chemical has

traditionally traded at

a premium to metal

The market is in a net deficit. Shortage of

intermediates.

Most intermediate turned into chemicals

What will break the cycle?

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Metal producer:

>Buy @ $27.5/lb

>Metal trading @ $30/lb>Conversion cost: $4/lb

>Profit? NO (probably)

Sulphate producer:

>Buy @ 27.5/lb

>Sulphate trading @ $32/lb

>Conversion cost: $3/lb

>Profit? YES

Miners ask for very highpayables -$27.5/lb

The cobalt price is high – MB @

$30/lb

Lack of metal supply pushes

price up

The market is in a net deficit. Shortage of

intermediates.

Most intermediate turned into chemicals

1) Intermediate market is no

longer in deficit

• Miners can no longer demand

high payables

2) Sulphate is no longer

traded at a premium

• Swing refiners will increase

metal production

But we still have a problem.

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Even if ALL of the world’s metal went to metallurgical applications, by 2023 we’d still be running out!

Metal Supply going to Metal Market Metal Supply going to Chemical Market Metal Demand

Global cobalt metal production, ‘000T

Conclusions

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• There is no shortage of cobalt sulphate or intermediates… for now.

• Prices have been high due to a lack of metal…

• …Which has been caused by high payables and sulphate

premiums. But this is already changing.

• The world needs a new cobalt metal refinery!

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