Muzhu Mining Ltd. (CSE: MUZU)
Creating lasting wealth by developing gold and silver properties with near-term mining potential
The electric vehicle market is currently experiencing a period of volatility, impacting mining companies, particularly those involved in lithium production. Lithium is a key component of lithium-ion batteries that power the majority of electric vehicles.
In the first quarter of 2024, electric vehicles’ share of total new car sales increased by approximately 3% year-over-year. However, compared to the fourth quarter of 2023, electric vehicle sales declined by 15%. Lower-than-expected consumer demand for cars has prompted many electric vehicle manufacturers to consider scaling back or delaying production. Some electric vehicle manufacturers have even filed for bankruptcy due to difficulties in financing.
Despite these setbacks, forecasts suggest that by 2027, electric vehicle sales will increase from 13.9 million units in 2023 to over 30 million units. Although the expected sales pace is projected to decrease from an average of 61% from 2020 to 2023, the average growth rate over the next three years is still expected to reach 20%.
This helps explain why some mining companies are looking for opportunities to expand production, while others are using strategies such as mergers and acquisitions to increase their presence in the market. Challenges still exist. Lithium is seen as crucial to the transition towards clean and sustainable mobility but faces scrutiny in terms of environmental, social, and political aspects in its mining and processing. These concerns may make mining M&A transactions riskier and more challenging to complete, making thorough Environmental, Social, and Governance (ESG) due diligence essential.
African Investment Enthusiasm Rises
According to S&P Global Commodity Insights, it is projected that this year the lithium supply from the African continent will represent nearly 11% of the global supply, a figure expected to increase to over 14% by 2028.
The surge in lithium prices in 2021 and 2022 sparked an investment wave from Chinese companies in African production. As supply increased and electric vehicle sales lagged behind expectations, lithium prices subsequently plummeted by over 80%.
Analyst Claudia Cook from Benchmark Mineral Intelligence stated that despite an expected surplus in global production this year, China, which produces most of the world’s lithium chemicals, continues to expand refining capacity and increasingly relies on overseas materials.
Metal analyst Thomas Matthews noted that over the past year and a half, Nigeria has become the second-largest lithium-producing region in Africa. In the first half of this year, low-grade lithium ores from Africa accounted for over a quarter of China’s total lithium imports (in terms of metal content).
Western companies are also seeking to develop lithium mines in Africa. Atlantic Lithium Ltd., registered in Sydney, is constructing Ghana’s first lithium mine to supply lithium concentrate to the United States. Andrada Mining Ltd. in London and Tantalex Lithium Resources Corp. in Canada are undertaking projects in Namibia and the Democratic Republic of the Congo, respectively.
