Western Australia is facing fierce competition in its ambition to become the world leader in lithium, with the industry’s biggest players ramping up processing and mining operations across the globe.
Demand for lithium – a key ingredient in the rechargeable batteries used in electric vehicles and consumer electronics – is expected to more than quadruple by 2025, sparking major investment across lithium deposits.
Along with investment in new mining operations, the world’s biggest lithium processing groups are also spending heavily on conversion facilities, with the metal requiring significant chemical conversion to become lithium carbonate or lithium hydroxide, which is then used to manufacture batteries.
United States-based Albemarle is the worldwide leader in lithium conversion, with a market share of about 18 per cent, according to commodities research house CRU.
Albemarle, an industrial chemicals giant, is followed by Jianxi Ganfeng Lithium Co, on 17 per cent; Chilean group Sociedad Quimica Y Minera (SQM) 14 per cent; and Tianqi Lithium 12 per cent.
Of the remaining 39 per cent, US-based FMC Corporation holds the largest market share at 5 per cent.
However, there are more than 20 lithium capacity expansion and new construction projects either under way or being planned across the globe.
A wave of new processing investment in WA, worth more than $2.5 billion, promises to shake up the global lithium order, as miners move to add value to the largest resources of hard rock lithium in the world.
Tianqi is building what will become one of the world’s biggest lithium processing operations in Kwinana, an industrial suburb in the south of WA’s capital, Perth.
Shenzhen-listed Tianqi has a market capitalisation of around $US9.5 billion ($12.8 billion) and is planning to raise at least $US1 billion from a float on the Hong Kong Stock Exchange later this year, with part of the proceeds expected to be used to finance its investments.
The company is investing heavily to challenge Albemarle as the dominant player in conversion, including a proposed $US4.3 billion acquisition of a 24 per cent stake in SQM, which is awaiting approval from Chile’s anti-trust regulator.
If the deal goes ahead, Tianqi would secure three seats on SQM’s eight-member board.
In Kwinana, Tianqi is developing a $700 million lithium hydroxide plant, which will produce 48,000 tonnes per year of battery-grade lithium hydroxide from spodumene concentrate mined at the company’s Greenbushes joint venture, 250 kilometres south of the plant.
With two phases of construction already approved, Tianqi is also considering the potential of adding a third stage to the Kwinana plant.
In addition, Tianqi and its joint venture partner, Albemarle, recently approved a third phase of expansion at the Greenbushes mine, the world’s largest hard rock lithium deposit.
The companies will invest $516 million at Greenbushes, increasing the mine’s production capacity to 1.8 million tonnes of spodumene concentrate annually by 2021.
Albemarle is also not sitting idly in its processing operations, planning a $560 million lithium hydroxide plant near Bunbury, which will have a capacity of up to 100,000tpa.
Near Tianqi’s Kwinana operations, SQM is partnering with ASX-listed Kidman Resources on a plan to build a 37,000tpa lithium carbonate conversion plant, which will convert ore from the companies’ Mt Holland joint venture near Southern Cross in WA’s Yilgarn region.
A capital cost for the facility will be released with a feasibility study later this year.
Diversified ASX-listed mining group Mineral Resources is also spending big on lithium processing, revealing last month its Wodgina operation in the north of WA could more than double its underlying earnings.
Mineral Resources has forecast capital expenditure of $US600 million to build a pair of lithium hydroxide processing facilities at its Wodgina operation, which would each have an output of 28,000tpa.
The company, which has put a 49 per cent stake in the Wodgina mine on the market, said the operation would deliver $600 million in annual earnings before interest taxes, depreciation and amortisation.
Mineral Resources achieved EBITDA of $464 million in the 2016-17 financial year.
Junior lithium miner Neometals is another WA-based ASX-listed player with processing ambitions.
In June, Neometals, which has also developed a lithium battery recycling process, entered an option agreement with the City of Kalgoorlie-Boulder to sub-lease a plot of industrial land where it plans to build a lithium hydroxide refining facility.
Neometals is planning to establish a 10,000tpa refining facility to upgrade spodumene concentrate from the Mount Marion lithium mine, the second largest hard rock deposit worldwide.
The company operates the mine as a minority joint venture partner, with Ganfeng Lithium and Mineral Resources each holding a 43.1 per cent stake, and Neometals 13.8 per cent.
A final investment decision on the processing facility is expected to be made midway through next year.
Collectively, the investments have injected new hope into WA’s economy, which is beginning to show signs of emerging from its prolonged downturn of resources sector investment.
WA Department of Mines, Industry Regulation and Safety director general David Smith said developing the state’s lithium processing capacity was a key priority of the WA government.
The government committed $5.5 million in its recent state budget to boost the Minerals Institute of WA’s efforts to develop and manufacture battery metals.
A Lithium and Energy Materials Taskforce has also been established to further progress the industry.
“This positioning of the state across the value chain will further diversify Western Australia’s economy,” Mr Smith told Australia China Business Review.
“This is critical in creating long-term jobs and maximising benefits to the local community.”
Mr Smith said significant analysis was needed to properly understand the current opportunities and challenges for WA in the battery materials value chain, including markets such as those in China.
He said WA miners and processors could potentially exploit specific competitive advantages over brine producers in meeting the rapidly rising demand for lithium, with short lead times and quick startups of operations compared with their counterparts.
