May 2022
Australia, the world’s largest producer of hard-rock lithium spodumene, is accelerating lithium projects amid increasing market tightness, which has fuelled strong price momentum over the last 12 months.

We expect new and restarting lithium assets, coupled with expansions, to add 351,685tpa of lithium carbonate equivalent (LCE) production capacity (351,537tpa of concentrate and 148ktpa of chemicals) in Australia by 2025. However, these forecasts are subject to a strong degree of uncertainty, given that project timelines have consistently been delayed by the pandemic and global supply constraints, in everything from equipment to labour.

Meanwhile, the country is gearing up to produce the country’s first battery-ready lithium chemicals as supply security concerns grow. The Kwinana refinery near Perth in Western Australia, a joint venture between Tianqi and Australian miner IGO, will turn refined spodumene from the nearby Greenbushes mine into lithium hydroxide. Greenbushes is the largest lithium asset in the world.

Western governments have expressed growing concern over China’s control of the lithium supply chain, given that production of electric vehicles and new energy technologies will see demand for lithium skyrocket in the coming years. The average light electric vehicle uses about 9kg of lithium. Currently, most of Australia’s spodumene concentrate is exported to China for processing, before being transformed into a battery pack in China, Japan, or South Korea. China alone controls nearly 80% of the world’s processing and refining of those critical minerals.

Australia’s lithium export volumes are forecast to rise to 287,264t LCE in 2021-22, up from 241,563t LCE in 2020-21, according to government forecasts. By 2026-27, this is forecast to jump to 692,638t LCE. Increased shipments, coupled with rising prices, is estimated to boost the export value of lithium to A$2.8bn in 2021-22, up from A$1bn in 2020-21. In 2026-27, the export value is forecast to jump to A$6.7bn.

As supply security becomes increasing important following Russia’s invasion of Ukraine, geopolitical considerations will play a larger role in investment decisions. Australia has strong ties to NATO and participates in the Quad defence framework with Japan, the US and India. This month, India and Australia announced plans to jointly invest US$6m to explore lithium and cobalt mines in Australia over the next six months.

Furthermore, Australia is an attractive destination for foreign investment, given its political and economic stability, technology, environmental and labour standards. The world’s biggest lithium producers—China’s Ganfeng, US-based Albemarle and Chile’s SQM—have brought into Australian biggest lithium mines in recent years.

Most global lithium production comes from four mined operations in Australia, two brine operations each in Argentina and Chile, and two brine and one mined operation in China. Australia has the fourth largest global lithium resources with 7.3Mt, surpassed only by Bolivia (21Mt), Argentina (19Mt) and Chile (9.8Mt), according to data from the United States Geological Survey (USGS).

 

 

Additional Lithium Ore Capacity

Commissioning of new and restarted projects, as well as the expansion of existing operations, will be needed to keep pace with unprecedented demand growth.

 

New Sites

Finniss

Core Lithium expects first spodumene production from its Finniss mine in Australia’s Northern Territory in the December quarter of 2022. Stage one would require an initial capital investment of A$89m (US$64.92m) to support 5.8% Li2O spodumene production of 175ktpa from a 1Mtpa plant—equivalent to 25,101tpa of LCE.

 

Kathleen Valley

Liontown Resources is targeting first production from its Kathleen Valley lithium project, in Western Australia, during the June quarter of 2024. Liontown plans to produce 500ktpa of spodumene (6% lithium) at the project (74,190tpa LCE), which will increase to 700ktpa (103,866tpa LCE) in the sixth year of production. The site will be 60% powered by renewable energy when it comes online in 2024, rising to >75% in 2029.

An Ore Reserve of 69Mt at 1.34% Li2O and 120ppm Ta2O5 supports an expected mine life of ~23 years. The 2021 Definitive Feasibility Study (DFS) outlined a post-tax NPV (8% discount) of A$4.2bn (US$3bn) and post-tax IRR of 57%. It is expected to have an all-in sustaining cost (AISC) of US$452/t spodumene for the first ten years of production. The project has secured offtake deals with LG Energy Solutions and Tesla. A Final Investment Decision (FID) is expected in June 2022.

 

Restarts

Wodgina

The biggest source of additional capacity will come from the restart of Albemarle and Mineral Resources joint venture, Wodgina, in Western Australia. The first 250ktpa (6% spodumene) train at the giant mine will be ready to produce spodumene in May. Before it has even restarted, the owners have approved the resumption of production at the second train, with first concentrate expected in July. Wodgina has three 250ktpa (37,095tpa LCE) trains in total. The mine was put into care and maintenance in 2019. The mine’s ownership has recently been changed to 50/50, from 60/40 Albemarle/MinRes. In 2019, Albemarle brought a 60% stake in Wodgina from MinRes for US$820m (A$1.2bn).

