Understanding lithium demand, page-1570

To keep the theme of this thread, please keep discussions around other aspects of AVZ in other threads, as I prefer this thread to be more about supply and demand (which is also applicable to other lithium stocks).

@pow4ade in the other thread you posted around UBS and its forecasts on lithium prices, and their view around lepidolite and its increased production (which dampens concentrate prices). Here is your post - Post #: 71664891

This issue also came up with GS forecasts in early December 2023 so I thought I would provide a perspective on lepidolite here. The content below is largely a duplication from posts I have made elsewhere that I am bringing back to this thread.,

1. Summary:
1. China's lepidolite is low grade.
2. Lepidolite has higher impurities than spodumene even when both resources grade the same in terms of Li20. As a result the lower grade plus plus higher impurities make processing costs much higher for lepidolite.
3. Recently it was stated in the press that 70% of concentrate destined for the Chinese chemical conversion process (i.e. into carbonate production) was rejected by chemical producers. I suspect that product would be lepidolite based IMO.

2. On Lepidolite
On lepidolite supply, this table is from this post and this table produced by GS has a lot of issues attached to it IMO as I posted in Post #: 71365275


IMO China has a long term outlook and doesn't care about losses in parts of the production chain, provided it can lock out its competitors. It may take a short term hit to achieve objectives, however, that is not sustainable, and I suspect you will find the rubbish UBS and GS has posted will not happen. Recovery rates are lower IMO in producing lepidolite concentrate and processing costs are higher in converting that to lithium chemicals IMO

IMO China would care about whether its products will have end customers - and to that end all I will say is were I to purchase an EV it certainly would not involve buying an EV where the lithium battery inputs are Chinese. Also, in time I see the Chinese people themselves will start asking more about environmental protection given the issues around mining and processing of lepidolite itself - processing costs for lepidolite would be even higher were more stringent environmental standards applied to it is my point, meaning the low grade lepidolite resources China has and processes wouldn't even be mined were Australian standards applied IMO IMO IMO.

Typical Li20 grades of lepidolite mines in China is less that 1% - and this makes processing costs and tones of lepidolite ore to produce concentrate significant. The so-called 'famous' Yichun lepidolite deposit in China, for example, has a Li20 content of around 0.9% Li20. As lepidolite has far greater impurities than spodumene this low grade and deleterious element makeup is what makes processing costs high - refer initial referred embedded posts in this post above.
Also refer:
Lithium extraction from hard rock lithium ores (spodumene, lepidolite, zinnwaldite, petalite): Technology, resources, environment and cost - ScienceDirect

3. Deleterious elements
For those interested:
1. Background reading on EV batteries and number of new lithium mines required -Post #:646119872. Spodumene formula -Spodumene Mineral Data (webmineral.com) As an aside spodumene can theoretically grade 8.03% Li20, but obviously spodumene resources generally grade anywhere between 1% Li20 to 3% Li20.
3. Lepidolite formula - see Lepidolite Mineral Data (webmineral.com)and Molecular weight of KLi2AlSi4O10F(OH) (convertunits.com)- it is obvious the chemical composition of lepidolite means you have more deleterious elements to deal with, hence why grade is the key and how easy it is to liberate the lithium from the lattice of the ore. As an aside, lepidolite can grade up to 7.7% Li20 (despite having higher deleterious elements makeup, but more often than not, especially in China, the grades are significantly lower than that)

The key deleterious elements that need removing when producing the concentrate feedstock required by converters to produce carbonate and/or hydroxide monohydrate are fluorine, iron and phosphorous. And lepidolite has a greater proportion of this in its chemical composition than spodumene. So if a lepidolite deposit grades say 1% and has far more deleterious elements than spodumene which grades say 1.4% then the costs of processing will be much higher (and you would suspect recovery rates would be lower for converting lepidolite to concentrate as well).

While the below does not go into differences in deleterious element makeup between spodumene and lepidolite it also provides other reasons why spodumene is preferred:
(13) Spodumene vs Lepidolite | LinkedIn

To repeat something earlier on this thread:

Example 1 - resource grade:
Li20 ore grade 1% - you will need to treat at 7.5 tonnes of ore, assuming an 80% recovery rate , to potentially get to 6% concentrate. But if say you have 1% Fe203 in the ore treated, which is a deleterious element, you also need to deal with the cumulative total of 7.5% F203 to get to a 0.8% F203 spec allowed in the chemical grade concentrate sold which comes at a cost and can impact your recovery rates.

Example 2 - resource grade:
Li20 ore grade 1.5% - you will need 5 tonnes of ore at a 80% recovery rate to produce 6% grade concentrate. Now if say you have 0.5% Fe203 in the ore, you also need to deal with the cumulative total of 2.5% Fe203 to get to the allowable 0.8% F203 spec in chemical grade applications.

