The book on lithium is only at Chapter two and there would appear many chapters yet to be written. Time and science will tell and not your mere scribe.
The major attractions to lithium centre around how light (third lightest when classified as a refined metal) lithium becomes, making it ideal for batteries when combined with the ability of the metal to receive and exude electric current efficiently, as and when required. It would be fallacious to suggest Lithium is the only metal that has these properties and readers need to take into account how fast science is moving into other alternatives (e.g., into sodium that is very abundant and should be a cheap source as well as zinc-air and zinc-bromine). This scientific explosion is partly driven by the fact that lithium has doubled in price over the last 12 months and partly by the climate change pressures to move from fossil fuels into more friendly energy technologies.
The compounds of this metal are used widely in the manufacture of ceramics, glass and consumer electronics and are an essential element in long life lithium ion batteries in cars, mobile phones and similar devices. There is also a lot of research going into mass energy storage generated from renewable energy sources, with lithium-ion batteries presently at the forefront. Just how big an international market for lithium compounds will be into the future is just too difficult to predict, so forecasts need to be taken carefully and with considerable personal research. Based on comments contained in a range of annual reports to the ASX and available on their respective websites, the immediate future for lithium and lithium producers appears very healthy.
Lithium is commonly sold as either lithium carbonate or lithium hydroxide.
More importantly, lithium is not actively traded on any major metals exchange, although there is a spot market. Prices on that market have fluctuated substantially, as can be seen from the below graph. Virtually all major sales occur through longer term contracts with refiners (for partly processed concentrates) or with battery manufacturers (essentially end products). There are smaller markets for lithium compounds and these have existed for some time, including in the manufacture of anti-depressant drugs. What new markets may yet be created is not known to your scribe.
When one reads the stock exchange reports of various producers, it is difficult to come to a proper comparison of their respective production levels and their costs per tonne or pound, as the case may be. This is because there are essentially two major sources of lithium that enter the batteries markets. The major Australian listed producers get their sales product from Argentina (e.g., Orocobre out of suspension from brine solutions, with brine being very salty waters) or from Australian hard rock operations extracting lithium from spondumene ores at around 2% to 3% of treated rock. Orocobre Limited (ORE) appears to be suggesting they have a major marketing advantage in that the contracts they enter to sell their lithium carbonates are directly with the battery manufacturers, cutting out the traders and the middlemen refiners.
From a very elemental perspective, most if not all of the brine producers would appear to have the edge at the moment on cost per pound of end sales product, principally because what they produce from the mining of the salt flats (salars) is essentially an advanced product requiring little additional processing post the treatment plant to generate a final high quality lithium carbonate. While Orocobre Limited is well advanced with its production from salt lakes and bores in northern Argentina, it is going to face increasing marketing pressures from other evolving brine producers and explorers in Argentina, Bolivia, Chile, Mexico and China. Orocobre Limited has announced plans to substantially increase production from its Olaroz project and based on its announcement details has a real cost advantage probably into the lowest cost quartile. Hence the A$4.30 price tag.
There are a number of Australian listed companies seeking to generate significant production from hard rock projects principally in Western Australia. The major producer to date has been Talison Ltd (TLH) from the old Greenbushes Tantalum/Lithium project 200 kilometres south of Perth.
We follow with comments on some other companies below, but readers should not treat this list as exhaustive or prioritised in any fashion.
Galaxy Resources Limited (GXY) is actually in production from a refurbished mine at Ravensthorpe in WA. Mining re-commenced in December 2016 and has made in first export delivery on 2 January 2017 from its Mount Cattlin spodumene and tanatalum project. Galaxy has an offtake agreement with Mitsubishi Corporation of Japan. Trading is around A$0.65 cents.
Lithium Australia Limited (LIT) has a technology called Sileach that is said to extract all metals from silicate rocks with alacrity and with no need for roasting.
Pilbara Minerals Limited (PLS) has reported a major exploration project in the Plibara some 100 kilometres south of Port Headland at Pilgangoora. The project has been quoted as possessing over 80 megatonnes of resource.
Needless to say, there are plenty of other quality companies with lithium projects here and overseas and each of the mentioned companies also has very interesting exploration plays in Australia, and in some cases also overseas. We apologise if we are seen to be selective, this is not our intention.
Before you consider any form of investment in any of the above companies or any of the unmentioned companies exploring for lithium-based minerals, you need to consult widely and do your own research, but don’t think lithium is risk-free and don’t think about putting all your risk dollars into one or a limited basket. There are substantial risks and there may be substantial rewards, which cannot be guaranteed. We make no recommendations.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.