 

 

Expansions

Mt Marion

Ganfeng and Mineral Resources plan to expand spodumene concentrate production at their jointly owned Mt Marion project, in Western Australia, to 900ktpa (6% lithium) by the end of 2022—equivalent to 133,542tpa LCE. The increase in output will come from a Dense Media Separation (DMS) plant upgrade, a new crushing circuit and an upgrade to the mine camp.

The JV boosted production capacity to 600ktpa (89,028tpa LCE), from 450ktpa (66,771tpa LCE), at the end of April 2022, from an upgrade to the site’s processing facilities. The mine, located 40km south-west of Kalgoorlie, underwent an upgrade in 2018-2019 to increase its nameplate capacity to 450ktpa. Production from the mine started in February 2017.

 

Ngungaju

Pilbara Minerals is aiming to produce 180-200ktpa (26,708tpa-29,676t LCE) of spodumene (6% lithium) from the Ngungaju processing plant, which is currently on care and maintenance, from the September quarter. However, the company has cited labour issues and cost inflation as dampening progress. Pilbara acquired neighbouring Altura Mining in January 2021, which included the Ngungaju plant. Once fully ramped up, Pilbara’s combined annual spodumene production capacity at its Pilgangoora operation—which also consists of the Pilgan plant—will rise to between 540-580ktpa (80,125-86,060t LCE).

 

Greenbushes

The giant Greenbushes hard-rock mine, owned by Tianqi Lithium/IGO JV (51%) and Albemarle (49%), plans to bring online two new chemical grade plants and ramp up a new Tailings Retreatment Project (TRP).

Greenbushes has boosted its spodumene concentrate production capacity to 1.5Mtpa by the end of 2022, from around 800ktpa in 2021. The increase in output will come from the 520ktpa-capacity Chemical Grade Plant 2, which restarted last year, and boosted the operation’s processing capacity to 1.34Mtpa of lithium concentrate. Meanwhile, the new TRP, at a cost of A$144m, began initial production in February and will ramp up progressively. TRP is expected to produce 280ktpa of chemical grade spodumene concentrate (6% lithium) for five years.

Construction of chemical grade plant 3 (CGP3) is ongoing and expected to be completed in 2025 at a capital cost of A$627m (up by A$69m from the June 2021 estimate). CGP3 is expected to add an additional 520ktpa of spodumene (6% lithium) to Greenbushes’ production. Following the ramp up of CGP3, Greenbushes’ total combined chemical grade spodumene capacity would rise to 1.92Mtpa (284,890 LCE). Construction of chemical grade plant 4 (CGP4) will follow CGP3, with all external approvals having been secured and funding to be generated internally, using internal financing.

The TRP and CGP3 will add to the technical grade plant, which has a production capacity 140ktpa of technical grade spodumene and CGP1, which has a production capacity of 600ktpa of chemical-grade spodumene (6% lithium)—equivalent to 89,028tpa LCE. First production at Greenbushes began in 1983.

Late last year, Australian miner IGO acquired 24.99% of Greenbushes and 49% of the Kwinana lithium hydroxide plant, from Tianqi, for US$1.4bn. This gave IGO a 49% stake in Tianqi Lithium Australia, with the remaining 51% owned by Tianqi.

 

 

New Processing Sites

Kwinana

Tianqi and IGO’s Kwinana refinery near Perth is expected to be the first of three planned lithium hydroxide refineries in Australia. At Kwinana, construction of 24ktpa Train 1 is fully constructed and in the trial production stage and is expected to deliver the country’s first battery-grade lithium hydroxide this year. The company has also committed A$18m (US$12.9m) to construct Train 2, which would add a further 24ktpa of production capacity.

 

Kemerton

US-based Albemarle and Australia’s Mineral Resources plan to produce 50ktpa at their joint-venture Kemerton refinery, starting this year. Train 1, with a 25ktpa-capacity, is mechanically complete, with commissioning having begun and first sales expected in the late 2022. Train 2, also with a 25ktpa-capacity, is expected to be mechanically completed in the September quarter.

Kemerton is expected to ramp up to 100ktpa over time, once fully operational. The plant will process spodumene produced at the Greenbushes and Wodgina mines. Kemerton is 60% owned by Albemarle and 40% by MinRes.

 

Covalent

Meanwhile, Australia’s Wesfarmers and Chile’s SQM plan to produce up to 50ktpa of lithium hydroxide from their joint-venture Covalent refinery, in Western Australia, from 2024. The project, which is expected to create 1,000 construction and 350 operational jobs, also involves the construction and operation of a spodumene mine and concentrator near Mount Holland. A Final Investment Decision (FID) for the project was reached in February 2021.

Over an estimated project life of 47 years, the integrated project would deliver EBITDA of US$22bn, and average revenues of US$713m a year. Wesfarmers originally acquired the interest in the project through a 2019 acquisition of junior Kidman Resources for A$776m.