Galaxy charges downstream

Galaxy Resources is poised to be the first Australian lithium producer to adopt a ‘value- add’ strategy, using its lithium carbonate to manufacture battery packs to capitalise on China’s growing demand for electric vehicles and clean energy. 

Western Australia-based Galaxy has struck a deal with US battery producer K2 Energy, which will provide it with licensing and commercial support for the construction and operation of its proposed $135 million Jiangsu battery manufacturing plant in China. 

Galaxy mines lithium-laden spodumene from its $80 million Mt Cattlin project, just north of Ravensthorpe, which it concentrates and ships to its plant in China where it is converted to lithium carbonate. 

Lithium carbonate is traditionally used in batteries, glass, aluminum production and pharmaceuticals.  Galaxy has now targeted the lithium ion battery market, which has been bolstered by China’s growing demand for electric bikes or ‘E-bikes’.

Managing director Iggy Tan is confident in the potential of the lithium market, which he said had been growing by 25 to 30 per cent year on year, with demand expected to triple by 2020. 

“Basically our whole strategy is based on lithium ion batteries … they are longer life, have higher energy density and they are environmentally friendly,” Mr Tan said. 

China produces on average 27 million E-bikes a year, which were traditionally reliant on heavier and shorter-life lead acid batteries.

“There is a lot of pressure on these E-bikes to convert across to lithium, because China is putting some weight restrictions on these bikes and has also started shutting down a lot of the lead acid plants,” Mr Tan said. 

Patersons Securities analyst Matt Trivet has predicted moderate growth of the lithium market over the next five years and said the long-term outlook would be dependent on the demand for lithium ion batteries.

“In Australia, it’s [lithium] a developing market but the long-term outlook is fairly robust … if electric vehicles become a popular item somewhere like China and it rolls out infrastructure to support those vehicles … then you can argue that the demand curve is going to skyrocket,” Mr Trivet said.

Mr Tan said Galaxy was the only lithium company in Australia to ‘value-add’ and, once construction of its manufacturing facility was completed next year, the company would produce 350,000 battery packs annually. 

“Galaxy itself is a pure lithium play and, unlike other mining companies that are just happy to sell their ore overseas, we want to be involved in the downstream process because this lends itself to value-adding,” he said. 

Mr Trivet said Galaxy’s strategy to produce its own batteries would allow it to capitalise not only on the chemical itself, but on the sale of the battery packs.  

“People in Australia have to think outside the square … the attraction of Galaxy is that they have a fully vertically integrated production line and not only will they be able to capitalise on their lithium carbonate, but also on the value-adding on producing the batteries,” he said.

There are only a handful of lithium miners in Australia, which include WA-based companies Talison Lithium and Reed Resources, and Queensland-based Orocobre Limited.

Toronto Stock Exchange-listed Talison Lithium, which mines and processes spodumene at Greenbushes, merged last year with Canadian lithium explorer Salares Lithium, giving it exposure to prospective lithium brine projects in Chile, the highest lithium producing company in the world. Reed Resources and joint venture partner Mineral Resources recently moved into the third phase of resource definition drilling at its Mount Marion Lithium project south-west of Kalgoorlie.

Toronto and Australian-listed Orocobre’s Salar de Olaroz brine deposit in Argentina has been recognised as the world’s next large-scale, low-cost lithium-potash brine resource, with initial commercial production to start in 2012.