The outlook for the Australian lithium industry is brighter after digging deeper into the June Resources Quarterly from the Federal Government.
While Monday’s release of the report revealed a doubling in export revenue from 2021-22 to 2023-24 to more than $9.4 billion grabbed attention, there are clear signs the Australian industry is heading for a sharp rise up the value adding processing chain.
“World output is estimated at 520,000 tonnes LCE in 2021, and is forecast to reach 655,000 tonnes in 2022 and 944,000 tonnes in 2024.
“This rapid growth — of around 80% in three years — is forecast to be met by gains in output by Australia, Chile (via expansions to Albemarle and SQM operations) and Argentina (via new and expanded brine operations by Livent, Allkem and Minera Exar),” the Quarterly explained.
“Total supply from mine and brine operations is currently insufficient to meet demand. While project development is underway, it will take time to close the supply gap.
“Stockpile size is hard to ascertain, with some estimates of 4-8 weeks for spodumene.
“Ongoing tight supply conditions and ongoing concerns about supply chain bottlenecks are forcing lithium processors and battery makers to pay record prices to secure supply.
That’s short term bullish.
And longer term, the Quarterly comments “Australian businesses are expected to continue their expansion into higher value-added activities over the outlook period.
“Potential avenues include growth up the battery value chain, from mining and refining into precursor chemicals for cathodes, electrolyte production battery anode plants, battery cell research/production, and battery manufacturing.”
The search for value looks like being successful and the Quarterly estimated that by 2024, Australia may have about 10% of global lithium hydroxide refining capacity rising to about 20% of global lithium refining by 2027. “
The 2027 estimate is up from a figure of 17% in the March quarterly, indicating that the number of refineries and other projects is on the rise.
There’s the now familiar warning of risks – mainly on the slowness of construction and operation of these new plants.
“Delays to approval and construction of new mine and processing plants, as well as difficulties achieving ramp up to full output, would see slower growth in spodumene output volumes and export values.
“Similarly, for Australia’s nascent lithium hydroxide refining sector, more unanticipated delays or technical challenges associated with achieving required product grade, purity and consistency, could delay forecast output and exports.”
There’s a growing list of new processing operations here and offshore.
Processing operations in WA from the likes of Albemarle, IGO and Tianqi have already seen delays and overly ambitious start up targets have been consistently missed. Benchmark Minerals Intellgience has referred to this risk constantly in recent reports.
For example, the Quarterly notes that trial production at the Kwinana lithium refinery (51% Tianqi and 49% IGO) continued in the June quarter 2022.
“In May, the company announced the first consistent production of battery grade lithium hydroxide. The qualification process with offtake customers is expected to commence following the completion of independent verification.
“Construction of Train 2 has been partially completed, with the decision for the full recommencement of construction to be made in H2 2022. Each Train has a capacity of 24,000 tonnes a year. “
And at the Albemarle plant at Kemerton, near Greenbushes in the southwest of WA “Spodumene ore has now been introduced into the Kemerton hydroxide plant, and production expected to commence in the June quarter 2022.”
“Mechanical completion and commencement of production at Kemerton’s Stage 2 — which will produce an additional 25,000 tonnes a year — is targeted for the December quarter 2022.”
Pilbara Minerals’ joint venture with POSCO for the production of lithium hydroxide in South Korea was completed in April, with major construction scheduled for the June quarter 2022. The joint venture plans to source 315,000 tonnes a year of spodumene concentrate from the Pilgangoora operations, based on existing production capacity.
Construction of the Kwinana lithium hydroxide refinery progressed in H1 2022. The refinery will source spodumene from Mt Holland (Wesfarmers and SQM), and is forecast to start in 2024 — making 50,000 tonnes of lithium hydroxide a year, according to the Quarterly.
Liontown’s Kathleen Valley project near Kalgoorlie saw its final investment decision made in the last week after a big offtake deal with Ford. The project is expected to deliver 500,000 tonnes a year of spodumene concentrate in the first year, rising to about 700,000 tonnes a year by year 6.
Production is expected to commence in the second quarter of 2024. Offtakes are in place with tier-1 customers, including Tesla, for more than 50% of production over the first five years, LG and Ford after last week’s major contract announcement, plus $300 million of financing from the American car giant.
Site construction continues at Core Lithium’s Finniss Project near Darwin, and environmental approval for the BP33 underground mine was granted in May.
Commissioning of the plant and first production of lithium concentrate are scheduled for the end of this year. Offtake agreements have been made with Ganfeng and Yahua for 80% of the first 4 years of production, amounting to 75,000 tonnes of spodumene concentrate a year supplied to each company.
