Batteries: Why We Need Them, and What We Need to Make Them

Jon Hykawy Jonathan Lee

Electric Cars and Battery Demand

• We believe electric vehicles will see more rapid adoption than

many credit

• We break down vehicle adoption as E-Bikes (mainly Asia), hybrids

(HEVs), plug-in hybrids (PHEVs) and fully electric vehicles (FEVs)

• Battery sizes, in terms of storage capacity, increase, moving from

eBike to FEV; 0.5 kWh for E-Bike, 2 kWh for HEV, 15 kWh for

PHEV and 25 kWh for FEV

• Results in significant demand; 33 GWh of storage by 2015, 82

GWh of storage by 2020

Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

HEV ('000) - 500 600 700 900 1,000 1,100 1,200 1,300 1,400

PHEV ('000) 20 70 300 400 750 1,000 1,200 1,400 1,600 1,750

FEV ('000) 25 100 300 500 750 1,000 1,250 1,500 1,800 2,000

E-Bikes ('000) 1,431 1,646 1,892 2,176 2,503 2,878 3,310 3,806 4,377 5,034

Storage (MWh) 1,641 5,373 14,146 20,988 33,051 43,439 53,105 62,803 73,789 81,567

Rechargeable Batteries

• A rechargeable battery, we all know,

allows storage of electricity

• Efficiency is solid, better than 90%

round-trip

• Basically, shuffles and stores ions from

cathode to anode in use, back when

recharging

• State-of-the-art today are lithium

batteries

• Lithium supplanting all other; when was

the last time you came across a new

electronic device with anything but

lithium?

Lithium Batteries

• Anode is typically graphite

• Cathode is a compound made from

lithium and some other metal

• Common cathodes are:

– lithium iron phosphate (LFP)

– lithium nickel cobalt aluminum (NCA)

– lithium nickel cobalt manganese (NCM)

– lithium cobalt oxide (LCO)

– lithium manganese oxide (LMO)

– lithium vanadium phosphate (LVP)

• Demand for battery materials obviously

scales with battery demand

Properties of the Rechargables

Energy Power Capacity

Cathode $/kg Life Voltage (Wh/kg) (W/kg) (mAh/g) $/kWh $/kW

LCO $29.46 Low

3.7 102

1,092 170 $289

$26.98

NCM $14.61 Poor

3.6 96

1,700 175 $152 $8.60

NCA $11.66 Good

3.8 140

900 200 $83

$12.95

LMO $0.47 Good

3.6 90

1,300 120 $5 $0.36

LFP $0.70 Good

3.3 90

1,100 170 $8 $0.64

LVP $7.10 Excellent

4.2 106

2,000 130 $67 $3.55

Demand Beyond the Consumer Battery

• Consumer electronics demand growth is

8% to 10% per annum

• Above and beyond consumer electronics

– E-bikes

– Electric vehicles

– Grid storage

E-Bikes and Electric Vehicles

• 27 million E-bikes in Asia are expected to grow to approximately

40 million by 2020

• Battery usage per e-bike limited

– significant penetration and growth required to put dent into demand

• At 20% penetration of e-bike market by 2020, not dominant

– contributes roughly 19,200 tonnes graphite per annum by 2020

• Hybrids, plug-ins and full electric vehicles

– 250k hybrids per year, plug-ins and full electrics just in infancy

– Estimate of over 2M vehicles by 2015 and 5M vehicles by 2020

– Electric vehicles contribute to electrification of powers – all energy sources

converted to electricity storage

Blue Sky – Grid Storage

• US power consumption is roughly 22% of global total

• Renewable Portfolio Standards in the U.S.

– 33 State Policies requiring electricity providers obtain

percentage of power from renewable energy sources

– Implementation dates ranging from 2013 to 2030

– Averages 17% of electricity from renewables

– 33 States combined for 2,538 TWh of electricity in 2010

• 17% of that would be 439 TWh

• Beyond renewables, perhaps even more importantly, storage

hardens the grid

– According to University of Minnesota, non-disaster related

blackouts are up 124%, from 41 in 1991-1995 to 92 in 2001-2005

Blue Sky – Grid Storage

• “Massive Electricity Storage,” a white paper written by

Bernard Lee and David Gushee for AIChE in 2008

• Provides estimate of storage capacity required for

stability

• Approximately 470 GWh storage required to stabilize

grid due to renewable adoption (“upper bound”)

• Depending on type of battery and actual

implementation – game changer

• Absolute game changer – Up to 280 kt LCE and 775 kt

graphite

– Depending on cathode material, multiples of those numbers for

other metals (Mn, V, Co, pure Fe, etc.)

