Lithium Universe to play pivotal role in closing North America’s lithium conversion gap
Lithium Universe (ASX: LU7) has committed to playing a pivotal role in closing North America’s lithium conversion gap and enhancing the region’s supply chain.
The company has addressed the issue in a strategic update centred around strong planned demand in the US and a burgeoning spodumene supply in Canada.
It stated concern over a looming gap in lithium conversion and processing capacity in North America and the relative scarcity of independent converters planned for construction in the region, potentially stemming from a lack of expertise.
“Assuming a planned battery manufacturing capacity of 1000 gigawatts by 2028 using a ratio of 850 grams lithium carbonate equivalent per kilowatt hour, [we] estimate that 850,000 tonnes of LCE will be required per annum to satisfy demand in North America,” the company said.
“Currently, there are no operational converters in North America and [we] estimate approximately only 100,000t of planned hard rock converters are slated for construction in the region.”
“Our strategy is to bridge this gap by leveraging a proven track record in constructing such converters.”
Steady provision
Under its new strategy, Lithium Universe said it would seek to convert essential spodumene supply for multiple original equipment manufacturers (OEMs) in North America to ensure a steady provision of lithium chemicals for their cathode/battery plants.
Currently, such supply needs to be converted in China — which is responsible for over 95% of global conversion capacity — before being shipped back to OEM supply chains in Europe and the US.
North America has previously stated an aim to decrease its dependence on Chinese companies, while Canada has also intensified efforts to reduce Chinese involvement in the sector as part of a “decoupling” strategy.
A November 2022 national security review saw the Canadian government mandate the divestment of Sinomine (Hong Kong) Rare Metals Resources, Chengze Lithium International and Zangge Mining Investment from local critical minerals companies.
Lithium Universe said the prevailing trend towards supply chain localisation presented it with a significant opportunity to leverage.
Limited converters
Lithium Universe said the limited number of lithium converters in North America creates a “significant hurdle” in establishing a dependable supply chain in the region.
It proposes contracts with OEMs based on “take or pay” agreements and incorporating risk-reducing mechanisms such as floor and ceiling prices.
“As long as there is an established margin to guarantee [our] refinery’s payback, these OEMs can gain assurance and sustainability in conversion supply without Lithium Universe being exposed to price and market volatility risks,” it said.
“This presents a win-win scenario and we have already commenced discussions with potential offtake partners.”
James Bay exploration
There are currently over 40 companies dedicated to lithium exploration in the James Bay area of Québec.
Assessments by Lithium Universe indicate a cumulative lithium resource in the region exceeding 500Mt at more than 1% lithium oxide across eight projects.
This amount has increased more than 100% over the last 12 months due to an upgraded resource of 110.2Mt at 1.3% lithium oxide by Arcadium Lithium (ASX: LTM) at its James Bay project, a maiden resource of 109Mt at 1.42% lithium oxide at Patriot Battery Metals’ (ASX: PMT) Corvette development and an announcement by Winsome Resources (ASX: WR1) of a 59Mt resource grading 1.12% lithium oxide at the Adina discovery.
“Despite these advancements, the James Bay region remains relatively underexplored compared to more established lithium industries, such as those in Western Australia,” the company said.
“We anticipate continued globally-significant discoveries and resource upgrades in the region in the years ahead.”
“The genuine prospectivity of James Bay, combined with its active exploration scene, presents a promising supply opportunity for our proposed lithium carbonate refinery.”