WA’s world-leading lithium sector could ride a wave of demand led by the charge in battery storage technology.
It is not often that another Australian state does Western Australia a favour, but when South Australia turns on the world’s biggest battery, being built as part of its drive to overcome an electricity shortage, it will almost certainly be powered by WA-mined lithium.
That might not seem as important as the battery itself, which is one of many ambitious projects planned by Tesla car and renewable rocket entrepreneur, Elon Musk.
Assuming the battery works as promised, it will reinforce a powerful shift in the global energy business; and while WA’s oil and gas industry is the local energy leader, it might not be long before lithium achieves a similar prominence.
The role of lithium, the lightest of all metals in long-life, rechargeable batteries, is well known. Less well known is that roughly one-third of the world’s lithium is currently supplied from mines in WA, led by the Talison Lithium project at Greenbushes in the South West.
The owners of the Talison mine, led by 51 per cent shareholder Tianqi Lithium, are investing $320 million to boost output.
In addition, Tianqi is spending $400 million building a processing plant in Kwinana that will produce 24,000 tonnes per annum of lithium hydroxide, and has plans for a further $320 million spend to double the planned output of the Kwinana plant.
Other mines, including the Mt Marion project of Neometals and Mineral Resources, and the Mt Cattlin mine of Galaxy Resources, have joined Greenbushes, with the Pilgangoora project of Pilbara Minerals under construction.
WA’s lithium rush is of international importance, because the local hard-rock deposits of the metal are being developed and delivered to a battery-hungry world at a much faster rate than the more heavily promoted dried salt-lake lithium deposits found in the Andes of South America.
In time, according to one view, the South American dry lakes will take over. But how that plays out remains to be seen, because doing business in most countries in that part of the world is exceedingly difficult, and right now WA has a considerable first-mover advantage and is the preferred supplier of lithium.
In effect, WA has become ‘lithium central’, a status being aided by SA’s big battery and a strong flow of fresh capital into a sector of the mining industry that has universal approval, even from ethical investment funds, which normally shun mining because of questions over the sector’s sustainability.
For the WA government, what’s happening in lithium is a perfect promotional opportunity and a chance to create something of lasting value, perhaps by establishing a research institute into lithium and renewable energy at one of the local universities.
An example of how that might work can be found in the National Graphene Institute at Britain’s Manchester University, a recently established research centre focused on understanding the properties of another new energy material derived from graphite.
The choice of Manchester for the NGI was a result of the discovery of graphene there by two scientists who would later share a Nobel Prize.
Similarly, WA’s leadership in lithium production would make it an ideal location for a national lithium institute, or some appropriately named body.
Conditions for such a research organisation could not be better, with interest in lithium never higher and large amounts of capital being earmarked for investment in lithium by companies, governments and investment funds.
The entry of ethical funds into the mining sector could be a game-changer for mining, because while most funds with a focus on clean energy and environmental protection have avoided mining, many are starting to recognise lithium is part of the solution rather than part of the problem they see in mining.
Winning the approval of ethical investment funds is an important step for lithium mining, and while some fund managers are uncertain about the full life-cycle of lithium batteries with the heavy use of other metals such a nickel, graphite and cobalt, the alternative is to see more coal mined for power generation.
Ethical funds may be a small part of the overall fund management business, but they are a growing part. A significant development in this space was the recent decision by Swiss Re, one of Europe’s biggest insurance companies, to shift its $US130 billion investment portfolio into a new, ethically-based benchmark index.
Whether any of the funds being redirected into ethical products ever make it to WA’s lithium industry is uncertain, because extracting lithium from dried salt lakes might appear more acceptable.
But the movement of funds towards ethical investment is occurring as big changes are made to electricity generation via renewables and to storage, as battery technology becomes a mainstream industry.
It seems that WA is being presented with a golden opportunity and, with an appropriate level of encouragement the state could cement its position as lithium leader, both in production of the metal and in researching its uses.