“In terms of lithium mining and processing opportunities, WA has the largest resources of pegmatite-hosted (hard rock) lithium in the world and it’s quickly developing its lithium ore supplies and downstream processing infrastructure,” Mr Smith said.
“WA’s development of strategic industrial areas designed to support the development of downstream process activities means the state is becoming an increasingly affordable option for downstream processing.
“These projects are taking advantage of low-cost power, natural gas, access to chemical supplies and proximity to infrastructure and port facilities.”
While WA investment is soaring, expansion plans are also advancing in the market leader for lithium conversion – China.
Tianqi, which operates two 17,000tpa lithium carbonate producing facilities in Zhangjiagang, Jiangsu Province, and Suining City, Sichuan Province, is in the planning phase for two additional conversion plants.
One of the plants will be located in Suining City’s Anju district, where Tianqi signed an investment agreement with the local government to invest ¥1.5 billion ($300 million) to build a new 20,000tpa lithium carbonate processing facility.
Tianqi’s Australian representatives declined to provide details of the company’s second new China plant.
At the same time that Tianqi is expanding, Ganfeng Lithium is also assessing its opportunities after filing for an initial public offering on the Hong Kong Stock Exchange that could raise up to $US1.5 billion.
Ganfeng, the world’s third largest lithium compounds producer, has interests in six lithium operations worldwide, in Australia, Argentina, Ireland and China.
Once its IPO is complete, Ganfeng is expected to not only be highly acquisitive, but also significantly expansive, as it increases its capacity in line with growing demand.
Another major Chinese player, Shandong RuiFu Lithium Co, which has offtake agreements in place with Australian miners Pilbara Minerals, Core Exploration and Galaxy Resources, is midway through an expansion of its Taian, Shandong Province, lithium carbonate production facility.
Shandong Ruifu has a current production capacity of more than 5,000tpa of lithium carbonate, while it is expanding that plant to more than 20,000tpa.
Work is also progressing on a 10,000tpa lithium hydroxide plant.
In South America, SQM is investing $US525 million to boost its production capacity through 2021.
The company currently has annual lithium carbonate production capacity of 48,000 tonnes, with expansion plans under way to reach 100,000tpa by next year.
SQM is also awaiting board approval for the next phase of expansion at its lithium carbonate plant, located in Chile’s Salar de Atacama region, which would boost its production capacity to as much as 180,000tpa.
FMC Corporation is delivering a similar investment in South America, at its Salar del Hombre Muerto lithium mining and processing operation in Argentina’s Catamarca Province.
FMC produces around 21,000tpa of lithium carbonate equivalent at its Argentina plant, with a $US300 million expansion plan to double its production by next year announced late last year.
Also in Argentina, miner and processor Orocobre, which is listed on the ASX and TSX, has begun early works on the second phase of its Olaroz lithium carbonate facility, which will increase its capacity by 25,000tpa to 42,500tpa for a $340 million spend.
Orocobre is also advancing plans to build a 10,000tpa lithium hydroxide facility in Japan, in joint venture with Toyota Tshuho Corporation.
Another ASX-listed miner, Argosy Minerals, recently produced its first batch of lithium carbonate from its Rincon project in Argentina’s Salta province.
The first stage of Argosy’s plant will produce 500tpa of lithium carbonate equivalent to demonstrate the company’s processing capabilities, with a second stage to produce up to 1,500tpa being planned.
In North America, US-focused miners are also in on the investment bonanza.
The US was home to the world’s largest lithium industry until the late 1990s, until Chilean miners launched brine pool extraction operations at a lower cost than the US hard rock mines.
Last year, the US produced just 2 per cent of the world’s lithium supply, but the country is home to around 13 per cent of the world’s lithium resources, according to the US Geological Survey.
Lithium operators in the US say the political stability of the country and its 21 per cent tax rate are operational advantages, while there is also a critical shortage of lithium in the US domestic market.
In response to growing demand, Albemarle is assessing re-opening a North Carolina mine it shut down about 25 years ago.
Lithium Americas Corp is also moving on the lithium boom, developing one of the world’s five largest deposits in Nevada.
However, LAC, which is in a partnership with SQM on a lithium brine project in Argentina, has to develop a new extraction technique for its Nevada deposit, as no lithium-from-clay operations exist globally.
Another lithium hopeful, Piedmont Lithium, listed on the Nasdaq and ASX, is developing a vertically integrated lithium mining and processing operation in the Carolina Tin-Spodumene Belt, located about 40km west of Charlotte, North Carolina.
Piedmont recently purchased a plot of land in nearby Kings Mountain, where it plans to construct a lithium hydroxide plant to convert spodumene concentrate from its proposed mine to battery-grade lithium chemicals.
The company expects to complete a pre-feasibility study for the project by early next year, with a scoping study indicating the operation could produce 22,700tpa of lithium hydroxide.
Despite the significant competition, and growing international investment, WA mines chief Mr Smith still held high hopes WA was set to become the world’s leading lithium-processing province.
“Regions like China and Chile have traditionally had cost advantages over Australia’s hard rock deposits as the result of lower energy and capital costs associated with production from brine-based lithium sources,” Mr Smith told Australia China Business Review.
“However, these areas are becoming increasingly under threat from frequent extreme weather events and an increasing focus by governments and environmental groups on the environmental consequences of mining brine lakes.
“WA has a transparent, democratic and free market system of governance, which offers a low sovereign risk to potential investors.
“This secure investment environment underpins the state’s position as a world leader in the mining and petroleum sectors.”