Commodities, Features, Lithium

Powering through the battery boom


The outlook for lithium remains prospective for ASX-listed companies which are looking to tap into the clean energy revolution.

As countries across the globe adopt green technologies to decarbonise, electric vehicles (EVs) and energy storage solutions are at the forefront of innovation.

Determining the success of a clean energy future relies on a steady supply of rechargeable lithium-ion batteries, which in turn requires a stable supply of lithium.

Australian mining companies are well-positioned to deliver lithium products that are used in these batteries. The country has 4.7 million tonnes of lithium reserves, according to data from the US Geological Survey, behind only Chile’s 9.2 million tonnes.

Fitch Solutions’ global lithium outlook states that the world’s lithium production will triple between 2020 to 2030 to 1.5 million tonnes.

The report highlights that Australia will remain the world’s largest lithium producing country as output continues to grows at its mines.

“Australia is by far the world’s top producer of lithium, let alone in Asia, with an output of 40,0000 in 2020,” Fitch Solutions senior commodities analyst Sabrin Chowdhury tells Australian Resources & Investment.

“And we expect the country to maintain its dominant position in the global lithium market for years to come with rising production.

“Lithium companies in Australia will remain dominant players in the global lithium market, providing major end industries globally with the metal.”

While Tesla remains the dominant force for EV production, traditional automakers such as Volkswagen are catching up to gain a piece of market share.

This is also driving up demand for lithium right down the supply chain, with Fitch Solutions forecasting around 27 million EV sales by 2030, representing a huge spike from the 5.6 million units expected in 2021.

Fitch Solutions anticipates that battery supply will become more vital due to supply chain demand from automakers.

“We believe that the lithium market will be tight in the next five years, with supply chasing demand; and we forecast that both carbonate and hydroxide prices will trend higher,” Chowdhury says.

“The sharp acceleration in demand for lithium-ion batteries will outpace supply growth, keeping prices elevated.”

Lithium miners are also receiving strong shareholder interest, with Piedmont Lithium increasing its market capitalisation by 1732 per cent in the 2020-21 financial year to $1.6 billion.

Its market capitalisation ballooned following a sales agreement with Tesla in September 2020, where Piedmont agreed to supply 160,000 tonnes per annum of spodumene concentrate.

The synergies between EV manufacturers and mining are expected to rise as supply chains are fortified.

“There are large supply growth opportunities in a variety of countries, including Australia, Chile, Canada, United States, China, Germany, the Czech Republic and Serbia, among others,” Chowdhury says.

“There is also potential for frontier producers to emerge (Namibia and Congo DRC in Sub Saharan Africa, for example). We are already seeing a growing number of projects across many different regions, with higher lithium prices in the coming years to benefit these explorers of lithium.”

The shift of companies like IGO to mining clean energy materials supports the world’s battery boom.

Fitch Solutions has identified 124 lithium operations globally, which include sites still under development.

Australia’s national and state governments have given support to local lithium projects, with initiatives including the Australian Government’s Critical Minerals Facilitation Office, which launched in January 2020.

The office encourages investment in critical minerals companies and supports partnerships, research and funding for lithium miners.

It also aims to reveal prospective critical minerals hubs and precincts across Australia, which could uncover additional lithium deposits.

At this stage, the consultancy expects the current number of lithium projects will not be enough to meet growing demand.

“Government support for lithium projects is rising, as lithium is viewed as a strategic mineral essential to the green and tech transition. This will accelerate project completion and funding,” Chowdhury says.

In the short-term, Fitch expects lithium to continue its positive trend.

“We expect broad lithium prices to trend higher in 2021 and 2022, as accelerating demand for lithium-ion batteries and a tight upstream supply keep prices elevated,” Chowdhury says.

“We forecast Chinese lithium carbonate 99.5 per cent to average $US13,450 ($18,190) per tonne in 2021 and $US15,025 per tonne in 2022, and for Chinese lithium hydroxide monohydrate 56.5 per cent to average $US11,950 per tonne in 2021 and $US14,300 per tonne in 2022.

“In the longer term, lithium prices are likely to be impacted by green premiums due to heightened priority of sustainable lithium extraction techniques.

“A faster-than-anticipated advancement of battery recycling technology presents a risk to lithium prices by significantly expanding sustainable lithium supply.”

Plugging into WA’s lithium supply

With Australia home to some of the world’s largest lithium mines, the industry is gearing up for the looming demand spike.

IGO has this year refocussed its operations on clean energy metals, beginning with its joint venture (JV) agreement with Chinese mining and manufacturing company Tianqi Lithium, which was finalised in July.

The $US1.4 billion ($1.9 billion) transaction forms the Lithium HoldCo JV, which will focus on the Greenbushes lithium mine and Kwinana lithium hydroxide refinery in Western Australia.

IGO owns a 49 per cent interest in the JV, with Tianqi owning the remaining 51 per cent.

Greenbushes is considered the largest hard rock lithium mine in the world and is now operated through Lithium HoldCo and Albemarle Corporation.

The mine’s chemical grade plant two has started to ramp up, increasing production capacity to 1.34 million tonnes per annum.

Formation of the Tianqi JV was complemented by IGO’s divestment of an interest in the Tropicana gold operation, strengthening the company’s position as a clean energy metals miner and explorer.

IGO managing director and chief executive officer Peter Bradford says the company’s shift of focus will aid the battery boom.

“Right now, the (Tianqi joint venture) has got two assets in it and they’re both here in Western Australia, and importantly they’re world class, vertically integrated lithium assets,” Bradford, presenting at the 2021 Diggers & Dealers Mining Forum, explains.