On the lithium ore production side of the business, the Quarterly says:
“Output from Mt Marion (owned 50% by Mineral Resources and 50% by Jiangxi Ganfeng Lithium Co. Limited) totalled 104,000 dry metric tonnes (dmt) of spodumene concentrate in the March quarter 2022, with an average realised price of US$1,952 a tonne (up about 70% on the December quarter).
“In April 2022, the joint venture announced a decision to lift spodumene production at Mt Marion from 450,000 to 600,000 tonnes per annum of mixed-grade concentrate, targeting an annual plant capacity of 900,000 tonnes by end 2022 (equal to 600,000 tonnes of 6% spodumene concentrate).
“Mineral Resources and Albemarle have announced an acceleration to the restart of the Wodgina mine. Wodgina Train 1 achieved production of first new spodumene concentrate in the June quarter 2022, following two years in care and maintenance. An accelerated resumption of operations at Train 2 is expected to see first production in July 2022.
“The three operational plants at Greenbushes operated by the Talison Joint Venture produced a combined total of 270,000 tonnes of spodumene
“Pilbara Minerals’ spodumene concentrate output in the March quarter 2022 was 81,431 dry metric tonnes (dmt), down 2.5% compared with the December quarter 2021 (83,476).
“March quarter 2022 production was affected by resourcing shortfalls, due to COVID-19 impacts and the tight labour market. With the Pilgan Plant Improvement Project now successfully commissioned, installed production capacity has been re- rated from 330 kilotonnes per annum (ktpa) to 360-380 ktpa. The staged restart of the Ngungaju Plant is underway, with load commissioning of the fines flotation circuit commencing in April.
“Once the Ngungaju Plant is fully operational, annual production is expected to be 540,000-580,000 dmt for the combined Pilgangoora operation. The final investment decision for an incremental 100,000 tonne capacity increase for the Pilgan plant was made in late June.
That will see Pilbara increase spodumene production at its Pilgangoora operation to 680,000 dry metric tonnes a year. The company will invest nearly $300 million in constructing a primary rejection circuit and crushing and ore sorting facility to increase production by 100,000 tonnes
The company also said it expects to have achieved a significant production increase for the June quarter to take total 2021-22 production to between 372,000 and 377,000 dmt of spodumene
It anticipates it will ship between 127,000 and 132,000 dmt for the June quarter which is more than double the shipments in the March quarter. That will see the company ship a total of 355,000 to 360,000 dmt for the year to June, sharply up on the 281,440 dmt sold in 20220-21.
The lithium business is of course global and there is a lot of new projects being floated, committed to and starting offshore.
The Quarterly has identified a lot of money with Benchmark Mineral Intelligence estimating that up to $US42 billion in new investment will be needed by 2030 to meet demand for lithium.(That’s in addition to the hundreds of billions to be spent on new EV plants, battery factories, charging networks, recycling operations and associated equipment.
“A number of expansions and new projects have been announced in recent months. Europe and North America are looking to reduce their dependency on Chinese imports and develop their own lithium production,” the Quarterly observes.
“The US Government is providing more than US$3 billion in grants to help process critical minerals — including lithium — to accelerate production of key battery metals.
“Canada has also earmarked up to C$3.8 billion to build a domestic critical metals supply chain.
Argentina, the world’s 4th biggest lithium exporter, has over 20 lithium projects at various stages of development, and is expecting to receive US$4.2 billion in investment over the next 5 years.
“Among these, Chinese mining firm Zijin Mining Group has announced it will construct a 20,000-tonne capacity lithium carbonate plant, with a goal of subsequently doubling production in the medium term.
“Albemarle has announced plans to restart exploration in the Salar de Antofalla, while Posco Holdings is investing US$830 million in a lithium hydroxide plant. In March, Rio Tinto completed the acquisition of the Rincon lithium project in Salta, which holds reserves of almost 2 million tonnes of LCE.
In Chile the state-owned copper mining firm Codelco has started exploration in the Salar de Maricunga, and drilling is expected to be completed in early 2023.
The Democratic Republic of Congo’s state-owned firm La Congolaise d’Exploitation Minière has announced it is launching a lithium exploration project in partnership with China’s Zijin Mining Group.
“Interest in recycling continues to rise, with recycling projects announced in many countries across Europe and other parts of the world. However, large scale operations will take time to be established. Stronger lithium prices, combined with increasing volumes of end-of-life electric vehicle batteries, should improve the economics of recycling projects,” the Quarterly points out.
