Lithium projects to deliver $1bn boost

Lithium projects in Western Australia are set to inject almost $1 billion of new investment into the state's economy as the past year’s surge in commodity prices and stock valuations turn into tangible commercial benefits.

The investment will be spread across five projects, with the prospect of substantially more to come as companies seek to take advantage of the big lift in global demand for lithium batteries.

The largest investment will be made by Chinese company Tianqi Lithium, which is already the majority owner of the state’s largest and highest-grade lithium mine.

Its Talison mine at Greenbushes produces about 460,000 tonnes per annum (tpa) of spodumene concentrate, equivalent to 30 per cent of global supply.

Tianqi has approved a $400 million investment in a chemical plant at Kwinana, which will process spodumene concentrate into 24,000 tonnes of lithium hydroxide per year.

The plant will create up to 500 construction jobs and 115 full-time production jobs.

To support the Kwinana plant, Tianqi, in conjunction with its Talison joint venture partner, US company Albermarle, is planning to expand production at Greenbushes.

The scale and cost of the mine expansion are not finalised, but could see a doubling of output.

That puts a question mark over how many other lithium projects will proceed.

Two are already under construction in WA.

Galaxy Resources is refurbishing the Mt Cattlin project near Ravensthorpe and recently engaged Primero Group as project manager for the final stages of construction and commissioning.

The cost of Mt Cattlin was recently increased to $22.6 million, with first shipments delayed by about three months to December.

The Mt Marion project south of Kalgoorlie is now poised to achieve first shipments ahead of Mr Cattlin.

Jointly owned by Mineral Resources (43 per cent), offtake partner Ganfeng Lithium (43 per cent), and Neometals (16 per cent), the project is targeting output of 400,000tpa of spodumene concentrate, making it substantially larger than other planned mines.

Mineral Resources, which is developing the project on a build-own-operate basis, has disclosed its total expected investment is $70 million – much lower than other greenfields projects, helped in part by the use of existing equipment, such as a crushing plant relocated from the Pilbara.

Pilbara Minerals released a definitive feasibility study last week on its Pilgangoora project, confirming it would go ahead with the 314,000tpa mine at a cost of $214 million.

It is planning to commence construction later this year, with first output in 2017.

Pilbara has also studied the cost of lifting output to 564,000tpa in year three, saying this would cost only an extra $128 million and improve the economics of the overall project.

Altura Mining is hoping to follow in the footsteps of Pilbara, with a definitive feasibility study on its adjoining project – also called Pilgangoora – released this week.

Altura said the DFS confirmed the 219,000tpa project was a significant mining opportunity delivering substantial long-term value to stakeholders.

However, Altura’s project has relatively small reserves, estimated at 20.3 million tonnes.

It also has relatively high operating costs, with estimated cash costs of $A315.90 per tonne (on a FOB basis).

The company is yet to secure funding for the project, which has an estimated capital cost of $139 million.

In contrast, Pilbara Minerals’ nearby project has estimated reserves of 69.8mt and cash operating costs for the first 15 years’ of $A261 per tonne (CFR basis).

In addition, the company has a strong balance sheet after raising $100 million of new equity this year.

These differences help explain Pilbara Minerals’ market value in excess of $600 million, about three times the valuation of Altura.

Perth companies in the lithium sector are also exploring opportunities for downstream processing.

These companies include Lithium Australia, which is seeking to commercialise its ‘sileach’ process.

Pilbara Minerals has signed a partnership agreement with Lithium Australia, and is also working with its Chinese offtake partner General Lithium on downstream processing opportunities.

Neometals is another company actively pursuing opportunities in downstream processing, through its 70 per cent-owned subsidiary Reed Advance Materials.

Neometals said a feasibility study completed in July found its patented Eli process was technically feasible and economically viable.

The Eli process converts spodumene concentrate into a high purity lithium chloride solution, then uses electrolysis to produce lithium hydroxide and lithium carbonate.  

The feasibility study was based on production of 20,000tpa at a proposed plant in Malaysia.

NB: This is an expanded and updated version of the article that appeared in the 26 September print edition of Business News.