As lithium prices remain under pressure with the surge in global demand for lithium-ion battery vehicles, Wimmer Financial LLP is in talks to finance a lithium mine in Zimbabwe, reports Tanzeel Akhtar.
The demand for certain natural resources found in Africa play a key role in electric products. For example, lithium is a much sought after commodity found in many parts of southern Africa’s Zimbabwe.
A jump in global demand for electric cars and batteries has driven demand for mined minerals such as lithium, graphite, cobalt and copper, a key compenent in electric car batteries.
“We see investment opportunities across Africa in mining, oil and gas, green energy as well as real estate. We are currently doing a deal in the lithium space. Lithium is what you need for batteries and electric cars,” says Per Wimmer, a former Goldman Sachs banker and the founder of Wimmer Financial LLP, a London-based corporate advisory firm.
As the demand for electric cars and batteries increases, so does demand for what goes into a battery, which is lithium, graphite, cobalt and copper, Wimmer explains. These elements are vital for new technology advancements and products, and are therefore shaping demand and supply on a global scale.
“As a result of that we are currently doing a $200 million deal with a lithium mine in Africa, so it very much plays into that theme for near-term production. This plant is in Zimbabwe,” says Wimmer.
Kibo Energy, a company focusing on the development of thermal coal power projects in Tanzania, Botswana and Mozambique, recently received formal notice from Tanesco inviting it to develop the Mbeya Coal to Power Project for the export market.
Kibo also recently appointed Wimmer Financial LLP to manage the structuring and provision of a project finance corporate credit line facility of up to $900 million, which will help to secure debt requirements for its African energy projects.
Stability and geopolitical risk
While political instability has declined over the years, it is still a huge issue when it comes to investing in mining operations in certain parts of Africa.
There is also continuous improvements in regulatory frameworks, which is enticing foreign investment and distribution.
“We do our own risk appetite [assessment] and go quite far out with political risk, as is the case with Zimbabwe, which is certainly not the most stable country in Africa.
“We normally like to call Namibia and Botswana ‘Africa for beginners’ because it is so stable, so boring and so well organised, whereas other countries are not.
“Having said that, when it comes to the slightly more risky countries, you can de-risk the financial aspect of doing deals in Africa, for instance through insurance, you can take political risk insurance on certain African countries,” explains Wimmer.
Wimmer highlights another major commodity – cobalt – which is particularly interesting and needed because it stabilises batteries so it doesn’t blow up like the Samsung Galaxy 7.
“You put in cobalt in to stabilise the battery. Cobalt is very expensive but it is also very important, so as we see an increase for batteries we see cobalt prices increasing a lot. Most recently they have come down again,” says Wimmer.
Wimmer adds one major problem with cobalt is that 64% of the reserves known today is found in the Democratic Republic of the Congo (DRC), and therefore the politics of the DRC indirectly determine the pace of the electric car revolution.
“There is cobalt elsewhere in Russia, China, Canada, but 64% is in the DRC, so we are very dependant when it comes to batteries for output from DRC.
“So if there were ever to be a supply disruption there, that’s a problem. Then you need other metals like copper and nickel,” adds Wimmer.