PRICE rises seen over the past year and increasing demand has caused a rush in companies evaluating, expanding and re-activating the mining of lithium bearing assets. With the fourth largest lithium reserves in the world, Australia is positioned to remain a key supplier of spodumene, more commonly measured by its lithium carbonate equivalent (LCE).
Given the strong demand scenario emerging for battery technologies, especially electric vehicles, at least one of WA’s hard rock mining projects has attracted an unusual investor due to its role in the clean energy supply chain.
Pegmatite deposits are a primary source of lithium either as spodumene, lithiophyllite or usually from lepidolite. Spodumene is an important source of lithium for use in mobile phones, batteries and grid storage, among other products.
World production of lithium via spodumene equated to around 80,000 tonnes of LCE per annum in 2016, primarily from the Greenbushes pegmatite of Western Australia, and from some Chinese and Chilean sources. Total global demand was around 200,000 tonnes LCE, of which around 120,000 tonnes was derived from mining brine as opposed to hard rock mining.
In the current calendar year, it’s estimated that Australia’s output of LCE will be 115,000 tonnes, from three mines: Greenbushes mine owned by Talisan Lithium (shipping from Fremantle and Bunbury Ports); Mount Marion mine jointly owned by Neometals, MinRes and Jiangxi Ganfeng Lithium (shipping from Fremantle Port); and Mount Cattlin mine owned by Galaxy Resources (shipping from Esperance Port).
But there’s a new player on the block that intends to kickstart a spodumene market in the Pilbara region, which will be exported via the port at Port Hedland.
Ken Brinsden, managing director and CEO of Pilbara Minerals tells Lloyd’s List Australia, “Here in WA, and in our case the northern Pilbara, we have a fantastic endowment of spodumene. We are going to become one of the biggest, if not the biggest supplier of lithium globally, its’ really phenomenal”.
Roskill is forecasting a global demand in 2026 of one million tonnes of LCE. It believes the short-term (to 2021) demand growth will be met by existing sources, expansion and some new capacity. In the mid-term (to 2026), more investment is required to boost capacity.
The metals and minerals research group says demand is being driven by growth in lithium-ion batteries, which are being used more widely in automotive applications.
“This was largely driven by the electrification of buses in China, but also strong government drives to meet emissions targets through electric vehicles,” said the Roskill report.
“By 2026, the transportation market for Li-ion batteries could reach over 1TWh – a 40% increase. Production of energy storage systems is also predicted to grow at a similar rate, but could be faster if costs fall and the up-take of renewable energy rises,” says Roskill.
Mr Brinsden believes suppliers of high quality spodumene concentrate are in the best position to capitalise on the opportunities.
“Run-of-mine spodumene ore has a place in the market in the short-term but I’m not convinced that it has a long-term life in the market,” he said.
“The spodumene concentrates will be more cost effective in the long-term as the key supply solution.
Ken Brinsden, managing director and CEO of Pilbara Minerals
“It seems inevitable to me that WA will become the key exporter globally to support this amazing growth, and likely exceeding what’s ultimately exported from South America,” said Mr Brinsden.
While he won’t speculate on volumes of LCE being exported from WA, Mr Brinsden said in order of magnitude it will go “from hundreds of thousands of tonnes of spodumene to millions of tonnes”.
Pilbara Mineral’s Pilgangoora project alone is aiming to contribute around 45,000 tonnes of LCE per annum averaged over the 40-year life of the mine, with the potential to export well over 100,000 tonnes of LCE over time. Pilbara commenced construction on the project in January, and is currently targeting commissioning from March 2018 with initial shipment in the second quarter of next year.
“The concentrate will be trucked to the port at Port Hedland, we’d use road trains similar to those used in the Pilbara now and we’re proposing to use the old berth at the port on the eastern side of the harbour,” said Mr Brinsden.
New investor in mining
Mr Brinsden explained that battery technologies provide two key functions: “They provide stability to the overall network, are a useful co-commitment to renewables networks, as they provide the opportunity to timeshift the power when it is most needed, that is to store power and re-deploy it at the right time”.
“But, they will become a very important part of any power network,” he said.
The synergies between batteries and renewables were a key driver in the Australian Government’s Clean Energy Finance Corporation (CEFC) becoming a cornerstone investor in what is, for it, an unusual collaboration with Pilbara Minerals.
The lithium project has secured a US$15 million (about AU$20 million) investment from the CEFC as part of a US$100 million senior secured bond issued by Pilgangoora Operations (a wholly-owned subsidiary of Pilbara Minerals Limited).
The CEFC says it’s a prime example of how it can use its mandate to support the development of a strong clean energy supply chain to further enable Australia’s transition to a low carbon economy.
It has typically provided support for the development of clean energy directly, and projects in energy storage or that generate significant carbon offsets.
This is the first time the CEFC has invested in an extractive minerals project and its associate director of corporate & project finance Melanie Madders, told Lloyd’s List Australia, “The key determinant was in looking at the supply chain with the global demand for batteries and the supply of lithium. This project is extracting lithium and converting it to a concentrate to sell to lithium conversion companies.
“The CEFC has been operating now for five years and we’re evolving… we’ve traditionally invested in the end of the cycle but if we want to see more battery solutions then we’re going to need the supply of lithium.
“It’s within our mandate to invest in enabling technologies to support that… so I guess our thinking has evolved in terms of where we need to be investing to secure all the pieces of the puzzle to move towards a clean energy future,” she said.
Part of the CEFC’s mandate is to use “financial products and structures to address the barriers inhibiting investment”. So where did it identify constraints in the development of the Pilgangoora project?
Richard Lovell, executive director of corporate & project finance at CEFC explains, “Our investment is designed to act as a catalyst to allow a broader set of investors to engage and provide financing to the sector.
“In this instance, it’s quite an early stage of the project… we supported their approach and gave them feedback and a level of clarity around how we would behave. That gave them the ability to approach their broader debt raising with confidence,” he said.
When asked whether other lithium mining hopefuls could expect similar support, Mr Lovell said, “You’d have to identify specific potential choke points in a supply chain, based on a profile of demand, that could potentially become a constraint”.
Given that lithium makes up only around 3-4% of a battery, which contains a number of raw materials including nickel, copper and cobalt, there could be opportunities for other producers or refining technologies to tout their clean energy supply chain credentials.
However, Mr Lovell confirms there are no such projects currently within the CEFC’s sights.
From the print edition August 3, 2016