Commodities, Features, Lithium

Lithium hydroxide: Australia’s way of the future

lithium hydroxide Australia

PwC expects Australia to make up 10 per cent of global lithium hydroxide capacity in a few years. We take a closer look at this growing industry.

While Australia is the world’s biggest producing country of lithium raw materials, it only exports a small amount of refined lithium.

China dominates the global lithium refining industry, producing close to 60 per cent of the world’s lithium chemicals and 80 per cent of the world’s lithium hydroxide, according to International Energy Agency (IEA) data. 

Lithium hydroxide is a key ingredient in the lithium-ion batteries used in electric vehicles (EVs).

But the winds are changing, and Australia is beginning to complement its global-leading spodumene concentrate production with a means to process it.

The Morrison Government supported the onshore lithium refining industry through its $1.3 billion Modern Manufacturing Initiative (MMI).

This supported ventures such as the ‘midstream’ lithium project being developed by Pilbara Minerals and Calix, where lithium salts will be produced via an innovative refining process.

If successfully developed and proven, the new process could mean spodumene concentrate is replaced by a higher-grade lithium salts product.

Pilbara Minerals and Calix advanced their partnership from a memorandum of understanding (MoU) to a joint venture agreement in November last year, paving the way for a final investment decision (FID) to be made on a demonstration plant in the June quarter of 2023.

Covalent Lithium’s Mt Holland project in WA, aiming for first production in the first half of 2025, aims to produce an initial 45,000 tonnes per annum of lithium hydroxide.

Liontown Resources is also investigating the potential for an integrated refinery at its Kathleen Valley lithium project in WA. This would see spodumene upgraded to lithium hydroxide monohydrate, another form of refined lithium.

PwC sees a strong future for Australia’s lithium refining industry.

Australia’s first refined lithium was produced in the form of lithium hydroxide from the Kwinana plant in WA in May 2022. Kwinana is shared in a joint venture (JV) between Tianqi Lithium Corporation (51 per cent) and IGO (49 per cent).

The JV partners will look to ramp up Kwinana to a nameplate production capacity of 24,000 tonnes per annum.

Then there’s the Kemerton JV between Albemarle Corporation (60 per cent) and Mineral Resources (40 per cent), which has involved the construction of the Kemerton lithium hydroxide processing facility in Western Australia.

Kemerton achieved first production in mid-2022 and is currently transitioning through commissioning for Trains 1 and 2 of the operation as it looks to achieve a nameplate production capacity of 50,000 tonnes per annum (tpa) of lithium hydroxide.

Albemarle is set to make an FID on Kemerton’s Trains 3 and 4 this year, including plans for construction of a $100-million-plus accommodation precinct to support construction and increased operations staff over the long term.

This could pave the way for Kemerton’s expansion to 100,000tpa, with over 1000 new jobs in construction.

PricewaterhouseCoopers (PwC) Australia partner Marc Upcroft said Australia’s increasing lithium refining presence was significant.

“In a few years, we’ll make up 10 per cent of global (lithium) hydroxide capacity and double that before the end of the decade,” he told Australian Resources & Investment. “That’s quite meaningful in a short period of time.

“At the other end, you’ve got some people, including government, suggesting we should go the whole way, we should go all the way down to lithium-ion batteries, we should go all the way to building our own EVs on the back of the lithium that’s in the ground. 

“Some of that feels like it’s a big challenge but I guess my perspective on this is that each time we take one step forward in that supply chain and that value chain, that then gives us the right to look at the next opportunity.

“And I think if we do that, we’ll find ourselves progressively moving along. As to whether we’ll get to batteries and EVs, I’m not so sure in that specialised area, but certainly when you think of vanadium flow batteries, for example, that should be a sector we should be able to easily jump to.”

Australia has an emerging lithium-ion battery manufacturing industry. Energy Renaissance began manufacturing lithium-ion batteries in October 2021, using imported lithium-ion battery cells.

Energy Renaissance has been building a battery manufacturing gigafactory, called ‘Renaissance One’, in Tomago, New South Wales, which is set to have an initial battery production capacity of 66MWh (megawatt-hours).

The Imperium3 plant in Townsville, Queensland is another proposed Australian lithium-ion battery manufacturing facility. ASX-listed Magnis Energy Technologies owns a 33 per cent stake in the plant. 

The project was initially supported by a $3.1 million Queensland Government grant in 2020 where a feasibility study was completed, but there had been no recent updates on the plant’s progress when this article was written in early January.

There are mixed views on the viability of a local renewable battery manufacturing industry within the wider mining fraternity. While Chris Ellison’s Mineral Resources and Andrew Forrest’s Wyloo Metals have endorsed the idea, Wesfarmers, which jointly owns the Mt Holland lithium project in WA with SQM, has been less supportive.

