Not paying alot of attention to PLS or its threads, so don't...

Not paying alot of attention to PLS or its threads, so don't know if this has been posted? Enjoy all the same.



Why Australia will win from the lithium boom
Westpac Institutional Bank
June 27, 2019
Despite recent volatility in prices, Australia’s lithium producers are still set to be the winners when demand for electric vehicle batteries surges, the experts tell Westpac IQ.
Australia is well-poised to capitalise on the lithium boom as the growing uptake of electric vehicles increases demand for the lightweight metal.
Following a surge in lithium prices, there is now a glut in the market that is currently depressing prices, but they are expected to recover in the longer term as carmakers consume more of the key component for electric vehicle batteries.
“Australia has really been able to capitalise on these high prices and the lithium boom much better than other places,” says Gavin Montgomery, Research Director, Battery Raw Materials at global energy and mining consultancy Wood Mackenzie.
In particular, a shift in the type of lithium needed for car batteries will benefit Australian producers and help them to capture more of the value chain of the commodity.
Importantly, there are two different methods for producing lithium.
The first is hard rock mining – digging out and crushing rocks to produce lithium ore, which is the way it is produced in Australia.
The second method, known as brine production, is used primarily in South America. This involves pumping subsurface brine, which contains dissolved lithium into pools where the brine evaporates, leaving lithium carbonate.
Previously, brine production gave South American producers a big advantage over their Australian counterparts, because the process was cheaper and lithium carbonate was ready to be used in lower-grade batteries.
The spodumene ore produced by Australia, by contrast, needs to be concentrated before the refining process can begin to transform it into lithium carbonate.
However, the rise of electric vehicles has changed that dynamic, because electric vehicles use high-grade, high-density batteries that require a different product, lithium hydroxide. For South American brine producers, this means another step in their production process. For Australian producers, it just takes a change in the conversion process.
This removes some of the advantage South American producers have had, says James Duncan, Senior Associate – Natural Resources at Westpac Institutional Bank.
There is also the issue of meeting the quickly-rising demand that is being driven by the growing electric vehicle market. Brine production has a long lead-time and can be very variable, as the amount of sun and rain determines how quickly it evaporates.
“They have found it harder than they expected to ramp up production quickly and respond to demand, which has presented a bit of an opportunity to the Australian producers because a hard rock mining process can be done consistently at scale, with a more steady-state production, which is what the industry needs at the moment,” explains Duncan.

A surge in Australian lithium mining

In 2009 the only lithium miner in Australia was Chinese and US-owned Talison Lithium which, on its own, accounted for 25 per cent of global supply and remains the world’s largest lithium mine. Eleven years later there are now eight lithium producers. Most of the mines are currently shipping lithium spodumene – which contains six per cent lithium – to China, where it is converted into lithium hydroxide.
Australia is already by far the world’s largest lithium miner, producing 51,000 tonnes of lithium content in 2018, up more than a quarter from the year before, according to the US government’s National Minerals Information Center. Next is Chile with 16,000 tonnes.
But the increasing supply from Australia and other producers outstripped demand last year, leading to a steep price drop. In its latest report on the lithium sector, the National Minerals Information Center said spot lithium carbonate prices in China decreased from approximately USD 21,000 per tonne at the beginning of 2018 to about USD 12,000 per tonne in the third quarter.
Duncan says he expects the oversupply will last for another two or three years as more supply comes on, but the longer-term outlook is strong.
Wood Mackenzie’s Gavin Montgomery agrees.
While electric vehicle penetration will grow at double digits for the next few years, the growth comes off a relatively low base. EV penetration is only about two per cent of passenger car sales, says Montgomery. As such, there is sufficient lithium supply for the next few years.
Additionally, the relatively small size of the current market could mean continued price volatility – only a small change in supply, such as a new mine coming on or a hold up in production at a significant mine can have a large effect on the prices of the valuable metal.
Wood Mackenzie expects prices to moderate, dropping down to USD 11,000 a tonne this year and remaining subdued for the next five or six years. “It’s that point, we think, where you’re going to start to see more market penetration of electric vehicles, so we do see the market tightening then,” says Montgomery.
The extent to which prices will rise depends on the take up of EVs, and forecasts vary widely.
Bloomberg New Energy Finance expects that by 2040, some 57 per cent of all passenger vehicle sales, and over 30 per cent of the global passenger vehicle fleet, will be electric.
Deloitte expects the electric vehicle market will reach a tipping point in 2022, when the cost of battery-powered vehicles will be on a par with their internal combustion engine counterparts. It is forecasting electric vehicle sales to make up 10 per cent of the total automotive market by 2024.
Wood Mackenzie is relatively conservative, expecting EVs to make up about seven per cent of car sales by 2025.

Holding on to more of the battery boom

Montgomery says Australia is well-placed to take advantage of the growing lithium market.
“Australia – the lucky country – has got quite a lot of spodumene resources, a lot of mining expertise, a very friendly regulatory environment, and lots of great existing infrastructure.”
The next stage of the lithium boom in Australia is arriving as miners move to capture more of the supply chain, by carrying out more of the processing in this country.
It was only 12 to 18 months ago that miners such as Mineral Resources were shipping unprocessed lithium ore – which contains only about one per cent lithium – direct to China. Many are now starting to produce the six per cent pure spodumene and beyond that, some miners have announced plans to build lithium hydroxide plants to process their spodumene.
Duncan says that while Australia has the mining expertise to extract the ore from the ground, there is a lack of industrial and chemical expertise needed to process the ore, and so they are teaming up with experienced offshore producers.
Australia’s Mineral Resources and US-based Albemarle, the world’s largest lithium producer, have signed a joint venture to build a lithium hydroxide plant at Wodgina in Northern West Australia, in exchange for a share of the Wodgina tenement’s output.
Likewise, Kidman Resources has established a joint venture with Chilean producer SQM to build a lithium mine and lithium hydroxide refinery at Kwinana south of Perth. The JV partners expect the project to have a lifespan of 30 to 50 years and to have an annual initial capacity of 44,000 tonnes of lithium hydroxide.
“The more of the supply chain we can capture economically, the better Australia will be positioned in terms of capturing as much as we can from this battery boom,” says Duncan. “When we’re talking about people moving from directly shipping ore to spodumene and then potentially down the track to producing hydroxide, those are all very promising developments.”
IQ cheat sheet: When do renewable products and services start paying for themselves?