EDITOR: | April 1st, 2016 | 3 Comments

Lithium mine back in action as China demand stays strong

| April 01, 2016 | 3 Comments
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Poor old lithium, they’re trying to rain on your parade – and on a day when two Australian companies have revived a major mine project there.

As reported here on InvestorIntel, Galaxy Resources (ASX:GXY) and General Mining (ASX:GMM) have announced that the Mt Cattlin mine in Western Australia has resumed production. Yet today my colleague John Petersen follows up his earlier ground-breaking work on cobalt, essentially pointing out that the shortages of that metal (a vital component of the lithium-ion battery technology) will curtail the growth of the technology in terms of making those batteries cheap and plentiful and thus appealing to technology users. His headline, Cobalt – a coffin nail for cheap lithium-ion batteries sums up his concern.

Others attack the technology itself. The Austin, Texas, based geopolitical strategy analysts Stratfor have doubts about the whole lithium-ion battery story. “To assume that lithium will be the primary battery type in the long term, or even the sole energy storage technology in the near term is shortsighted,” their new report says. But then there are some important caveats. Caveat No. 1: “What exactly could replace lithium is unknown at this point”. To which we might respond, “OK, but in the absence of something better let’s keeping on making lithium-ion batteries as people seem to want them”. Caveat No. 2: “In the meantime, lithium-ion batteries will advance and become more prevalent”. So, phew, no need for immediate panic; that means we can relax for the moment.

Stratfor also asserts this: “Lithium will never have the same geopolitical importance as oil”. Can anyone say that for certain given the increasing number of predictions that battery technology will replace oil in many applications in the motor vehicle sector? And even if it doesn’t acquire the same importance as oil, so what? As long as there is increasing demand for lithium, that will propel the story.

Because the markets still seem to like the lithium story. After all, Galaxy shares have gone from 4c at the beginning of October to 25.5c now (that is in Australian dollars) and General Mining from 10.5c to 38c. As the companies point out, Mt Cattlin is the only producing hard rock mine owned by Australian listed companies (GMM is now entitled to a 14% stake having met production deadlines), so it is not exactly a market that is being overcrowded by producers. They also point out the spodumene continues to play a critical role in feeding demand in China.

As if on cue, Bloomberg is reporting that BYD Co., China’s largest electric car and bus manufacturer, “plans to obtain supplies of lithium to guard against spiraling costs of the raw material used in vehicle batteries, amid rising pressure on automakers to lower prices”. In other words, the company is looking to becoming part of the lithium supply chain. As Bloomberg notes, the prices of lithium carbonate — a key element in lithium-ion batteries — tripled in China last year and have continued to surge in 2016. “Prices are rising as Chinese automakers step up their production of new-energy vehicles even as domestic lithium-mining capacity remains restrained,” the report says.

And research firm Marketsandmarkets says in a report from India it expects overall battery demand to grow by a compound annual growth rate of 37% between 2016 and 2022.

Of course, lithium-ion faces challenges from new technologies. But then innovation is the whole point of technology. Today Singapore-based Asian Scientist magazine reports that a research team from the Shenzhen Institutes of Advanced Technology of the Chinese Academy of Sciences has developed an environmentally friendly, low-cost battery that overcomes many of what they see as the problems of lithium ion batteries. The new aluminum-graphite dual-ion battery (AGDIB) offers significantly reduced weight, volume, and fabrication cost, as well as higher energy density, compared to conventional lithium ion batteries. The electrode materials comprise low cost aluminum and graphite only, while its electrolyte is composed of conventional lithium salt and carbonate solvent.

In the meantime, the potential lithium miners keep on aiming to get into production, and are not deterred by any pessimism about the future of lithium-ion batteries. Just a few kilometres from the Mt Cattlin mine, Lithium Australia (ASX:LIT) reports it has uncovered several additional lithium pegmatities at its Ravensthorpe project. (That announcement is also to be found here on InvestorIntel.)

As someone who has reported on many forecasts in the metals business – the collapse of gold, the end of silver, “peak oil”, “peak iron ore”, you name it – it seems to me that any early predictions of lithium-ion’s demise should be treated with caution. In the meantime, the miners will keep looking for lithium as it remains one of the better performing mining investment stories.


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Comments

  • Eric Roche

    I think most Li-ion batteries will move over to the newer lithium iron phosphate (LFP) system, since it removes the cobalt price problem. Iron and phosphorus are cheap and abundant whereas cobalt is rare and expensive. That is particularly important in the near term as Palmer’s refinery produces a substantial chunk of world production of battery grade cobalt oxide. LFP batteries are fine for automotive applications although they have a slightly lower energy density than Li-Co batteries. As always cost/benefit will drive the choice of system any particular manufacturer will go for.

    April 1, 2016 - 4:03 PM

  • Robin Bromby

    Interesting take on cobalt issue, Eric. Thanks.

    April 2, 2016 - 6:15 AM

  • AL

    Someones missing a jv here as Lithium Americas and SQM just signed a long term contract to process Lithium over in Argentina .

    April 4, 2016 - 9:49 AM

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