The huge appetite for cannabis investing is putting the brakes on the global electric vehicle revolution, say some experts.
Mining companies and analysts at this month’s Lithium Supply and Markets Conference in Santiago said many sessions were played to half-empty rooms, demonstrating a the lack of interest from investors and fund managers, reports BNN Bloomberg.
Lithium is the key component in the electric vehicle battery and has attracted a price premium as the automotive sector looks to support the global, low-carbon transition.
Lithium Prices Plummet
But this year lithium prices have fallen 17 percent as investors chase more ambitious returns in cannabis and crypto-currencies. Chris Berry, an analyst at House Mountain Partners told BNN Bloomberg “The capital is firmly parked on the cannabis sector.
“As this speculative cannabis view matures, the hope is that that capital will come back to mining — but I don’t see a lot of money coming into the space for now.”
Risk Capital ‘Running Into Cannabis’
His view was supported by Tobias Tretter, managing director at Zurich-based fund manager Commodity Capital AG. He told BNN Bloomberg: “A lot of the risk capital that had gone into the lithium (electric vehicle) sector is now running into cannabis.”
One reason for the Lithium price fall has been the consistently high levels of investment in proceeding years – demand is set to increase from 325,000 tons to one million tons per year, according to BloombergNEF.
Anthony Tse, chief executive officer of Perth, Australia-based producer Galaxy Resources Ltd said about US$9 billion has to be invested in lithium mining to add the 600,000 tons of new capacity needed to match future demand.
Electric Vehicles Need The Raw Materials
He said the industry needs to see some “meaningful slots of capital and checks being written for the sector”. During a Conference presentation he said it is proving difficult to ‘get the amount of supply needed to meet demand’.
He added: “You can build all the EV (electric vehicle) factories that you want, but if you don’t have any of the raw material, you can’t feed that chain.” Wanda Cutler, Nemaska’s head of investor relations has also seen ‘a lot of the speculative money moving to cannabis and crypto-currencies’.
But Tse had some words of consolation for the battery makers. “People have made very attractive returns there on their investments and I hope to see that money redeployed back into junior mining.
“We’re in a bit of a pause right now, but I do think interest will come back — it’s just hard to predict when,” he told BNN Bloomberg.