He may only be one guy but there is little doubt that American entrepreneur Elon Musk single-handedly lit a fire under Australia’s lithium miners and explorers.
Musk’s Tesla cars made it abundantly clear that the electric car revolution was no longer a pipe dream but a very cool reality and his Tesla Powerwall showed that storing renewable energy not only made sense at a household level but for big businesses and also for the entire state of South Australia.
All of a sudden light weight lithium-ion batteries had made an enormous jump from powering toys, phones and pushbikes to cars, houses and industry.
With reliable, baseload coal power on the way out and more electricity coming from sporadic renewable sources such as wind and solar, large lithium batteries offered one solution for stabilising electricity grids around the world.
In this report we are going to look at the production and demand side of lithium, the companies that dominate current production and the long list of Australian producers and explorers that are trying to meet the future demand for this light but extremely useful metal.
Demand: bigger batteries need more lithium
With much bigger batteries comes much bigger demand for lithium carbonate and other battery components such as graphite and cobalt.
As the Musk revolution took hold, it did not take long for people to start making projections and checking out the state of supply of lithium – which until a couple of years ago was predominantly used for making ceramics, glass and other industrial applications such as grease.
What the analysts found was that a serious supply response would be needed if the projected demand for lithium carbonate was going to be fulfilled.
Most analysts now expect global lithium carbonate demand to double, or even triple by 2030.
In China alone, five million so called “new energy’’ electric vehicles are expected to hit the road by 2020 and in the West the electric car revolution is moving from being of niche interest and into the mainstream.
Just a couple of years ago in 2015, the annual lithium market was estimated to be 170,000 tonnes, with up to 40 per cent of that used in lithium ion-batteries.
That demand is forecast to reach 270,000 to 340,000 tonnes by 2020 with lithium-ion batteries swallowing more than half of the supply.
By 2025, demand is set to reach between 500,000 and 600,000 tonnes, with lithium-ion batteries accounting for up to 70 per cent of demand.
Big companies dominate
What really scared lithium users at the start of the lithium price boom was that just four companies dominated world supply, accounting for more than 90 per cent of the light metal.
Manufacturers like to have a variety of supply options rather than a small number of dominant suppliers so this scenario was particularly scary.
The world’s biggest mine – Talison at Greenbushes in Western Australia – produces around a quarter of the world’s lithium supply and is owned by heavyweights China’s Tianqi Lithium and US company Albermarle.
SQM (Sociedad Quimica y Minera) in Chile and FMC Lithium in the USA speak for the bulk of the rest of world supply and all are looking at protecting their positions by boosting production further.
Search for new lithium deposits
Most of the world’s lithium carbonate comes from mines of two distinct types – brine pool deposits and rock deposits such as spodumene and pegmatite.
Brine pool mines are found mainly in the so called lithium triangle in South America which encompasses parts of Chile, Bolivia and Argentina.
Brine pools are found throughout the Andes mountain chain and Chile and Argentina are currently the biggest lithium producers. However, very big deposits are also found in Bolivia and are now being developed.
The United States also has some large brine producers in Nevada and some deposits are found in Wyoming.
Australian lithium mines are predominantly rock deposits, although some brine deposits in dry lake systems also have potential for commercial exploitation.
Australia to the rescue
Australian miners are known around the world for their excellence and entrepreneurial spirit and with the price of lithium rising sharply and forecasts of compound annual demand growth in the market of more than ten per cent a year, it was only natural that they would respond.
There are now a host of lithium producers and explorers to choose from on the Australian stock exchange and during rapid lithium price booms such as the one experienced during 2016 they have been responsible for some absolutely stellar share price rises – doubling and even tripling in some cases.
Strong share price rises are not limited to companies already producing lithium.
You only need to take a look at the share price graph of Pilbara Minerals to see what can happen to a company when it locks in an offtake agreement – in this case a late September deal with Chinese automotive heavyweight Great Wall Motors to supply raw materials for the batteries in its electric and hybrid vehicles.
This was a pioneering offtake deal with an actual car company rather than with a chemical company or trader, which shows that those companies at the end of the production chain are getting anxious about locking in their lithium supplies in the midst of tightening supply.
List of lithium stocks on the ASX
With lithium set to play a vital role in the future of humanity, investors are taking note and seeking to gain exposure to the commodity.
Let’s dig a little deeper and peek into the various lithium companies listed on the ASX and their unique stories.
Galaxy Resources (ASX: GXY)
Galaxy Resources has become a heavyweight in a fairly short time, with a market capitalisation now well above $1.2 billion.
It has grown to that size through a combination of developing its large Mt Cattlin mine near Raventhorpe in WA and through acquisitions of development projects at James Bay in Canada (spodumene) and Sal de Vida in Argentina (brine).
Galaxy has admitted it is in discussions with Panasonic, which supplies batteries to Tesla, but has denied reports that a Panasonic deal has been finalised.
Either way, Galaxy is highly likely to strike some long term offtake deals with companies in the battery supply chain this year, given that some other large producers have virtually “sold out’’ their future supplies.
