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Thursday, May 20, 2010

San Francisco Startup to Mine Lithium for Batteries

Mining Weekly
Many new lithium entrants as electric cars, consumer goods drive demand


When the global recession spilled like hot coffee on the collective lap of consumers worldwide, sales of luxury goods spiralled downwards, dragging lithium demand with them.

The lithium market is dominated by industrial applications such as ceramics and glass, laptop and cellphone batteries, greases, aluminium production, air treatments, thermoplastic production, and that newest of automotive thrills, the electric car.

Demand for most of these applications dimmed in 2009 and, consequently, lithium uptake also decreased, says US Geological Survey beryllium, gallium and lithium commodity specialist Brian Jaskula.

“There is currently an oversupply of lithium due to the economic downturn that began in 2008,” he says.

In 2009, worldwide lithium production decreased some 30% from that of 2008, while worldwide lithium consumption decreased by 15% to 20%.”

Despite the global economy now inching out of intensive care, as well as burgeoning demand from electric vehicle developers and for laptop computer batteries, Jaskula believes it will take some time for the lithium market to return to 2008 levels.

That said, lithium-ion batteries used in transportation applications provide hope for a sturdy recovery, as it is set to be the fastest-growing end use for lithium during the next decade, he adds.

SQM (Sociedad Quimica y Minera), of Chile, currently the largest lithium producer in the world, and Roskill Information Services both estimate this end use to grow at a compound annual growth rate of more than 40% during the next decade.

However, warns Jaskula, “even with this huge growth rate expected in the trans- portation area, lithium demand is not anticipated to outstrip supply by 2020, because all of the current lithium producers have a series of lithium capacity expansion plans in place that should meet any demand scenario”.


The list of global lithium producers is topped by Chile (45%), followed by Australia (23%), Argentina and China, leaving the fifth spot to the US, where there is currently only one lithium producer.

Lithium for batteries comes mainly from South America and China, while lithium minerals used for the glass and ceramics industry are sourced predominately from Australia.

The four dominant corporate producers are SQM (Chile), FMC (Argentina), Chemetall (Chile) and Talison Lithium (Australia), with several projects under development by emerging lithium miners.

In a January 2010 presentation, SQM said that the recession-hit lithium capacity utilisation rate worldwide was only 57%, and that this was expected to increase to 66%, owing to demand recovery and other foreseen capacity expansions.

The worldwide utilisation rate was expected to remain lower than 75% until 2020 – con-sidering only current producers’ capacity expansion plans.

SQM believed the lithium market would remain well supplied over the next 15 years by the current lithium producers.

By including the capacity of potential new entrants, SQM said, the worldwide lithium capacity utilisation rate would remain below 55% until 2020.

In such a scenario, SQM warned, the lithium market would move to a situation of oversupply over the next 20 years.

However, says Jaskula, “there are others in the industry that believe Western-based lithium analysts have completely under- estimated the potential lithium demand from Asia, especially China, which may provide lucrative markets for emerging lithium producers”.

Jaskula says the official energy policy in China is that 10% of cars will be emission-free electric vehicles by 2013, and 20% of power will come from renewable resources by 2020. (To support renewable energy, battery storage is necessary, and batteries require lithium.)

“It was projected that there will be 80- million electric two-wheeled vehicles worldwide (mostly in Asia) by 2016,” notes Jaskula.

Well-entrenched lithium-miner Talison Lithium agrees with Jaskula and SQM on where demand will come from, but CEO Peter Oliver notes that “everyone has a different forecast for how demand will grow”.

Talison Lithium mines and processes lithium-bearing mineral spodumene at Green-bushes, near Perth, in Western Australia. (The shareholders of Talison withdrew a proposed initial public offering in December owing to weak market conditions leading up to Christmas and year-end.)

Roskill Information Services estimated lithium supply in 2008 at about 121 364 t lithium carbonate equivalent (LCE), says Oliver.

Consultants are forecasting 10% to 20% penetration rates by 2020 for electric vehicles and hybrid electric vehicles.

This could represent an increase in demand of up to 286 000 t LCE.

“Therefore, demand for lithium is expected to grow,” says Oliver. “However, the rate of increase in demand depends entirely upon what assumptions are used for rates of growth in energy storage systems and electric vehicles.”

Major automotive manufacturers are currently tooling up for the mass production of hybrid and electric vehicles, he adds.

