The Talga Group Ltd (ASX: TLG) share price has surged by almost 250% this year, smashing through 10-year highs. Meanwhile, most investors have probably never heard about the company.
Talga is a lithium battery player, making battery anodes for lithium-ion batteries. Its business model is closely aligned with the expected boom in electric vehicles (EV).
Here’s the reasons why the Talga share price has risen so much in 2020.
An anode supply crunch
The company has said that despite a large number of graphite producers globally, there is a worldwide shortage of anode, and car and battery makers will struggle to source enough anode.
The company predicted that 3.5 million tonnes of graphite anode will be required by 2029, up from 600,000 tonnes today.
To anticipate this supply crunch, Talga has invested in the Vittangi mine in Sweden, which produces super high-grade deposits with graphite flakes already the perfect size for anode.
The company says that only a small fraction of global graphite resources can be converted into anode, which is nowhere near the levels where demand will be.
Recent progress
The company has also doubled down on its graphite investments, recently completing a scoping study on its graphite resources (the Niska project) in Northern Sweden. That study supported a 450% increase to its current European anode production plans.
In May this year, Talga inked a deal with giant European lithium-ion battery manufacturer Farasis Energy. Through the agreement, Talga will provide coated anode products, which Farasis will evaluate for its batteries and potential European development.
Bet on electric vehicles
The demand for lithium-ion batteries for use in electric vehicles is growing rapidly as the world transitions to more renewable energy sources.
Bloomberg’s annual Electric Vehicle Outlook forecast predicted that global demand for EV batteries will grow 14-fold by 2030.
Such a massive spike would require approximately 1.7 million tonnes of anode material every year, in order to sustain it.
How has the Talga share price performed in 2020
As mentioned, the Talga share price has risen by around 250% in 2020.
At the time of writing, the Talga share price is trading at $1.64, down nearly 5% amid a broader fall in the ASX.
At the current share price, the company commands a market cap of $487 million.
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More reading
- Why the Talga (ASX:TLG) share price surged by 5% today
Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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