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Altura Mining opens Pilgangoora amid uncertainty in lithium prices

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

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Altura Mining opens Pilgangoora amid uncertainty in lithium prices

Altura Mining Ltd.'s namesake mine at Pilgangoora officially opened on Sept. 5 having become Western Australia's seventh lithium project to start production, but short-to-medium term uncertainty persists as to whether the fall in lithium carbonate prices this year thus far is cyclical or not.

The mine, located 123 kilometers southeast of Port Hedland, was opened 18 months after construction started, having recently achieved first lithium concentrate production and the start of product haulage to Port Hedland ready for export.

Altura Managing Director James Brown said the focus now was on loading the spodumene cargo, with the vessel due for arrival by mid-September, amid plans to double production to 440,000 tonnes per annum to tap into the global demand for electric vehicle and static storage batteries.

Altura has employed around 1,000 personnel over the past 18 months, and Western Australian Mines Minister Bill Johnston, who attended the mine opening, said the state's lithium sector employed more than 1,200 people in 2017 as lithium sales that year reached A$780 million.

The government has established a Lithium and Energy Materials Industry task force which is working closely with industry to develop a strategy to build on the state's competitive advantages.

Customers becoming more sophisticated

Yet while producers and Western Australia's government continue to tout strong lithium demand based on forecast electric vehicle and battery demand, Hartleys Head of Research Trent Barnett, who covers another lithium player, Mali-focused Birimian Ltd., said that while the 99.5% purity lithium carbonate price on Asia Metal has dropped 49.4% year to date, customers may be getting more sophisticated in what product they are willing to take.

Barnett noted that the lithium hydroxide price has not fallen anywhere near as much due to the change in battery chemistry towards higher nickel concentration, as McKinsey & Co. partner Prabhav Sharma explained at a recent meeting of the recently created Lithium and Energy Materials Industry Consortium in Perth, Australia.

Sharma said lithium hydroxide would be the intermediate chemical of choice for the NMC811 (nickel-manganese-cobalt) cathode which should grow "very rapidly" as lithium hydroxide supply based on existing, upcoming and announced capacity will fall short of demand in coming years.

"A higher nickel battery has better performance, but the technology is more complicated, that's why when we went to China a year ago [battery makers] said they expected to be making more lithium hydroxide batteries later this year," Barnett told S&P Global Market Intelligence.

"Then again, with lithium carbonate you can store it for a lot longer, so there might be a switch or maybe it just means that there's more oversupply of carbonate because it's been more speculative.

"So what is actually happening in the lithium pricing is not very clear. The producers will say there's still very strong demand, but markets say there's not as much demand as reflected in the equity share prices and some of the indices for lithium."

Birimian is no exception, with CEO Greg Walker telling the Africa Down Under conference in Perth on Aug. 31 that while the junior's market capitalization had barely moved in 12 months, "supply-demand modelling would suggest we are going to need somewhere between a minimum of 600,000 tonnes and 1 million tonnes of lithium carbonate equivalent by 2025 to 2027."

Indeed, Hartleys views what is causing the lithium pricing issues as a short-to-medium-term risk, believing that electric vehicle penetration will continue, as evidenced with BMW releasing a new video on Sept. 4 of its upcoming iNext electric vehicle; while the Mercedes-Benz EQC, an all-wheel drive electric SUV, was also revealed that day.

Given such news, Barnett said the current supply of lithium is "still nowhere near enough to satisfy" the 2025 or 2030 demand forecasts.

"People are still trying to work out whether [the fall in lithium carbonate prices] is a cyclical correction or not, but structurally there's still a lot more supply that needs to be brought to the market," he said.

"There is an argument that hydroxide is slightly better for Australian hard rock miners versus the South Americans, because if you're making hydroxide or carbonate from the hard rock, you choose which one you want to make, and you make it; whereas they always make lithium carbonate from the brines and it has to be re-processed into lithium hydroxide.

"Whether it's an advantage or not is still being worked out, because some argue that the brines are so much cheaper that the reprocessing isn't a disadvantage, while others say it is because there are so many impurities in it to get it to a high-quality hydroxide."