Lithium - warnings over lithium surge - thank's to dajarra4
Warnings over lithium surge. 27/8/09
Simon Moores / www.indmin.com
As the number of companies developing lithium deposits worldwide rockets, and with it being increasingly difficult to forecast future demand, the industry could be going headfirst into oversupply. One of the key reasons for IM establishing Lithium Supply & Markets 2009 at the beginning of 2009 was to cut through the hype surrounding lithium (Li) and get to the crux of demand from electric automobiles.
At the time, the industry had four active Li producers and a handful of players developing new resources such as: Western Lithium Corp. (hectorite, USA), Canada Lithium Corp. (spodumene/brine, Canada), Nordic Mining ASA (spodumene, Norway), Rio Tinto Exploration (jadarite, Serbia), and China (predominately brine).
In the last six months Li exploration has gone into overdrive. At a rate never seen before, new companies exploring Li claims across the globe have emerged. Hotspots of activity have appeared in the Canadian provinces of Alberta and Ontario (and to some extent Quebec), and in Nevada in the USA. Steady activity has also been seen at the brines of Bolivia and Argentina, and spodumene resources of Western Australia.
“There is practically a new company on the scene everyday, today its Reward Minerals with a Li-bearing salar in Western Australia,” explained Robert Baylis, Senior Analyst at UK based Roskill Information Services. “Anyone who buys a Li claim now just sits back and watches their share price rise, even though their purchase is usually just a large mass of spodumene in the ground,” added Baylis. There is certainly a bandwagon feeling about the Li industry at present. It has undoubtedly become, together with rare-earths, the industrial mineral of focus for investment banks and exploration companies.
Leading the developing pack.
Australia’s Galaxy Resources Ltd, one of the more promising Li developers, this week secured key funding for its operation which mine spodumene from Mt Cattlin in south-west Australia and process the concentrate into lithium carbonate (Li2CO3) in Shanghai (IM 25 August 2009: Galaxy lithium secures funding).
Baylis commented: “Galaxy have secured some funding from the Chinese and look to have the best potential out of the lithium developers, but my concern is this: SQM only utilised 70% of its capacity last year (after its expansion to 40,000 tpa lithium carbonate equivalent - LCE) and the Chinese mineral converters were operating even lower than that at 50%.”
It is true that at present the Li industry is in oversupply. Demand from all of its present end markets – ceramics, glass, batteries, pharmaceuticals, grease – is down. And while the interest in new resources is driven by electric car interest, the need for additional tonnages are not expected in the next three years.
“Do the math. From SQM alone you have 12,000 tpa LCE of potential spare production capacity, this is enough for 500,000+ 24kWh Nissan “Leaf” batteries (at 21kg LCE per unit),” Baylis told IM. “That is without the spare mineral conversion capacity in China and doesn’t even touch on brine production in Tibet and Qinghai which could enter the supply equation more strongly in the short-term,” he added.
Australian action.
Reward Minerals Ltd, as mentioned by Baylis, has submitted an application to develop Australia’s first Li brine resource at Lake Dumbleyung in the South West Mineral Field of Western Australia. Present testing at the site, originally for potash extraction, shows 530mg/l of Li – “the equivalent of 5.1kg of lithium carbonate per cubic metre”, according to Reward Minerals.
Reed Resources Ltd has also made waves in the past week when it purchased one of the remaining well known spodumene tenements in Western Australia, the 20,000 tonne Mt Marion resource (IM 26 August 2009: Reed invests in Mt Marion lithium). Reed became aware of the demand for Li during the course of its research into the demand for vanadium – as Reed owns the Barrambie Vanadium Project in Western Australia, one of the country’s highest grade reserves.
Simon Hicks from Reed’s investor relations division told IM: “The use of vanadium to enhance the energy density of lithium-ion batteries is being researched by a number of labs around the world. During the course of our research, it became evident that Li demand could skyrocket as its use in batteries grows – particularly for electric cars.”
Australia has two other major pre-production Li projects. One is located in Grants Gully-Buchanan’s Creek, Queensland (Queensland Gold & Minerals Ltd). The other one is Australia Galaxy Resources Ltd’s Mt Cattlin, in Western Australia. Of course, it is also home to the world’s biggest spodumene Li producer, Talison Minerals Pty Ltd.
The competition in the Li marketplace in Australia is something Reed has taken positives from. Hicks said: “Initially, they have assisted us by creating awareness in the Australian investment community of the market potential for lithium.”
Rio Tinto & New World.
It was revealed by IM today that Rio Tinto Plc is now looking to a 2015 production start at its Li-borates resource in Serbia (IM 27 August 2009: Rio lithium/borates by 2015). The 114.6m. tonne resource of jadarite – the newly discovered mineral made famous for its exact chemical match to kryptonite from the Superman series – is one of the largest ever Li deposits discovered.
Rio Tinto's Jadarite deposit in Serbia.
Located in the Jadar Basin in Serbia, Rio’s efforts to date have focused on “Project demonstrating that the deposit has sufficient mineral resources to justify further development.” Rio Tinto confirmed to IM that it expects to be producing in 5 to 6 years.
New World Resources, the only foreign company with a stake in Bolivia’s Li reserves also revealed its intent to build on its brine project in Pastos Grandes. The company is looking to buy more brine resources in Bolivia’s south-west. Don Flahiff, communications and corporate development manager at New World told IM: “The greatest challenges we face in our Bolivian undertakings are perception from the financial community, political rhetoric and a sometimes slow bureaucracy in country.”
There is much scepticism regarding investments Bolivia’s mining industry. The government, however, has recently u-turned on its decision not to allow foreign investment into its development of the world’s biggest Li resource, the Salar del Uyuni (IM September ’09: Bolivia strikes Uyuni Li deal with South Korea).
Reed on the Li attraction.
Whether or not Reed will make a success of its new Mt Marion spodumene resource in Australia – a tough ask considering the higher Li production costs from spodumene and location – but its rationale is sound, and in a nutshell, captures the reasons why Li is so hot.
Hicks from Reed told IM: “We get the feeling that China desperately needs emission free transportation and that electric cars are a likely answer. In addition, there appears to be a concerted effort to reduce the USA’s dependence on foreign oil. “This is providing a big boost to the electric car market. To put that into perspective, the Obama administration recently awarded $2,400m. in grants to makers of car batteries and hybrid technology,” he added (IM 13 August 2009: US grants Chemetall lithium $28m.).
‘Lithium bubble about to burst’?
The vast majority of today’s Li developments will not come to fruition. Deposits under development today face a significant uphill battle with logistical costs related to the location from markets, and chemistry/mineralogy of the brine/spodumene. There is also the overriding issue of demand from the auto battery industry. The world is waiting to see a) if the electric automobiles will be produced b) when they will be produced and c) in what quantities.
Baylis of Roskill is sceptical: “Notwithstanding a [significant] flood of the Atacama Desert [the world’s leading source by production], the Li market seems to be going headfirst into potential oversupply. The lithium bubble might just be about to burst.”
RWD Price at posting:
46.7¢ Sentiment: Hold Disclosure: Held
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