Commentary: Lithium opportunities abound in Australia

The following is an edited excerpt from the publication “The lithium–ion battery value chain — new economy opportunities for Australia” by the Australian government’s Australian Trade and Investment Commission. To download the full report, visit www.apo.org.au/node/210341.

Australia has a comparative advantage in its access to the mineral elements needed for lithium-ion battery production. Australia has world’s third-largest reserves of lithium and is the largest producer of hard-rock lithium spodumene. Australia also produces nine of the 10 elements used to produce most lithium-ion battery anodes and cathodes, and has commercial reserves of graphite — the remaining element. Australia also has secure access to all of the chemicals required for lithium ion battery production.

Australia’s lithium resource base (over 18% of the world’s economic resources) ranks third globally, behind Chile and China. Australia’s economic demonstrated resources (EDR) of lithium in 2016 stood at 2.73 million tonnes, up from 1.61 million tonnes in 2015. Talison’s Greenbushes project, the world’s largest and highest-grade spodumene deposit, has 50% of Australia’s lithium EDR. Other significant resources include Mount Cattlin, Mount Marion and Earl Grey in the Yilgarn region and the two Pigangoora deposits in Western Australia.

Australia was the world’s largest producer of lithium in 2017, with an output of 14,300 tonnes, equivalent to 76,200 tonnes lithium carbonate, and equivalent to 43% of global lithium output. Production in Australia increased 34% in 2017, as two spodumene operations boosted their concentrate production. Australian exports of spodumene ore have risen from A$117 million in 2012 to A$780 million in 2017, and are expected to rise to A$1.1 billion by 2020.

Australia is developing its lithium extraction capacity faster than any other country. Forecast output from existing Australian operations and planned projects tracked by the Western Australian Department of Mines indicates a potential supply of more than 1 million tonnes lithium carbonate equivalent (LCE) by the early 2020s. This projection indicates underlying industry demand for lithium at a higher rate than forecast by many industry analysts. For example, McKinsey & Co. forecast only 669,000 tonnes global LCE demand in 2025.

The following is a summary of current Australian lithium projects, as of September 2018:

• Privately held Talison Lithium operates the world’s largest lithium mining project: the Greenbushes mine near Bunbury, 250 km south of Perth in Western Australia. Greenbushes satisfies one-third of global lithium demand. The company has board approval for another A$516 million to expand the project, which is expected to double lithium concentrate production to 1.95 million tonnes (520,000 tonnes LCE per year). The Greenbushes project has two processing plants, which produce different lithium concentrates to meet specific customer requirements: one producing technical-grade lithium concentrates with a low iron content; the second producing high-yielding, chemical-grade lithium concentrate to produce lithium chemicals for making lithium-ion batteries.

• The Mt Cattlin mine, operated by Galaxy Resources (ASX: GXY; US-OTC: GALXF) and located near Ravensthorpe in Western Australia, began production in 2016. Estimated reserves are 11.6 million tonnes with a grade of 1.20% lithium oxide. At full capacity, ore can be processed at a rate of 1.6 million tonnes per year, with production of spodumene concentrate at 180,000 tonnes per year. Bulk concentrate is shipped to China from the Esperance Port in Western Australia.

• The Mt Marion Mine, 40 km southwest of Kalgoorlie, began production in 2016. This project is jointly owned by Australia’s Mineral Resources (ASX: MIN), 43.1%; Australia’s NeoMetals (ASX: NMT; US-OTC: RDRUY), 13.8%; and China’s Jiangxi Ganfeng Lithium, 43%. The estimated reserves are 77.8 million tonnes, with lithium oxide grade of 1.37% providing for a 2.7 million tonnes of LCE. Production could reach 400,000 tonnes LCE per year.

• The Earl Grey lithium project in Mt Holland, 370 km east of Perth, is being developed by Australia’s Kidman Resources (ASX: KDR; US-OTC: KDDRF), 50%; and Chile’s Sociedad Quimica y Minera (NYSE: SQM), 50%. This deposit holds an estimated  189 million tonnes spodumene at 7.03 million tonnes LCE. Kidman Resources expects the project will create 300 full-time operational jobs and supply up to $1.7 billion in royalties to the Western Australian Government.

