This is the second in a 2-part feature series.
This article is a sponsored feature from Mining.com.au partner Pan Asia Metals Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.
Emerging diversified clean energy company Pan Asia Metals (ASX:PAM) is leading the electrification revolution in Southeast Asia, positioning itself to build a presence across the entire lithium battery value chain.
The company’s strategy is to be a leading battery metals and chemical supplier in this burgeoning ecosystem.
As Managing Director Paul Lock explained in the first part of this series, Pan Asia is looking beyond the mine gate and is now taking strategic steps to leverage its leadership position to explore opportunities to move downstream.
Lock says from a global perspective, Southeast Asia presents the company with a plethora of opportunities in a mineral-rich region that’s an emerging world leader in the lithium-ion battery market.
Lithium-ion battery market growing at 16.5% CAGR
The global lithium-ion battery market is expected to have grown from US$41.93 billion in 2021 to US$48.86billion at the end of 2022 at a compound annual growth rate (CAGR) of 16.5%. The market is forecasted to reach US$85.72 billion in 2026 at a CAGR of 15.1%.
Asia Pacific, which includes countries in East Asia, Southeast Asia, and Oceania that border the Pacific Ocean, is emerging as the largest region in the lithium market, ahead of North America and Europe.
The market is driven by the energy transition and government pledges around the world to phase out fossil fuel cars
The market is driven by the energy transition and government pledges around the world to phase out fossil fuel cars.
In 2019, the lithium-ion battery market remained somewhat stagnant and was in the vicinity of about 300,000 tonnes, with previous growth rates around 30,000-50,000 tonnes a year. Currently, the market is growing some 200,000 tonnes a year, almost the full size of what the entire market was back in 2019.
Lithium prices are likely to remain high in 2023 as China’s economy starts reopening and there is further relaxing of COVID rules. Currently, China is the largest EV market globally.
Southeast Asia – global growth gateway
As Lock explains, within this growth profile, Southeast Asia is emerging as the global gateway for opportunities.
The region generally includes 10 countries – Singapore, Thailand, Philippines, Malaysia, Indonesia, Vietnam, Myanmar, Brunei, Laos, and Cambodia. With a total population of more than 600 million, it has an overall economic growth rate higher than the global average and is one of the key drivers of future global economic growth.
The economic levels of these Southeast Asian countries vary considerably. Singapore is the only developed country with a per capita GDP of about US$73,000, while Myanmar and Cambodia will have a GDP per capita of less than US$2,000.
The population and minimum wage levels also vary greatly from country to country, with Brunei having the smallest population (less than 500,000 people), and Indonesia with the largest population (about 275 million people).
At present, the development of the lithium battery industry in Southeast Asia also varies greatly. For example, Vietnam’s lithium battery industry is small in scale but developing rapidly, with companies such as Samsung, LG, and VinGroup setting up production plants in the country.
The MD adds: “I was in Vietnam recently and it’s one of the youngest populations in the region and there are 100 million people. So, there’s a lot of opportunity there.”
Countries such as Thailand, Indonesia, and Malaysia are also at the forefront of establishing lithium battery production plants. Chinese battery manufacturer EVE Energy recently announced the construction of a battery manufacturing plant in Malaysia.
“I was in Vietnam recently and it’s one of the youngest populations in the region and there are 100 million people. So, there’s a lot of opportunity there”
Thailand, where Pan Asia Metals’ lithium assets are located, is an advanced industrial economy and has implemented an aggressive lithium-ion battery and EV policy framework with more than 30 related projects underway.
Thailand is also the largest vehicle manufacturer in Southeast Asia and the fourth largest in Asia. It has an annual output of more than 2 million vehicles for a variety of brands and its EV policy aims for 30% of the country’s total vehicle production to be electric by 2030.
Car manufacturing (and car parts manufacturing) is an important component of Thailand’s economic landscape. Car exports together with car part exports, are the most important (by value) from Thailand and accounts for more than 5% of total GDP. Thailand has no car brand of its own though but many foreign companies are producing or assembling cars in the country. Mercedes just started production of its flagship EQS EV there and BYD, Geely and Great Wall have or are about to start manufacturing EVs there. Battery production will follow.
As such, Pan Asia Metals’ projects are strategically located within close proximity to the rapidly growing Asian EV and lithium-ion battery markets, with all required inputs for lithium chemical processing nearby.
Abundant labour resources and low production costs
Lock says that the abundant labour resources and low production costs in countries like Thailand attract global lithium battery manufacturers to transfer their production capacity to the region. Also, the economic growth of Southeast Asian countries, the improvement of living standards, and the growth of demand for lithium-related products such as EVs and smartphones will promote the development of the region’s lithium battery industry, he adds.
This is a material advantage for the company. For instance, labour in the region has a degree of mobility – a shortfall in one country can be filled with labour from another.
“For a company like Pan Asia Metals which plans to build a mine as well as processing facilities, labour can cross borders”
“For a company like Pan Asia Metals which plans to build a mine as well as processing facilities, labour can cross borders. So, if I’m building a plant in Western Australia, say, I’m restricted by labour. We’re seeing inflationary pressures on labour rates and also seeing building schedules getting delayed.
In Southeast Asia there’s a lot of accessible labour with the necessary skills to help build these plants and mines and so on. If we really need, we can source labour from other countries to help build whatever plant we’re building.”
As part of that, he says Pan Asia will ensure its activities benefit local communities, respecting heritage and safeguarding health, supporting the sports, as well as children’s education.
“Any impact we have will always be offset by the goods we’ll help to produce, activities that will help local communities, and production that will benefit the global society.
We believe that local relationships are key to our success, we achieve this by committing serious time and effort to engage with the community in areas that are important to them, from respecting their heritage and safeguarding their health, to supporting their sports teams and co-shaping their children’s education.”
The most economically advanced countries in Southeast Asia do not have a legal minimum wage. The actual minimum wage is more than US$400 per month, while the lowest minimum wage level in Myanmar is only about US$93 per month.
Pan Asia Metals has plenty of work for its labour force in the pipeline and is readying for a huge year ahead in 2023.
Readying for resource upgrade
One objective it is striving to achieve is to increase and upgrade the Mineral Resource Estimate (MRE) at the Reung Kiet Lithium Project.
In November, Reung Kiet drilling results continued to support the geological model of extensive lithium mineralisation hosted in lepidolite rich pegmatite dykes-veins and adjacent metasediments. Drilling continues with Lock saying that a MRE will potentially be increased this year and upgraded to indicated and possibly the measured category.
Pan Asia has been conducting diamond core drilling at the project since March 2021. Once drilling at Reung Kiet is completed, the company will move to the Bang I Tum prospect.
Lock adds: “For Reung Kiet, which is our lead project, it comprises 2 prospects, for the Reung Kiet prospect we will deliver a resource upgrade sometime in the near future. We’ll submit our mining licence application near the end of the second quarter or early in the third quarter.
“And we’re looking to release some PFS results also during the year for at least Reung Kiet but hopefully Bang I Tum”
For the Bang I Tum prospect, we should have drilled about 15,000m of diamond by then. We’re doing our environmental assessment work in the background, which will allow us to submit an MLA for that prospect later in the year.
And we’re looking to release some PFS results also during the year for at least Reung Kiet but hopefully Bang I Tum.”
Pan Asia will also assess other growth opportunities as it enters what is shaping up to be a transformational year for the company.
The electrification revolution will be televised.
Write to Adam Orlando at Mining.com.au
Images: Pan Asia Metals Ltd & iStock