Tonnage alone isn't everything.Former geologist and experienced stockbroker Guy Le Page is director and responsible executive at Perth-based financial services provider RM Corporate Finance.
We can describe lithium like most mining ventures, and something that the Romans (and their predecessors) were well aware of and that is net revenue per tonne of ore.
Put more simply, revenue per tonne of rock mined, less costs.
While the concept is a simple one, I think it is lost on many investors and with a paucity of resource analysts to unpack company announcements it may be time for investors to start doing a little digging themselves before making the plunge.
What should investors look for in a hard rock lithium deposit?
With hard rock lithium deposits, typically hosted by pegmatites, I like to start with grade.
Higher-grade deposits would include the likes of Allkem’s (ASX:AKE) James Bay project containing around 40Mt @ 1.4% Li02.
These deposits can also host commercially extractable tin, tantalum, and niobium, like at Greenbushes (TLEA (Tianqi, IGO) JV 51% Albermarle, 49%).
Aside from grade I am also interested in the width and depth of the mineralisation which affects the amount of waste that needs to be removed to extract the ore.
The low cost Mount Cattlin spodumene mine in WA is an open-pit mine that rests on a flat-lying, 1.6km by 1km pegmatite ore body.
Near surface deposits like these with greater width and strike extent would be cheaper to mine that deeper narrower deposits which tend to require the removal of greater volumes of waste to extract the ore.
There’s more to a quality deposit than grade and size
As is the case with many mineral deposits, grade and width/strike extent is only a part of the story.
There are many other things to look out for, including identifying the presence of deleterious elements such as iron, phosphorus and fluorine that can lead to heavy penalties on spodumene concentrates.
As Andrew Scogings from CSA points out in an AIG Journal (N2016-001), omitting this type of information can be potentially misleading to investors as the presence of impurities will have a significant bearing on any concentrate price to be received.
Scogings highlights the case of a Mineral Resource Estimate of a pegmatite resource of 20Mt @ 1.5% Li2O containing 300,000 tonnes of Li2O.
At first glance this looks quite appealing, however there is no data on:
- What mineral species are present;
- Whether lithium is present in minerals that may be recovered using conventional flotation, gravity or magnetic separation technologies;
- The potential need for roasting;
- The likely purity of concentrate(s) that may be produced from mineralisation;
- Impurities such as iron or fluorine that may impact on industrial applications; nor
- Whether lithium can be extracted from the lithium minerals to produce acceptably pure lithium carbonate or other compounds.
There could also be a bonus of cassiterite, tantalite and other metal credits, however what minerals can be extracted, or are saleable is another matter.
Importantly Scogings goes on to point out that many companies reporting lithium resources are making assumptions on the application of standard processing methods that are assumed will be applicable to their deposits, without adequate metallurgical and process engineering testwork.
More technical stuff
There are many other technical matters Scogings highlights that could also affect recoveries (and therefore economics);
What minerals are present in the mineralised rock?
If there are a number of lithium minerals, can they be recovered and processed economically?
Are the minerals pure or are they interlocked with other mineral species (eg quartz) that could reduce concentrate purity? This often occurs with spodumene quartz intergrowths that replace petalite.
What processing methods can be applied e.g. gravity, floatation and cleaning to produce concentrates of acceptable size distribution and purity?
Will grind size affect the recovery of other minerals of interest, such as niobium and tantalum?
In the case of lepidolite or zinnwaldite, are there potentially deleterious elements (e.g. fluorine) that should be taken into consideration?
