Lithium legend Ken Brinsden on Pilbara Minerals, Patriot and why prices can rebound

Plunging electric vehicle costs will help lithium prices recover as demand tops market expectations and helps rescue local miners from a steep downturn, according to the former chief executive of Pilbara Minerals, Ken Brinsden.

Speaking to Livewire Markets, Brinsden says he's still a happy shareholder in retail investor favourite Pilbara Minerals (ASX: PLS) and expects its flagship Pilgangoora Mine in Western Australia to remain a mainstay of lithium hard rock supply.  

"I think they're navigating difficult market circumstances as well as you could hope," Brinsden said of Pilbara Minerals. "It's one of the world's great hard rock mines and the fact it's being challenged by this price environment tells you how bad the situation is in the market."

Between 2016 and 2022, Brinsden took Pilbara Minerals from a penny stock punt to a $6 billion supplier of Chinese buyers converting its spodumene concentrate into battery grade material. 

Since leaving Pilbara Minerals, the engineer has taken the chief executive role at Patriot Battery Metals (ASX: PMT), which is a dual Sydney/Toronto-listed lithium developer based in the St James Bay region of Quebec, Canada. 

So can Brinsden repeat the wealth creation trick at Patriot and make investors rich?

Monster deposit

There's no doubt Patriot has a monster, high-grade deposit, thought to be the largest in the hard-rock category in the Americas and around the fifth-largest in the world. 

However, Brinsden acknowledges his new venture has permit, development, financing and environmental compliance hurdles to clear before it breaks ground on the site. 

Still, broker Macquarie has compared the size of Patriot's deposits to the mega Greenbushes Mine in Western Australia co-owned by IGO Ltd (ASX: IGO).

"Greenbushes' overall resources grade is around 1.4% lithia but it mines a higher grade around 1.8%," says Brinsden. "There's not many hard rock mines around the world that can [reach that grade], but there's a subset of our resource as per the PEA [Preliminary Economic Assessment] level of analysis that shows we could mine about 25 million tonnes at 2%. So that's after mining dilution, and shows there's reasonable comparisons to [Greenbushes] to be made."

Assuming Patriot can navigate hurdles including environmental permitting regarding local lakes, and other resources from state government and First Nations authorities, Brinsden thinks it can get into construction from late 2027. It can then turn to commissioning from late 2028 and ramp up production in the first part of 2029. 

Lithium price outlook 

As a sign of the ongoing demand for lithium from electric vehicle (EV) makers, Volkswagen signed a binding off-take agreement and invested $CAD69 million in Patriot for around 9.9% of the business last January.

Brinsden says the market is underestimating soaring battery demand and expects hamstrung lithium prices to recover as the cost of electric vehicles, lithium-ion batteries, and solar technologies starts to fall. 

He reckons lithium demand can average a 30% compound growth rate over the medium-term as the law of large numbers and exponential growth resets the supply and demand imbalance. 

"Battery electric vehicles are getting cheaper mainly through the influence of China but also the effect of hybridisation," he says. "When you buy a classic Japanese or European hybrid it's nominally a petrol engine car with a battery and motor.... the Chinese and others are turning that on it's head - a hybrid is now more likely to be an EV with a tiny petrol motor charging the battery."

This transformation means hybrid EVs such as those produced by Chinese manufacturer BYD are now becoming top sellers in Australia as they offer longer travel ranges and cost less. 

"So, I've almost no doubt today that the Western world is underestimating lithium raw material demand growth," says Brinsden. 

The entrepreneur also argued a lot of the cheap lithium supply now coming out of Africa is  unsustainable as the world accelerates its shift from fossil fuel energy sources. However, other analysts suggest this new supply source will continue to be tapped by China. 

Among the brokers, Macquarie rates Patriot's ASX scrip an outperform with a 50 cent 12-month price target, but acknowledges this is likely to be a volatile stock given the fast-changing nature of the energy transition.