Wesfarmers managing director of chemicals, energy and fertilisers (WesCEF) Ian Hansen told the Australian Financial Review in an August 2022 feature that battery manufacturing in Australia is “a lot more challenging” given there is no local EV manufacturing.

“The more we learn about the battery sector, the more we see the battery manufacturers having very close relationships with the individual car manufacturers, the OEMs (original equipment manufacturers) because the batteries really dictate the car’s performance,” Hansen said.

“The design of the batteries, the nuance of batteries – both the chemistry and packaging – reflect the performance of the car and so individual OEMs want to have their battery suppliers very close to them, so they can rapidly enhance, modify, change the battery design or packaging design to optimise the vehicle design.

“I think the prospect of a battery manufacturing sector in Australia is a little bit more challenging than us getting involved in further minerals opportunities.”

Australia is not only trying its hand at lithium refining but also renewable battery manufacturing.

Wyloo chief executive officer Luca Giacovazzi has been more optimistic.

“WA has all the ingredients we need to become a battery producer – we have the metals, the mining expertise, nearby end markets and, by leveraging our abundant renewable energy potential, we could produce some of the most ESG friendly batteries in the world,” he told the Australian Financial Review in an August 2022 feature.

Wyloo recently entered into an agreement with IGO to jointly evaluate the viability of developing a downstream nickel processing facility in Australia. The WA-based company also has investments in Australian mining companies, Mincor Resources, Hastings Technology Metals and Regis Resources.

No matter the scale of Australia’s lithium refining and battery manufacturing industries, there won’t be a shortage of future demand for these offerings.

In order to achieve global decarbonisation, the world is going to need more mines, and more processing and manufacturing capacity to ensure renewable technologies are developed at the desired speed and scale.

Lithium is just one of the metals key to a net-zero reality, with nickel, copper, cobalt, vanadium and rare earths just a few other crucial commodities.

Most of these make up the ‘critical minerals’ that increasingly permeate the mining vernacular. 

PwC’s 2021 ‘Aussie Mine’ report was the firm’s first signal that critical minerals were an important thematic for the local mining industry. When PwC prepared the 2022 Aussie Mine report, the narrative had accelerated.

“The last Aussie Mine report was our first signal that critical minerals was that important space … to watch,” Upcroft said. “A year on, the big change is now we’ve got governments, financiers, mining companies, customers, and to some extent the community all really switched on to what is happening in amongst all of that.

“That’s a really significant change from a year before. It’s a starting point and provides a platform to be able to start to think differently in relation to what can we do, because fundamentally, without really accelerating things from here in terms of exploration, right through to supply of critical minerals, decarbonisation doesn’t happen on the same timeframe that we want it to.”

The 2022 Aussie Mine report reiterates what PwC calls ‘mission critical’, where Australia has the opportunity to take the critical minerals opportunity with both hands, with nationwide economic benefits, jobs and skills, and a sustainable, climate-friendly society the long-term possibilities.

Upcroft said given Australia’s strong critical minerals endowment and stable geopolitics, there is a “significant advantage” to capitalising on critical minerals opportunities.

But to realise these opportunities, Australia is going to have to “think differently”. When asked whether there were any levers Australia can anchor to do this, Upcroft said “I don’t think it’s which lever, I think it’s all of the levers”.

“Some of the things we’ve thrown out there for the industry and government to think about include what can be done at the front end in terms of incentivising exploration for the right minerals,” he said. 

“Not necessarily exploration of everything, but for those minerals where we can see that we’ve got an advantage or where the shortage is coming fast. Or it might even be an industry situation where they can’t necessarily fund that riskier front-end process well enough.”

Upcroft said it could also be worthwhile introducing mechanisms to support market stabilisation.

“One of the ideas we had is should there be, for some minerals, strategic reserves of minerals to help stabilise the market, to help those companies that have a great idea and a great project, but the financing sector is not quite ready to throw money behind a company in an industry where you’ve got really high volatility in prices,” he said.

“So could there be some mechanisms there to help stabilise markets, to help the financing and investment markets get over some of their challenges a little easier.”

An example of this in action is Western Australia’s domestic gas policy, where liquefied natural gas (LNG) projects must reserve 15 per cent of LNG production from each LNG export project for domestic use.

This has kept WA gas prices down amid a recent energy crisis, while gas prices have soared on the east coast where a less explicit “gas trigger” is in place at the whim of the Minister of Resources.

It is an exciting time for Australia’s lithium industry, where a globally-renowned mining sector is complemented by growing refining capabilities. 

Lithium is the poster child for Australia’s critical minerals aspirations, and its continued evolution in Australia could be a source of inspiration for other battery metals. 

This feature appeared in the February issue of Australian Resources & Investment.

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