Orocobre (ASX: ORE)
Orocobre is a fascinating lithium stock and has been heavily shorted since it disappointed investors with a production downgrade in February caused by a “spreadsheet error.’’
A small mistake in the spreadsheet led to a snowballing production shortfall which caused the company to be punished when it was revealed. However, the shorting of the stock may have provided an opportunity as it is now priced lower than most other producers.
The Argentinian brine producer has just begun to make a profit and those profits could swell rapidly if it can avoid any more production mistakes at its elevated new Olaroz plant 4000 metres up the Andes.
Investors are also worried about its ability to self-finance a proposed lithium hydroxide plant in Japan.
Profit margins are high at around 60 per cent but scepticism is also high given past management disappointments.
Pilbara Minerals (ASX: PLS)
Pilbara Minerals is widely acknowledged to be sitting on one of the world’s biggest new lithium ore (spodumene) deposits about 120 kms from Port Hedland in the Pilbara region of northern WA.
Drilling has shown a measured, indicated and inferred resource of 156.3 million tonnes containing 1.57 million tonnes of lithium oxide and other valuable minerals including tantalite.
The Pilgangoora Lithium-Tantalum Project came up trumps in a feasibility study completed late last year with a strong internal rate of return of 38.1 per cent and a mine life of 36 years with life of mine revenue estimated at $9.23 billion.
Some offtake agreements are already in place.
Neometals (ASX: NMT) and Mineral Resources (ASX: MIN)
These two companies are partners in the innovative Mt Marion lithium project, 40km south west of Kalgoorlie.
Mineral Resources owns 43.1 per cent of the project among its many other interests while the more concentrated Neometals owns 13.8 per cent, with large Chinese lithium producer Jiangxi Ganfeng Lithium owning the remaining 43.1 per cent.
A revised mineral resource estimate last year rose dramatically to 60.5 million tonnes compare to previous estimates of 23.2 million tonnes.
Latin Resources (ASX: LRS)
Latin Resources has more than 101,450 hectares of exploration concessions in the lithium pegmatite districts of Catamarca and San Luis Provinces in Argentina.
The company also has a portfolio of projects in Peru and is actively progressing its Iron Oxide-Copper-Gold and Copper Porphyry projects in Peru’s Ilo region with its joint venture partner First Quantum Minerals.
Altura Mining (ASX: AJM)
Altura Mining’s Pilgangoora project is a world class hard-rock open pit lithium mine which is scheduled to enter production in early 2018.
The open pit spodumene project, located at Pilgangoora in Western Australia, is approximately 123km drive from the town of Port Hedland.
The mine is being constructed along with processing, logistics and support infrastructure and forecast production is set at 230,000 tonnes of lithium spodumene concentrate a year, with a mine life of 20 years.
Offtake partners have requested a stage two expansion study to satisfy their growth plans.
Concentrate will be exported by ship from Port Hedland to Altura’s lithium partners in China, for further processing into a wide range of lithium chemicals, including lithium carbonate (standard and battery grade), lithium hydroxide, lithium metal and lithium chloride.
Argosy Minerals (ASX: AGY)
Argosy Minerals has an interest in the Rincon Lithium Project in Argentina.
Its flagship Rincon Lithium Project is within the “Lithium Triangle” – host to the world’s largest lithium resources, and has a strategy to fast-tracked lithium production.
Argosy is committed to building a sustainable lithium production company, highly leveraged to the forecast growth in the lithium-ion battery sector.
Anson Resources (ASX: ASN)
The Paradox Brine Project is Anson Resources’ flagship project. It is a subterranean pressurised brine (SPB) and consists of 291 placer claims covering 2,234 hectares, located in the Paradox Basin, 300km from Salt Lake City in Utah.
Very high lithium brine grades have been produced in the area, along with other minerals such as Bromine, Boron, Iodine and Magnesium.
The pressurised brine was first discovered during oil drilling and is so pressurised that it often flows to the surface.
The project is located only 11 hours’ drive from the Tesla Giga Factory and is accessible year round by major sealed roads and rail.
An aggressive exploration schedule began this year, allowing Anson to fast track the progression of the Paradox Brine Project.
Kidman Resources (ASX: KDR)
Kidman Resources holds the globally significant Earl Grey Lithium Deposit.
In December last year Kidman released its maiden Combined Mineral Resource of 128Mt at 1.44 per cent Li2O for 1.84Mt lithium oxide (4.54Mt Lithium Carbonate Equivalent).
An additional pegmatite exploration target has been found nearby.
The company claims the large scale and high grade of Earl Grey propels it into the ranks of tier-1 lithium deposits globally and makes it the largest hard-rock lithium resource on the ASX.
Lithium Consolidated Mineral Exploration (ASX: LI3)
Lithium Consolidated is searching for lithium in South Australia’s large exposed salt lakes with additional concealed potential for lithium bearing brine.
It also has a large suite of other promising lithium exploration projects in Australia, Botswana and Nevada.