Tesla Roadster

• Uses NCA batteries

• Larger than competitors at 39 kg LCE, 110

kg graphite and 21 kg cobalt per roadster

Source: Tesla Motors Source: Tesla Motors

BYD e6

• LFP batteries (Fe Power)

• 2,400 kg vehicle – BYD is investigating more

compact and energy dense technologies

Source: BYD Auto

Subaru G4e

• Concept car using LVP, which has high power

density, high voltage

• LVP could be a next generation battery with

superior performance attributes

Source: Subaru Inc.

Nissan Leaf

• Uses LMO batteries

• A 24 kWh battery using 4 kg Li metal, 58 kg

graphite, 62 kg Mn

• Over 3,600 vehicles sold as of March 11’

Source: Nissan Motors Co.

Chevy Volt

• Also utilizes LMO batteries

• Volt’s 16kWh battery uses approximately 2 kg Li

metal, 28 kg graphite, and 30 kg Mn

Source: General Motors

With all these new investments..…

Who Will Mine the Material?

The Materials:

• Graphite

• Lithium

• Manganese

• Cobalt

• Vanadium

Who:

• The companies we’ll hear today

Graphite

• Used in refractories, batteries, brake

linings, lubricants, steelmaking

• 1.1M tonnes production per year

• 80% sourced from China

– 220 kt ex China

• Sold in various forms:

– Natural flake

– Amorphous

– Synthetic/Artificial

Graphite Demand

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

An

nu

al G

rap

hit

e D

em

and

(To

nn

es)

Year

Manganese

• 15 million tonne/yr market

• Main use is manufacture of stainless steel

– Sold as into market as FeMn

• 1.3 million tonnes/yr electrolytic Mn

– Purity level needed for battery use

– 97% from China

– 34,000 tonnes/yr produced ex China

Battery Demand, Relatively Speaking

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Man

gan

ese

(to

nn

es)

Year

LMO Contribution

NCM Contribution

Ex-China Production

Cobalt

• 60 – 70 kt per year production

– Largely by-product from nickel and copper

production

– 65% sourced from DRC

• 23% of demand is due to battery use

• Cobalt was in first lithium ion battery

– Majority of cobalt used in batteries is for LCO

(85%)

• NCA, NCM use much less cobalt than LCO

Beyond Battery Grade

• Sold as metal and chemical

• Metal is graded 1 through 4

– Grade 1 (99.9%) mainly supplied by Xstrata, Vale

and Sumitomo

• During failed Inco-Falconbridge merger, European

Commission comments:

– “specifications relate not only to level of purity of

cobalt, but more importantly impose strict

maximum levels measured at the ppm levels for

specific impurities”

Vanadium

• 90% of vanadium used as a steel

strengthener

– Better building codes requiring stronger

materials means more vanadium

– Near-term demand driver

• Upside potential in two types of batteries

– Automotive: LVP

– Grid Storage: Vanadium Redox

Vanadium Curve

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

An

nu

al V

anad

ium

De

man

d (

ton

ne

s)

Year

Consumers will Decide

• No battery dominates; choices made on

basis of power, capacity, safety, price

• Consumers may ultimately decide

• Multiple types of batteries within vehicles

– Different chemistries for different vehicles

Disclaimer

Information contained herein has been drawn from sources believed to be reliable but its accuracy or completeness is not guaranteed. This is not a research report. Byron Capital Markets (“Byron”) does not assume any responsibility or liability for these trade recommendations. From time to time, Byron and its directors, officers and other employees may maintain positions in the securities mentioned herein. The contents of this report cannot be reproduced in whole or in part without the expressed permission of Byron. This information is intended for use by qualified accredited and institutional investors only and is not intended for retail investors. This information is not intended for use by any U.S. investor.