Lithium: The race is on

Growing demand for electric vehicles is driving the need for more of the metal.

With global demand for lithium at more than 32 thousand tonnes per annum, and estimated to increase by more than 10 per cent each year, juniors are rushing to gain a foothold in the market. But is it too early to predict its long term economic viability in Australia?

Once dubbed by Goldman Sachs as “the new gasoline”, lithium has cemented its place as a key component in rechargeable batteries amidst the push for more sustainable reusable energy sources.

In January this year, managing director of Lithium Australia Adrian Griffin said the demand will continue to grow due to shifting attitudes towards power, particularly in terms of renewable energy and the move to portable power.

“The types of power being generated in the future are going to require storage and lithium gives you the ability to store that power,” he said.

The push for greener car alternatives has added to lithium’s bouyancy, with the Economist pointing to ‘new energy’ vehicle sales in China nearly tripling to 171,000 in the first ten months of 2015, compared to the same time period in 2014.

Tesla Motors is one of the pioneers in the use of lithium-ion batteries, having recently altered their mission to produce 500,000 cars a year by 2020, to 2018 with each of them requiring batteries.

Other manufacturers have also adopted the use of lithium-ion batteries such as Toyota’s Prius hybrid.

Tesla’s chief technical officer J.B. Straubel, said, “There’s so much hype in the lithium market right now…people look at it as this magical element.”

The company’s US$5 billion battery factory in Nevada, named the Gigafactory, alone is set to produce more lithium-ion batteries than all other lithium battery factories in the world combined.

During an event for the Model 3, Tesla’s first mass market vehicle, CEO Elon Musk said, “In order to produce half a million cars a year, we would basically need to absorb the entire world’s lithium-ion production. That is why we are building the Gigafactory. This is a vital element.”

Add to that the Tesla Powerwall, a home battery storage unit, and even more lithium may potentially be required.

With this production of electric vehicles expected to grow, several junior companies are rushing to enter the lithium market. Thirty-five ASX listed companies are involved in lithium exploration or have development plans, with a third of these moving into the lithium sector within the last five months.

Lithium is produced either from lithium brines in salt lakes, or mineral rock deposits (spodumene). The world’s largest spodumene deposits are WA’s Greenbushes, approximately 250km south of Perth, whereas the largest salt brines are found in South America; particularly Chile and Bolivia.

Juniors leading the pack

Pioneer Resources also invest in lithium, with a number of projects including the Mavis, Pioneer Dome, and Phillips River. At the RIU Resources Round Up in Sydney in May, managing director of Pioneer resources David Crook told Australian Mining that Phillips River Project had the highest lithium value from a stream sediment sample in Australia, according a report by Geosciences Australia.

In April this year, the company entered an Option Agreement to acquire 90 per cent interest in the Donnelly Lithium Project in WA’s Greenbushes mineral field, which involves two exploration licenses over an area of approximately 220 square kilometres.

Similarly, Altura Mining completed a Binding Offtake Agreement (BOA) with Chinese based Lionenergy for the Pilgangoora Lithium Project in the Pilbara. The agreement stipulated that Lionenergy will take 100,000 tonnes of six per cent Li2O grade spodumene concentrate annually for the next five years.

Adelaide Resources was also granted an exploration license over a potential lithium brine in South Australia. Not only does it hold a license for another potential brine in the Eyre Peninsula, it also recently put in an application for hard rock lithium opportunities at Northern Territory’s Davenport Ranges.

Overseas exploration ventures are also sought, with Lithium Australia, and Alix Resources, beginning exploration in Sonora, Mexico, in the hope of discovering lithium.

But so far in Australia only Galaxy Resources is producing lithium  at its Mt Cattlin mine.

Even gold companies, which are seeing a revival of the metal, considering exploration, as managing director of Kidman Resources, Martin Donohue said, while Kidman remains primarily in the gold sector, it is testing old drill sites for potential lithium pegmatites.

“We hadn’t paid any attention to the lithium potential of our ground because we were so focused on gold but in the last month we have had at least four separate approaches from companies enquiring as to whether we would sell our lithium rights and that sort of made us sit down as a board and say… ‘perhaps we had best take a look ourselves at what we might unknowingly be sitting on’,” he said.

Iggy Tan, managing director of Altech Chemicals and former managing director of Galaxy Resources – and central to starting up Mt Cattlin’s mine – told Australian Mining it is not surprising that several companies are exploring, however not all of them will become producers.

“Not all projects are gonna go ahead, it depends on grade and how well they can develop processing in a short period of time,” he said.

One company however, has increased their market share significantly with their production of lithium. The Olaroz lithium facility (Salar de Olaroz) in Argentina, a joint venture by Australian firm Orocobre and Toyota Tsusho Corporation, was the first new lithium brine built in twenty years. In the last six months, its share price has increased by 133 per cent, getting it closer to its maximum output production rate of 17,500 tonnes per annum. In the first quarter of 2016, the mine produced 2332 tonnes of lithium carbonate, with the second quarter expected to produce 3000 tonnes.

Although continued rising demand is acting as the foundation for a renewed lithium market, it remains to be seen if this early flurry of exploration will pay, both literal and figurative, dividends.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.