“What that means is we’ve got a 25 per cent interest in the Greenbushes mine … it is the world’s lowest cost, highest grade hard rock lithium mine on the planet and we also get a 49 per cent interest in the Kwinana lithium hydroxide refinery, which is the first fully automated lithium hydroxide plant in the world.”

The Kwinana facility produced its first lithium hydroxide in August, with the focus now shifting to operating the first production train at the site, ramping up production to 24,000 tonnes per annum by the end of March 2022.

Kwinana is a key region for lithium processing, with Covalent Lithium receiving approval from the Western Australian Government to construct its own lithium refinery in the area during August. Covalent’s operation has been designed to produce 50,000 tonnes per annum of lithium hydroxide.

IGO and Tianqi’s share of spodumene concentrate at Greenbushes is currently taken to Tianqi’s processing plants in China.

“Going forward as we commission the Kwinana lithium hydroxide refinery, spodumene will start (being produced) here,” Bradford says.

“We would expect to be commissioning that second train in early 2024. That would give us an installed capacity of 48,000 tonnes per annum of battery-grade lithium hydroxide that goes to markets in South Korea and Europe.

“There’s the opportunity and there is the supply from Greenbushes to build train three and four, doubling production through to 96,000 tonne per annum.”

Bloomberg New Energy Finance data reveals lithium-ion battery demand will approach 3000 gigawatt hours per year by 2030, primarily driven by passenger EVs.

This would result in a 25 per cent annual growth rate, with Bradford anticipating the real results may be even higher.

“Each year, the analysts reprojected higher, and each year reality outperformed it,” Bradford says.

“We expect if you increase the number of lithium-ion batteries five times, generally the amount of metal you need goes up by five times as well.

“(We) produce nickel, copper, cobalt and lithium, and those four metals represent 55 per cent of the metals that go into a lithium-ion battery. And to my knowledge we’re the only company globally that produces that one-stop shop for EV battery metals.”

IGO and its JV partners plan to grow the capacity at Greenbushes to 2.5 million tonnes per annum of spodumene concentrate by 2027.

This includes a tailings retreatment plant that will add 30,000 tonnes of capacity, and a potential third and fourth concentrator being commissioned in 2024 and 2027, respectively.

“If you can imagine when all of that is up and running, we will have a 20-year reserve life and will have on top of that probably another five or seven years of resource life from the parallel Kapanga pit,” Bradford says.

“(EVs are) driving this shift in the outlook for lithium-ion battery demand and that’s all underpinned by passenger vehicles, but also includes commercial vehicles, bikes, buses and even the consumer electronics.”

With its foot in the door at Greenbushes, IGO joins other growing lithium plays in Western Australia, including Pilbara Minerals at the Pilgangoora lithium-tantalum operation.

Pilbara Minerals is aiming to produce between 460,000 and 510,000 tonnes of lithium spodumene concentrate per annum at Pilgangoora. The company has rapidly grown to become a major success story in the state since its first spodumene shipment in October 2018.

Spodumene is a major source of lithium.

Pilbara Minerals managing director and chief executive officer Ken Brinsden says Pilgangoora could easily become a one-million-tonne-per-annum operation in the future.

“I’ve no doubt that over time Pilgangoora will rival Greenbushes as the most important hard rock lithium operation globally,” Brinsden says.

Brinsden also believes the lithium market is facing a potential supply deficit, with too many chemical conversion plants compared with the amount of spodumene supply available.

“When I started in the lithium world we would go and knock on doors in China for the purpose of selling spodumene and there would be about five buyers – a handful basically,” Brinsden says. “In the intervening period, oodles of chemical capacity have been built in China.

“China has built too much chemical conversion capacity for the available spodumene supply. There is a genuine shortage of spodumene in the market and that means that the miners are going to attract a higher margin than the historical norm.

“The chemical conversion industry is now stuck, they’ve built a lot of capacity without reference to the underlying raw material supply base. As a result, the miners are going to attract more margin.”

Brinsden says Pilbara Minerals has managed to weather the storm of declining lithium prices in 2019 and 2020 to capitalise on the shortage.

In January, the company acquired Altura Lithium for $US175 million, then renamed the company’s assets as the Ngungaju plant and operations.

“It’s in care and maintenance today (August) but we’re now active in the restart at the Ngungaju operation and that’s going to be a really important part of our future,” Brinsdsen says.

“There’s 200,000 tonnes of unallocated spodumene supply and it’s not allocated in offtake. That is really, really important leverage in today’s market.”

Pilbara Minerals will ramp up Ngungaju’s capacity to 200,000 tonnes by the middle of 2022, complementing its existing Pilgan plant (originally the Pilgangoora plant).

In September, the company upped its resource by 39 per cent to 309 million tonnes after discovering pegmatite domains at Nugungaju.

Pilbara Minerals has also developed its battery material exchange (BMX) platform with Australian technology company GLX Digital to open a lithium spot market sales platform.

Since trials started in March, the platform has qualified 27 entities for the platform, which allows buyers to purchase spodumene concentrate through auctions, providing a separate sales channel for Pilbara Minerals’ unallocated spodumene outside of existing offtake agreements.

“Pilgangoora (has a) huge mineral endowment, massive resource, massive reserve and what that means is that we can contemplate how we’re going to respond to market conditions, and I’d like to think that we’re incredibly well placed,” Brinsden says.

“We are already the world’s largest independent lithium raw material supplier – that is we’re not vertically integrated with the chemical facility.”

Australia’s position in the lithium market is showing all the signs that the country is set to grow even further as a producer.

Backed by successful mines like Greenbushes and Pilgangoora, lithium mining is ready to meet growing demand from the chemical conversion industry and EV manufacturers.

Previous ArticleNext Article
Send this to a friend