(Note Fe203 is only one potential deleterious elements as indicated above btw)

Clearly one is better off under Example 2 than Example 1 above in terms of the ore a miner would like to have in their deposit. Moreso, the lower grade ore you have and higher deleterious elements means you might maximise your 'assumed profit' at possibly producing less than 6% grade concentrate as that is also where you can meet deleterious elements specs in the concentrate to be sold/produced better and have your best 'recovery' scenario." Now think of Example 1 above as lepidolite and Example 2 as spodumene - you can also play around with the numbers if you assume under example 2 a lower LiO2 content.

To conclude this section, ultimately lepidolite has higher processing costs than spodumene. Furthermore Chinese resources are low grade and that combined with the higher deleterious element makeup, when compared to spodumene, means higher processing costs.

4. LPD process
Lepidolite, like spodumene, can be a one stage process through to hydroxide theoretically, but lepidolite itself has a lot more impurities than spodumene (hence a previous post of mine on the subject again on this thread above) so it may be a lot more difficult to get to hydroxide than through using spodumene etc etc. I guess the proof in the pudding will be when a LPD builds a conversion plant for producing hydroxide on the same scale as you see typical conversion plants that accept spodumene concentrate as a feedstock.

These are pretty small plants that LPD is building for lepidolite, almost like a pilot plant I would say.

To illustrate, I found this article:Lepidico The article has this paragraph in it btw:

5,700 tpa of lithium hydroxide (and I presume it is lithium hydroxide monohydrate - grades 16.5% Li) is equivalent to 6% grade spodumene concentrate equivalent feedstock of 37,050 tonnes. If it is lithium hydroxide (which grades 29% Li been the output that becomes 29/16.5 * 37050 = 65,120 tonnes of equivalent spodumene feedstock (yes I realise it is lepidolite). In terms of LPD I felt they were producing lithium hydroxide monohydrate (which is your feedstock to EVs and what most prices quoted relate to) as against lithium hydroxide per se. So looks like quite a small plant.

5,700 tonnes (assuming it is monohydrate) converts to about 5000 tonnes LCE equivalent (LCE grade 18.8 Li) which converts to is equivalent to around 110,000 EVs (assuming battery size 50kWh). Conversion data here for those who may seek to duplicate this -Post #:37817451In other words current tech for converting lepidolite to concentrate is still in development stages.

At the end of the day facilities producing say 6,000 tonnes per annum in total lithium hydroxide monohydrate are not significant. The table below shows the LCE need for producing number of vehicles so you can see in a diagram what I am referring to which then translates to number of mines - with that data provided in my posts on this thread just above this one (look at the end columns as I did this graphic in a graphite stock). Current demand forecasts are around 4 - 5 LCE TWh for context to the below table in 2030.



5. Twitter post taken from Post #: 71358845 on 9/12/23:

I suspect that rejection in the above is lepidolite based IMO. I wouldn't be surprised that lepidolite was the input to what the Chinese converters are now rejecting. Most converters operate on the assumption of recovering 85% - 90% of the lithium concentrate in the 6% grade concentrate exported, when converting to say carbonate/hydroxide for example. Now, high deleterious impurities means that these impurities, if not removed in the 6% concentrate making process adequately to meet sales specs, stick at high enough concentrations in the 1050 degrees roasting process meaning they form clinkers and therefore in their removal you end up losing more lithium in downstraem converters, and this is why downstraem converters (those producing lithium carbonate of lithium hydroxide monohydrate) would penalise sales not at right specs for example and/or pay a premium for concentrate products with very good deleterious specifications. This article explains the concept of clinkers in more detail:
https://www.linkedin.com/pulse/all-chemical-grade-spodumene-concentrates-same-harman-grant/

So in summary, for converters to operate commercially they need to source feedstock that maximises their potential networth. When LCE prices are high they may use 'lesser quality input' material as the higher LCE price balances out lower recoveries. But that is not sustainable when LCE prices drop. As the lithium market matures I suspect lithium pricing will become less opaque and pricing will be set against quality. Only have to look at how spodumene producers like PLS were receiving prices above - if I recall - what were published Chinese prices at the time.

Just a few thoughts, but posted for debate and if people don't agree it will be good to get the alternate perspective. But please stay on topic to this thread been about supply and demand (and not anything to do with AVZ's current issues).

6. Recovery rates and spodumene concentrate

Not all spodumene deposits will maximise their profit potential by producing 6% grade concentrate (and the same goes for any other ore type that has lithium in it). Ultimately it is about cost and process (i.e. WOF or DMS or DMS/WOF), deleterious elements in the ore and how easily they are removed and obviously grade of the resource. For example, if you are producing 5.5% Li20 concentrate it implies that is your sweet spot whilst meeting the deleterious elements in the concentrate specs, because producing say 6% Li20 means your recovery rate falls further (whilst still meeting deleterious elements specifications) and results in you making less profit than if you sold 5.5% concentrate. Provided further details on this in a post on this thread - refer Post #: 69711272

All IMO IMO IMO

All the best for 2024, and time for a VB. Actually need more than one VB.

All IMO IMO IMO