23/04/2009 - 00:00

New WA lithium player shows promise

23/04/2009 - 00:00

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OVER the past decade, the expanding global push to introduce cleaner, less polluting and more sustainable energy sources has been underway.

OVER the past decade, the expanding global push to introduce cleaner, less polluting and more sustainable energy sources has been underway. So far, very few technologies have been found to be profitable on a standalone basis, without some level of subsidy from public funding.

Wind-powered electricity producers have only recently begun to compete with fossil fuels as economies of scale kick in.

Early versions of wind turbines were rated at less than half a megawatt each. More recently, massive 'wind farms' have been established, employing huge machines, each capable of 2 to 3 megawatts of generating capacity which adds to the commercial effectiveness of this source of zero emission power.

But, the wind does not always blow and if the total cost of backup gas turbines is added to the equation, wind power is still an expensive option.

The rise of biofuels, in the form of ethanol and synthetic diesel, produced from sugary, starchy grains and oily grains respectively, has had the unintended consequence of lifting the price of corn, used for ethanol and oil seeds, which might otherwise have been used for human food requirements.

Rising grain prices put the whole biofuel business model under commercial strain. Diversion of grains and food oil into the production of fuel also has moral feedback for the wealthy few.

The undernourished poor, whose sustenance is effectively being priced out of their reach or diverted into fuel for rich folks' hummers, have legitimate grievances which, combined with other factors, have lead to an ongoing mass migration of people fleeing to Europe and even Australia, from destinations in North Africa and Asia and from Latin America to North America.

Technical innovations in the areas of solar, geothermal and wave power are showing promise for sustainable energy solutions, but the development and eventual mass application of these processes appears to be decades away from making any real impact and will not curtail the ever increasing tonnages of coal being burned every year in developing countries.

For example, southern Africa will need at least 1,600 megawatts of new power generation capacity every year for at least the next 20 years.

This will result in the burning of an additional 140 million tonnes of coal each year by 2029. Against this sort of growth in energy demand and use of fossil fuels, a few solar panels on your roof or the odd couple of hundred MW of wind power seems hopelessly inadequate to stem a rising tide of air pollution.

Ultimately, commercialisation of fast nuclear reactors holds promise to deliver safe and virtually limitless energy at low cost.

Existing nuclear reactors only recover 5 per cent of the available energy content of their fuel, leaving spent fuel products requiring long life storage.

A new breed of fast reactors will recover up to 98 per cent of the available energy content of their fissile fuel, leaving only small volumes of long-lived radioactive waste products.

But this solution is also several decades away from mass application.

Local company Galaxy Resources is entering the fray with a proposal to supply lithium carbonate to the world's battery manufacturers for the production of highly efficient Lithium ion batteries (Li-ion).

Li-ion batteries are the efficient little packs now found in your mobile phone and laptop computers.

This rapidly developing area of battery technology looks set to provide a near-term solution to low emission transport via battery and hybrid vehicles and also an effective storage solution for other, intermittent renewable energy sources.

Gone are the days when your laptop would conk out after 40 minutes or so. Nowadays, you can work for four hours, all the way to Brisbane on a jet flight, (so long as the person in front doesn't put their seat back on top of you) on a fully charged Li-ion battery.

A switch by auto makers to expand production of battery operated, electric and hybrid vehicles sees strong growth in demand for lithium minerals, used in the manufacture of lithium ion/polymer batteries

Galaxy's Mount Cattlin deposit was purchased from the receivers of Sons of Gwalia. It is conveniently located just 4 kilometres north of the south west town of Ravensthorpe and close to the seaside town of Hopetoun, where there is plenty of accommodation and a ready supply of local workers, following the shutdown of BHP's nickel mine.

Favourable findings from a preliminary feasibility study last year led the company to embark on a bankable feasibility study and it has recently received strong expressions of interest in buying more than its planned 17,000 tonnes a year of lithium carbonate output.

Mt Cattlin has flat lying pegmatite mineralisation containing a complex lithium silicate called spodumene, along with smaller amounts of tantalum, the oxide of which is used to produce electrical capacitors, also found in mobile phones.

So far, a shallow global mineral resource of nearly 25 million tonnes, containing 2mt of spodumene and 6.6 mlb of tantalite, has been estimated.

When applying a cut-off grade of 0.4 per cent Li2O or 5.9 per cent spodumene, a high grade resource of 12.3 mt, containing 1.8 mt of spodumene and 3.7 mlbs of tantalite is estimated; but Briefcase believes that the region holds promise for a much larger resource, which can be defined once funds are available.

The company plans to concentrate lithium minerals on site and ship a concentrate to its own refinery, to be constructed in China, from where a lithium carbonate product will be shipped out to lithium ion battery makers around the world.

Global lithium carbonate/chloride production, arising largely from processing of continental brines in places such as Chile, the United States and Argentina is currently estimated at between 70,000 and 80,000 tonnes a year.

A further 12,000 tonnes a year of lithium carbonate equivalent is contained in spodumene, which is used directly in the manufacture of ceramics and high temperature glass.

WA's Greenbushes mine is the world's largest supplier of spodumene.

Bolivia has large lithium brine deposits, but the Bolivian government is currently placing unrealistic conditions of foreign miners to keep all profits in the country and also to process lithium all the way to batteries in that country.

Recently, Chinese and Scandinavian processors have developed a refinery process for spodumene, using roasting and leaching, either with sulphuric acid or using an alkali leach solution of sodium carbonate. Lithium carbonate is then precipitated from the resulting leach solution.

As a rule, 1.4 kilograms of lithium carbonate is required for each kilowatt hour (kWhr) of battery capacity. Each Toyota Prius has a 1.5 kWhr battery and there are currently 17 million of these vehicles.

Totally, electric vehicles, such as GM's proposed Volt, will need a 16 kWh battery containing 22.4 kg of lithium carbonate. The energy density of Li-ion batteries is twice that of competing Ni/Cd batteries, but they are fragile, requiring protection circuits which limit peak voltage.

The industry is seeing rapid technological advancement, with new chemistries and circuitry introduced about every six months. Latest advances involve lithium/polymer/gel technologies.

Several new battery making ventures have recently been announced, including Matsuchita, Volkswagen/Sanyo and Nissan-NEC, which have announced new, large scale manufacturing initiatives which are likely to raise demand for lithium after 2011.

Galaxy, which is led by experienced industry veteran Iggy Tan, currently has a market capitalisation of about $28 million.

Briefcase estimates that its lithium carbonate project has a net present value of about $160 million and the ability to generate an after tax profit of around $35 million a year from 2012, which would value it at over $250 million in today's terms.

Galaxy could fund this project independently, or reduce its interest by bring in an industry partner to fund its estimated $120 million capital cost. Either way, the project looks good for Galaxy and the Ravensthorpe region with Galaxy having legs to $1 per share.

n Peter Strachan is the author of subscription-based analyst brief StockAnalysis. Further information can be found at Stockanalysis.com.au.

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