• The Pilgangoora deposit, 120 km south of Port Hedland, is 100% owned by Pilbara Minerals (ASX: PLS; US-OTC: PILBF). Estimated reserves are 226 million tonnes with a 1.27% lithium oxide grade. At full capacity, the project could produce 800,000 tonnes per year of spodumene concentrate. Production began in 2018, followed by a first shipment of 8,800 tonnes of spodumene concentrate in September 2018. The company has offtake agreements with China’s General Lithium and Jiangxi Ganfeng Lithium. In November, the Pilbara board approved a second-stage expansion of the Pilgangoora project, which will see another 3-million-tonne-per-year processing circuit added to the operation, taking the project’s annual capacity to 5 million tonnes. The expansion would increase annual production from 314,000 tonnes to between 800,000 tonnes and 850,000 tonnes of spodumene concentrate over a forecast 17-year mine life.

• A similarly named Pilgangoora project, being developed by Altura Mining (ASX: AJM; US-OTC: ALTAF), began production in July 2018. The company is considering a feasibility study to double production. Estimated reserves are 30.1 million tonnes, with a lithium oxide grade of 1.04% for a total 774,000 tonnes of LCE. Project owners hope to produce 230,000 tonnes per year of lithium spodumene concentrate.

• The Bald Hill lithium-tantalum mine is 100% owned by Alliance Mineral Assets (ASX: A40), which merged in December 2018 with its joint-venture partner at the project, Tawana Resources. Bald Hill’s estimated reserves are 18.9 million tonnes, with a lithium oxide grade of 1.18% for 551,000 tonnes of LCE. Lithium concentrate production began in March 2018.

• Mineral Resources’ Wodgina deposit is 100 km south of Port Hedland in Western Australia. The mine began exporting direct-shipping ore in April 2017 to provide cash flow to fund building a spodumene concentrate plant, which will produce 750,000 tonnes per year of 6% spodumene concentrate. The estimated resource is 198 million tonnes, with lithium oxide grade of 1.18%, and 5.78 million tonnes of LCE. On Nov. 21, Albemarle (NYSE: ALB) announced that it had signed an exclusivity agreement with Mineral Resources in relation to a potential fifty-fifty joint venture to own and operate the Wodgina hard-rock lithium mine, and develop an integrated lithium hydroxide operation at the resource site.

• Core Lithium (ASX: CXO) is developing the Finniss lithium project south of Darwin in the Northern Territory. The estimated resource is 3.45 million tonnes, with a grade of 1.4% lithium oxide. Core has an offtake agreement with China’s Yahua. First deliveries are scheduled for late 2019.

Processing

Lithium is typically marketed in the form of lithium carbonate (Li₂CO₃), lithium hydroxide (LiOH) or lithium chloride (LiCl). Lithium products derived from brine operations can be used directly in end-markets, but hard- rock lithium concentrates must be further processed before they can be used in value-added applications like lithium-ion batteries. Most of Australia’s lithium is exported overseas as a bulk concentrate for processing. Generally Australian shipments contain only 6% Li₂O concentrate.

China dominates lithium processing, accounting for 89% of the world’s lithium hydroxide. Chinese refineries produce lithium carbonate, lithium hydroxide and lithium chloride — the precursors to lithium-ion battery cathode materials. They are chemically stable (for storage and transport), contain a high proportion of lithium and can be readily transformed into a lithium compound for cathode building.

Australia has attracted investment from two of the world’s largest lithium producers — Tianqi from China, and Albemarle from the United States. These companies are both investing in downstream lithium processing at Kwinana and Kemerton in Western Australia.

There are three processing plants in the development phase in Western Australia:

• Tianqi is building a two-stage lithium processing plant in Kwinana, Western Australia, at a cost of A$700 million. Construction began in October 2016 and is scheduled for commissioning towards the end of 2019. The project was estimated to create 500 local construction and 175 full-time production jobs at completion of the first stage at the end of 2018. Once complete, the Kwinana plant will have a capacity of 48,000 tonnes per annum of high-purity, battery-grade lithium hydroxide.

• Albemarle has gotten final regulatory approval for its plans to develop a lithium hydroxide processing plant at the Kemerton Industrial Park, near Bunbury. Albemarle aims to process spodumene ore concentrate from the Talison Greenbushes mine to produce 100,000 tonnes per year of lithium hydroxide by 2025.

• Also active at Kwanina is Covalent Lithium Pty (previously Western Australia Lithium Pty), which is the managing entity for a fifty-fifty joint venture between Kidman Resources and SQM to develop and operate the Mt Holland lithium project, as well as a proposed downstream lithium-processing facility. The companies expect to produce 44,000 tonnes per year of lithium hydroxide in 2021, 37,800 tonnes per year of lithium carbonate, or a combination of both. The project is expected to create 700 full-time jobs (400 at the refinery) during construction and 300 (150 at the refinery) during operations.