Lithium King Bets Big on Demand Shift With Australia Mine Deal

By Laura Millan Lombrana

22 November 2018, 00:55 GMT+10 Updated on 22 November 2018, 12:50 GMT+10

 

·       Albemarle agrees to buy 50 percent of agiant lithium project

 

·       Wodgina lithium deposit has a mine lifeof over 30 years

 

Albemarle Corp. agreed to pay $1.15 billion for a stake in a giant lithium mine in Australia, guaranteeing the biggest producer of the mineral greater access to a more refined form of the raw material that’s increasingly being used in electric-car batteries.

The Charlotte, North Carolina-based company willtake a 50 percent stake in a potential joint venture with Mineral ResourcesLtd. that will own and operate the Wodgina hard-rock lithium deposit with amine life of over three decades. Under the deal, Albemarle will manage themarketing and sales of lithium hydroxide, which fetches a higher price thanlithium carbonate. Mineral Resources rose as much as 33 percent, the most sinceJuly 2006, in Sydney trading Thursday.

Albemarle plans to expand output in Australia to gain from rising demand for lithium hydroxide, also known as spodumene. The mineral works better with cathodes containing higher levels of nickel, helping electric cars go further on a single charge. The deal signals the company’s swift reaction toward shifting demand that has previously been concentrated mostly on lithium carbonate.

"It makes sense for the companyto diversify its spodumene assets to ensure growth in their hydroxide supplychain," Andrew Miller, a senior analyst at Benchmark Mineral Intelligencesaid by email. "Those producing hydroxide from spodumene will only becompetitive on cost if they integrate raw material and chemical production, andthis is a position Albemarle is clearly trying to strengthen through theMineral Resources JV."

Total demand for lithium is expected to almosttriple through 2025 as manufacturers such as Tesla Inc. ramp up electricvehicle production.

Halting a Project

Albemarleannounced earlier this month it was halting a project to increase output capacity in its operations in Chile beyond 2021. That project would have produced lithium carbonate. Instead, the company will focus on expanding its Kemerton plant in Western Australia, which processes hard rock from the Greenbushes mine to produce lithium hydroxide.

Lithium hydroxide is produced mainlyfrom hard-rock mines, while the more abundant but less refined lithiumcarbonate is extracted from salty brine sitting underneath salt flats, mostlyin South America.

"We’reseeing a significant acceleration in demand of lithium hydroxide and so we needto address that," Chief Executive Officer Luke Kissam told analysts at thethird quarter earnings conference call earlier this month. " We’ve always said that we are going to invest capital to meet the needs of our customers. It’s clear we need to focus on lithium hydroxide, have the focus there."

Thedeal with Mineral Resources came after the Chilean Nuclear Energy Commission,known as CCHEN, rejected Albemarle’s application for a license required for thecompany to expand its operations in the country beyond 2021. Another Chileanagency, Corfo, said it will take a separate dispute with the company to the International Chamber of Commerce for arbitration.

Albemarle’s decision to join the Wodgina mineproject “may also be a way of hedging their exposure to Chileanregulators," Miller said.

https://www.bloomberg.com/news/articles/2018-11-21/lithium-king-to-pay-1-15-billion-for-australian-mine-stake