Japanese vehicle manufacturer Nissan has started taking orders for its Leaf electric car.

Another Japanese manufacturer, Mitsubishi, has announced that it is lowering the price of the Mitsubishi iMiev electric car to match the pricing of the Nissan Leaf. The company has also announced that it intends to increase iMiev production to meet demand.

The first electric vehicles are also to hit US streets later this year.

Tru Group president Edward Anderson says that lithium use in batteries has been one of the major drivers of lithium demand since the rechargeable lithium-ion battery was invented in the early nineties, with the use of these rechargeable batteries in consumer electronics such as cell phones and laptops key to much of the growth since 2002.

Batteries accounted for about 14% of total lithium consumption in 2007.

“Further global proliferation of consumer electronics and the potential for electric vehicle batteries will push this proportion to almost 40% by 2020,” says Anderson.

He believes electric car battery use will start to take off in 2015, which will influence lithium consumption sharply.

However, should there indeed be a healthy uptake in demand for these electric vehicles, it does not necessarily ensure an easy entry for emerging lithium producers.

Oliver believes that the four current lithium producers have each been in production for more than 20 years, and that they all have the ability to expand their current production capacity to meet demand forecasts.

For example, Talison expanded its production capacity and output during 2009, and has plans to further increase production over the next few years.

“None of the development projects currently being promoted have completed development, permitting, financing, construction or commissioning. Nor have any of these projects fully developed the sales, marketing and distribution networks necessary to sell their products. As with any development project, there are con- siderable risks associated with development, permitting, financing, construction and commissioning, and there is no guarantee that any of these development projects will achieve commercial production.

“If some of these development projects are successful, they will contribute to supply,” says Oliver.

Jaskula waves a red flag on a possible over-supply-price-pressure scenario.

He warns that, if some of the development projects currently in the pipeline start producing lithium in the near term, adding to the production of lithium by current suppliers, then there may be an oversupply of lithium in the next decade.

This could drag down prices, potentially pushing some emerging producers out of the market “since the reduced lithium price may then be lower than their production costs”.

The lithium price is already under pressure.

Although demand dropped last year, 2009 lithium prices remained at levels similar to those of 2008, However, in late 2009, SQM announced that it would reduce its lithium prices by 20% for all contracts written in 2010.

Other lithium producers have not yet announced any price decreases for 2010, says Jaskula.


Canada Lithium, sporting an electric vehicle on its home page, is an emerging lithium producer.

Investor relations director Olav Svela says the company is upbeat about the demand for the commodity.

“Our own projections suggest supply will reach approximately 185 000 t in 2015, and that demand will likely be higher than that, given the projected growth in demand due to electric car and motorcycle batteries.

“We think that even with new producers coming on stream, or expansion by existing producers, lithium prices will rise.”

Svela says he believes the North American company’s work carries more importance than merely speaking to a pure supply-demand situation.

“US President Barack Obama says he does not want an Organisation of the Petroleum Exporting Countries-style cartel controlling the lithium industry. That is why we view our project as strategic to US interests because we are in mining-friendly Canada.”

Canada Lithium has initiated a prefeasibility study on its Quebec lithium project, near Val d’Or.

“We plan to be commissioning the mine and the processing plant by 2012,” says Svela.

Western Lithium is another emerging lithium producer and is developing its Nevada lithium deposit, in the US, to support what it says is “the new generation of hybrid/ electric vehicles”.

Western Lithium president Jay Chmelauskas tells Mining Weekly that the electric car has “the potential to completely change the nature of the lithium industry”.

He says a growing number of automotive industry leaders and analysts expect at least 10% to 25% of vehicles to be electrically powered in some way by 2020.

“An automotive market with 10% electric vehicles and 25% hybrid vehicles is estimated to require around 300 000 t of battery grade lithium carbonate per year,” says Chmelauskas.

“To put that into perspective, that is three times the size of the entire lithium market at present and 15 times the amount of battery-grade lithium carbonate that is being made today.

“We expect additional production to come on line over the next several years to match the development of the electric vehicle. Some of that is expected to come from current producers; however, we expect to see additional projects from outside the current geographic- ally concentrated supply base, which will also mitigate some of the political, social and geographical concentration present in the existing supply structure.”

Chmelauskas says Western Lithium’s project in Nevada, scheduled for full production in 2014, “is very well timed to take advantage of the projected demand upswing, and is particularly well suited to the just-in-time manufacturing culture of the automotive industry. Our production brings geographic diversity, is scalable and has significant flexibility in both quantity and quality.”

