Amid a growing lithium demand landscape, concerns have been raised about the lack of concentration in the battery metal’s mining sector.
Fitch Solutions has deemed the lithium mining industry “immature”, suggesting the competitive landscape is characterised by a limited number of major players and a large proportion of junior exploration companies.
Fitch found that of the 129 lithium projects included in its Global Lithium Operations Database, 105 were owned by individual companies (owning 50 per cent or more of the interest).
Of those 105 companies, only 18 have more than one lithium project, while 87 own just a single lithium project.
“The lithium supply sector comprises a very large number of junior and exploration companies,” Fitch said in a recent report.
Fitch noted that Rio Tinto was the only large global miner developing lithium projects, highlighting its ownership of the now-defunct Jadar project in Serbia and its Boron mine in the US, where Rio extracts battery-grade lithium from waste rock.
“The small presence of large mining players poses risks to the execution of the currently planned projects and raises questions on the long-term project pipeline for lithium,” Fitch said.
“Since the commodities crash of 2014–15, major miners have preferred to acquire projects already developed by junior miners that are proven to be profitable rather than develop projects start to finish, a dynamic that affects junior lithium miners frequently searching for financing and support for any final investment decision.”
Fitch said it expected merger and acquisition (M&A) activity to increase in the lithium sector in the coming years given the low level of consolidation in the sector.
The credit ratings and research firm also forecast greater consolidation from major miners as they look to have access to a steadier and more diversified source of lithium.
Lithium has a strong new project pipeline, which Fitch said would keep growing as interest in the lithium sector continues to rise and new production techniques are tested.
“Overall, we are confident in the development of the majority of new lithium projects given the looming tighter market supply, but a number of them will face delays and are even unlikely to be developed,” Fitch said.
“(This is) due to the characteristics of the competitive landscape and the location of a number of projects in markets facing significant economic, political, operational and mining risks.”