EDITOR: | October 15th, 2013 | 3 Comments

Lithium in Europe: a match made in critical metals heaven

| October 15, 2013 | 3 Comments
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rbliartPerhaps with all the news and opinion about critical metals and who is producing (and who wants to produce them) we may, occasionally, have forgotten about the other end of the supply chain. By that, I mean the customer.

Europe is the world’s second largest consumer of base metals and, of course, the economic recession has been an influential depressive effect on metal prices. Macquarie Research in London is reported by Reuters this week saying a European recovery will have an uplifting effect on metals generally, but on lead and tin especially. But Europe, with its high technology industries, and drive to renewable energy, is also a huge market for strategic metals.

The point is that Europe itself produces only a fraction of the metals it needs, and is seriously deficient in many critical metals (hence the study by the European Commission into what commodities Europe should concentrate on acquiring).

Clearly, rare earths is an issue (especially with Germany), as is tungsten, where Sweden’s Sandvik (the large toolmaking firm) is a major customer. (Incidentally, the news is that Japanese buyers are at present finding it almost impossible to buy tungsten.) There’s also a search for graphite going on in Europe.

And then there’s lithium. Europe produces none. But it consumes 24% of the world supply. And Europe is seeking security of supply of metals where it can.

So there will be interest in the announcement this week that a mine in Austria is back in business. Global Strategic Metals (ASX:GSZ) reports bulk sampling has begun at its Weinebene mine, part of its Wolfsburg project, the first time anything has been mined there for 20 years. Once the bulk sampling process completes in November, GSZ expects to have satisfied conditions and obligations that will allow Austrian mining authorities to grant mining leases.

The ore will be used to update metallurgical test work on Weinebene’s ore in the 1980s by the North Carolina State Minerals Research Laboratory.

There is other activity stirring. Six weeks ago a subsidiary of German photovoltaic manufacturer SolarWorld AG was given permission by the German state of Saxony to drill for lithium at Zinnwald, a mountainous area near the border with the Czech Republic.

An industry website says this area contains high-grade lithium, and the need is for manufacture of lithium-ion batteries.

Der Spiegel, the German news-magazine, reported last year that geologists believed about $1.5 billion worth of lithium was to be found in this area. In SolarWorld Solicum’s ground the target is 40,000 tonnes of the light metal (and the expectation is that some 80,000 tonnes is waiting to be explored on the Czech side of the border). So much is known about the German side because it was drilled extensively by the resource-starved German Democratic Republic, the old communist East Germany.

The company’s plan is to expand its solar panel business by offering customers the ability to store power from the panels in their basements through lithium-ion battery packs.

The aim is also to free Germany of the need to buy all its lithium from Chile, Argentina or Australia.

Of course, if Bolivia can get development going at its massive brine lakes lithium resources (with Argentina now trying to expand its output) there will be no real shortage of lithium (there’s always many “if’s” in the mining business) but within Europe there is the ever-present concern about resource security.

In 2012, the biggest players in the lithium business were the Australian-based Talison Lithium, producing 35% of world supply, followed by Chile’s Sociedad Quimica y Minera de Chile on 26%. Talison Lithium operates the Greenbushes mine in Western Australia and had doubled its capacity in anticipation of the looming battery demand. But Talison, which was listed in Toronto, was acquired earlier this year by a Chinese group, Chengdu Tianqi Group, for $C847 million. So nearly a third of world supply moved into Chinese control, adding to the 10% global share that country already had.

In terms of world supply (as opposed to individual company share), Australia produces 31% of the world’s lithium, China 10%, Chile 38%, Argentina 13% and Nevada 3%.

They’re all a long way from Europe. And subject to competing demands. That’s why Europe needs its own sources of as many as possible of the critical metals.


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Comments

  • Lloyd Hamilton

    Dear Robin
    Yesterday (14 Oct) in The Australian you mentioned that General Motors is now using lead instead of lithium for its batteries. This surprised me as I had assumed that lithium batteries were superior in all respects. I will have to check it again. I hold Orocobre shares which Toyota has invested in for car batteries. In this article you did not mention lead. I use a lithium battery on my electric bike and would feel less comfortable with a lead battery. I did have shares in zinc batteries for a while. I expect zinc could out perform lead but I need to see the chemistry.

    cheers

    Lloyd

    October 15, 2013 - 4:06 AM

  • Doug Ogilvie

    Hello Robin. Nice article, I am new to the rare earth following and enjoy the investorintel website immensely. I just wanted to throw in a plug for Canadian Lithium. I believe they claim to be able to produce 12% of world supply once they attain full production in 2014.

    October 15, 2013 - 3:25 PM

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