A supplier to Toyota Motor Corp secured a lithium supply deal in Argentina on Wednesday that could help the world's largest automaker keep its lead in gasoline-electric hybrid cars.
Lithium is expected to be in increasing demand as carmakers look to costly but more efficient lithium-ion batteries to power hybrid and electric vehicles.
Toyota employs nickel-metal-hydride batteries for the current Prius hybrid but has decided to use lithium-ion batteries for future plug-in models.
When it comes to mass production of hybrids, the main hurdle has been a shortage of batteries, said Yoshihiko Tabei, chief analyst at Kazaka Securities. Toyota is taking a step on its own to secure the materials it needs to ensure stable production.
Toyota Tsusho Corp, a trading house 22 percent-owned by Toyota, said it would jointly develop a new lithium project in Argentina with the project's owner and operator, Australian-listed Orocobre Ltd.
Orocobre shares jumped by as much as 47 percent to a record high of A$2.04 in its heaviest ever trading volume. The stock has risen almost 10-fold in the past 12 months, and closed up 32 percent at A$1.85.
Toyota Tsusho rose 6 percent, while Toyota Motor's stock was down 0.9 percent, roughly in line with other auto shares.
The Salar de Olaroz project in Argentina is estimated to cost around $80-$100 million, with the final figure to be determined after a feasibility study, Orocobre spokesman Paul Ryan said, adding the study should be complete by end-September.
As environmentally friendly electric car demand continues to grow, Toyota Motor Corp will have the opportunity to become a cornerstone offtake customer, Orocobre said in a statement.
STEP CHANGE IN DEMAND
Orocobre went public in December 2007 and now has a current market capitalization of nearly A$150 million.
Managing Director Richard Seville said the lithium market had been growing at a compound annual growth rate of about 7 percent between 1997 and 2007, before the global financial crisis, thanks largely to demand from consumer electronics makers.
That growth will continue, but on top of that we have the step change in demand with a new application which is in large format batteries for use in electrical vehicles, Seville told Reuters.
Houston-based James Calaway, non-executive chairman, and his family members hold an 11 percent stake in Orocombre, while other board members own a further 15-20 percent, Seville said.
Toyota aims to double its global output of gas-electric hybrid cars to 1 million units in 2011, as it fights to stay in the lead in the growing market for low-emission cars, the Nikkei business reported this month.
Subject to the finalization of the terms, Toyota Tsusho will acquire a 25 percent equity interest in the joint venture while Orocobre will continue to own the remaining 75 percent of the project and will operate the venture.
The Japanese government-affiliated Japan Oil, Gas and Metals National Corp (JOGMEC) is looking to take a part of Toyota Tsuho's 25 percent stake, as part of Japan's efforts to secure stable sources of rare metals, government officials said.
Rare metals are essential not just for the high-tech sector but for Japan's manufacturing industry overall, said Hiroshi Kuwayama, a deputy director at Japan's Agency for Natural Resources and Energy.
With other countries, such as China, investing in mines around the world, we want to be more aggressive to support the private sector in securing stable supplies.
(Additional reporting by Mayumi Negishi; editing by Mark Bendeich and Lincoln Feast)