Rio Tinto (ASX: RIO)
You may not expect to see the name of a mining giant like Rio Tinto here but it has taken notice of increasing lithium demand and is now undertaking a pre-feasibility study on its Jadar lithium deposit in Serbia. Of course, even if you believe the most bullish forecasts for lithium, they are unlikely to cause much of a blip on Rio Tinto’s overall profitability.
Novo Litio (ASX: NLI)
Novo Litio is listed in Australia and Frankfurt and aims to become a sustainable European lithium carbonate/lithium hydroxide supplier from its Northern Portugal operations.
Europe is leading the world in uptake of electric vehicles and energy storage using lithium-ion batteries and is very keen to manufacture and source lithium-ion batteries locally for security reasons and to stimulate the economy.
Novo Litio has a significant cash pile from the sale of an Australian lithium project and is fully funded until it completes a Definitive Feasibility Study at Sepeda.
Tawana Resources (ASX: TAW)
Tawana Resources is committed to becoming a lithium producer in the next two years and has the Bald Hill Lithium and Tantalum Mine in WA and the adjacent Cowan Lithium Project.
Lepidico (ASX: LPD)
Perth-based Lepidico is a lithium company with global interests based on its ability to commercially extract lithium from unconventional sources.
Its L-Max technology has helped it establish a global footprint in lithium via wholly owned projects and joint ventures in Australia, Canada and Brazil
Lithium Power International (ASX: LPI)
Lithium Power International holds some very promising exploration projects, the best known probably being the Maricunga brine joint venture in Chile which potentially could be quite large. It also has Australian projects near the Greenbushes mine and in the Pilbara plus a project in Argentina.
AVZ Minerals (ASX: AVZ)
AVZ Minerals is a mineral exploration company focused on developing the Manono Project, potentially one of the world’s largest lithium, caesium and tantalum pegmatite deposits. Manono is in the south of the Democratic Republic of Congo in central Africa.
Lithium Australia (ASX: LIT)
Lithium Australia is effectively a technology play, having developed a SiLeach technology which is said to produce much better recoveries and can process all lithium silicates into battery-grade materials without the need for ‘roasting’.
It is developing SiLeach processing hubs in many major lithium provinces including Australia, including Europe, Australia and North America.
It has also negotiated farm out deals on its exploration properties to retain access to the supply chain without taking on exploration funding risk.
MetalsTech (ASX: MTC)
MetalsTech is developing a series of cobalt and lithium projects in Ontario and Quebec which have the advantage of being close to good transport links.
Birimian (ASX: BGS)
Birimian has its Goulamina Lithium Project located in Mali, which covers 295km2 of ground and is currently being explored for its spodumene pegmatite deposits.
Lake Resources (ASX: LKE)
Explorer Lake Resources is undertaking a vigorous Argentinian exploration program looking for lithium brine basins and lithium pegmatites in the lithium triangle.
It has a very large tenement package of around 165,000 hectares, much of which lies near some of Argentina’s largest producing brine and pegmatite areas.
With around $2 million of funding, it could be able to produce some significant news flow in the near to medium term.
European Metals (ASX: EMH)
European Metals‘ Cinovec project hosts what is claimed to be the largest lithium resource in Europe, and one of the largest undeveloped tin resources in the world.
A recently finished Preliminary Feasibility Study showed that Cinovec, within the Czech Republic near the border with Germany, has the potential to be the lowest cost hard rock lithium producer in the world.
The area has a strong local mining culture and workforce and the deposit has the benefit of significant credits of tin, tungsten and potash; ore that is readily crushable and easily processed with access to good infrastructure and low power and labour costs.
Force Commodities (ASX: 4CE)
Force Commodities has just entered the ranks of lithium explorers after signing a binding heads of agreement over two highly prospective lithium projects in the Democratic Republic of Congo.
The explorer is buying a 70 per cent stake in both the Kitotolo and Kiambi lithium projects, located in the Tanganyika province in the Democratic Republic of Congo, about 500 kilometres north of Lubumbashi.
The Kitotolo Lithium project overlays a large portion of the world-class Manono-Kitotolo pegmatite and is just 30 kilometres southwest of AVZ Minerals’ Manono project.
Sayona Mining (ASX: SYA)
Sayona Mining is developing an advanced-stage, hard rock, lithium project in Quebec, Canada. Mineral Resources total 17.4Mt @ 1.02% lithium and the company recently completed its Pre-feasibility Study.
The Pre-Feasibility Study and Ore Reserve Statement (10.2Mt @ 1.02% lithium) has demonstrated the technical and economic viability of developing a simple open-cut mining and processing operation producing lithium concentrate.
An update of the Pre-Feasibility is due early next month incorporating a larger resource, and a number of metallurgical optimisation programs. A DFS will start in November for completion in early 2018.
Greenpower Energy (ASX: GPP)
Greenpower Energy is developing the Morabisi Lithium & Tantalum Project in Central Guyana, about 150km SW of Georgetown.
Guyana is the only English speaking country in South America and is strongly pro-mining with three new gold mines commissioned recently.
It also has the Pretoria project in the MacArthur Basin area of the Northern Territory which is being assessed for Sulphate of Potash (SOP) potential and also for lithium salts.