Western Lithium has one of the world’s largest known lithium deposits.

Developing it is a scalable project, with 8% of the historical deposit scheduled for development in the first stage and potential production of 27 700 t of lithium carbonate a year, and with a potential by-product of 115 000 t of potassium sulphate a year.

Cash operating costs are estimated at $1 967/t of lithium carbonate, after the potassium sulphate by-product credit.

“Following a positive scoping study released earlier this year, we are now proceeding with further engineering and pilot plant studies to advance the project to prefeasibility,” says Chmelauskas.

“We are in discussions with major lithium buyers to define product quality specifications, long-term supply requirements, and we expect to work with these groups through the piloting programme.”


As of 2008 – the latest date available for worldwide consumption data – Roskill estimates that China and Europe are the largest consumers of lithium, each accounting for about 28% of total consumption.

Japan and North America (13%) are the next biggest consumers.

The US is the world’s largest importer of lithium carbonate, which it converts into downstream products, or into lithium hydroxide, for the export market.

As lithium is used in batteries for cellphones and laptops, and in new-generation electric cars and defence vehicles, it has morphed into a strategic source of energy.

“As with other commodities such as oil, iron-ore and copper, Japan and China are trying to secure long-term supply of other commodities important to their industrial growth,” notes Oliver.

“If the forecast growth in electric and hybrid vehicles materialises, then lithium may also become a strategic commodity.”

Chmelauskas believes that lithium is increasingly viewed as a strategic resource, and specifically to support the large-scale investments being made in the electric vehicle sector.

“Auto manufacturers and large-scale suppliers to that industry realise that the lithium-dependent sector of their end market – electric/hybrid automobiles, cell phones, computers – could easily generate revenues of $300-billion a year by 2020 and, so, are looking ahead to secure reliable supplies. We are starting to see countries and com- panies making investments today to ensure a stable and diversified supply of high- quality lithium.”

“Some countries do seem to be scrambling to secure supply,” concurs Jaskula. “Japan has struck deals with Argentina and possibly Bolivia. Canada is staking many mining claims, both inside and outside of Canada.”

He says last year turned out to be quite a boom year for lithium exploration, as there was a “huge increase in the number of potentially emerging lithium producers worldwide since 2008”.

As of January this year, more than a hundred companies are actively looking for lithium, with 68 of these companies being Canadian.

Jaskula says 144 new properties have been staked or claimed and are being evaluated.

“Some of these new companies are already fully financed and carry no debt, as their investors believe lithium may be the next gold rush.”

There are many companies staking claims in the US in anticipation of obtaining lithium from both mineral and brine sources, adds Jaskula.

Hectorite clays and geothermal brines are also being explored.

“Western Lithium is currently developing a lithium-rich hectorite clay operation and is making good progress.

“Geothermal brines located in southern California and throughout the world are generally rich in lithium, as well as other profitable industrial minerals. Simbol Mining is exploring the viability of obtaining lithium from geothermal waste streams generated by California’s Mammoth Lakes geothermal plant.”

In Africa, Zimbabwe, Niger, Namibia, Senegal and Côte d’Ivoire have known lithium deposits.

Jaskula is, perhaps, more cautious in his long-term market outlook than the various mining companies.

“There is more than enough economically obtainable lithium available in the short to medium term to meet the needs of lithium for hybrid and electric vehicles, no matter what the future demand is from these vehicles. In the long term, once recycling of lithium vehicle batteries has reached its cost-effective stride, approximately 20 to 30 years from now, the primary source of lithium from then on will be from recycling, and not from virgin lithium sources.

“Also, lithium battery chemistry development is in an extremely dynamic phase right now, with each new generation of battery chemistry offering more power, lower cost, greater driving distances, and lower lithium requirements than the [previous] battery chemistry.”


Anderson expects another “breakthrough for lithium” to be the adoption of lithium metal in alloy production.

“An addition of 1% of lithium to aluminium results in a 3% reduction in weight and a 5% increase in stiffness. This offers quite an advantage in aerospace. We see these alloys have now already been adopted, even for structural uses in mainstream commercial aircraft like Airbus and Boeing.”

Anderson says this means the long-term lithium use in alloy production will become “quite major, following a strikingly similar adoption curve over time [to that for] batteries”.

He expects demand from this market to take up 10% of lithium supply in 2020.