JOHANNESBURG (miningweekly.com) – Advances in energy-storage technology and rising demand for batteries from the global electric vehicle (EV) market are driving the need for technology minerals – such as lithium and graphite – which are increasingly used in lithium-ion batteries.
The sectors mining these industries are “young and niche” and not commoditised yet, says London-based research firm Benchmark Mineral Intelligence director Simon Moores.
“However, these minerals are [rapidly] gaining further traction in the battery market, which is experiencing very strong growth and entering a hypergrowth period over the next decade. Consequently, the lithium and graphite industries will have to completely restructure for this new substantial market.”
Professional services firm EY mining and metals sector leader Wickus Botha agrees, telling Mining Weekly that, given the rapid rate at which technological innovation is taking place, “the demand for technology- based minerals and metals is sound for the next decade”.
He adds that, more importantly, the pace at which the energy-management market is being transformed will inform the pace at which demand for these minerals will grow and how they will be used.
The surge in lithium-ion megafactories, of which the Tesla gigafactory, in Nevada, US, is but one, indicates that these batteries are improving in quality, becoming cheaper to produce and, therefore, more abundant, leading to rapid market uptake in both existing and new markets, according to Moores.
Currently, almost half the lithium and graphite produced is used in battery applications, with about 45% of lithium, a mineral dominated by the battery market, converted to chemicals for use in battery manufacturing.
About 160 000 t of lithium chemicals, measured in lithium carbonate equivalent, was produced in 2015, according to Benchmark Mineral Intelligence’s research. The firm forecasts that the market catering for graphite, the anode in lithium-ion batteries, is set to increase from 80 000 t/y in 2015 to at least 250 000 t/y by the end of 2020, with significantly more tonnages required thereafter.
Similarly, advisory firm Global Lithium president Joe Lowry expects global demand for lithium carbonate to rise to between 260 000 t/y and 280 000 t/y by 2020, from about 163 000 t/y in 2015. Larger spikes are expected after 2020, according to risk management consultancy PGI Intelligence’s latest 2016 ‘Insight’ report.
However, there are shortages currently in the lithium industry, which are expected to become severe by the end of this year, owing to demand from Asia, particularly China, for lithium-ion battery production, Moores explains.
Consequently, the price of the mineral has soared, doubling outside China in the past six months.
The lithium carbonate price ranges from $10 000/t to $12 000/t, while the lithium hydroxide price is about $14 000/t. In China, the lithium hydroxide price reached its highest level – $30 000/t – during the first quarter of this year. However, the prices of both lithium carbonate and lithium hydroxide have since subsided.
Moores expects that high prices will be the mainstay of the lithium industry for the next two years and does not expect a collapse.
While mining consultancy Core Consultants MD Lara Smith highlights that lithium carbonate prices in China have surged by 253% over the past year, she does not expect prices to continue increasing indefinitely.
“[With] the hype surrounding this element, analysts are forgetting that lithium is just a commodity and, as is the case with most commodities, economics and profits drive technological advances, which make way for substitutes, efficiency of use or recycling and, ultimately, prevent prices from going unchecked for too long,” she avers.
While graphite serves the steel industries in an uprocessed form, serving the battery market will require a value-add process, such as in the production of spherical graphite, Moores explains.
Flake graphite production since the beginning of the year has reached 608 000 t/y, according to Benchmark Mineral Intelligence, with most of the mineral delivered by China, which produced 66%, or 350 000 t, of the world’s supply last year.
The price of flake graphite concentrate, at about $700/t, is currently depressed, given the struggling steel market, Moores states. But he highlights a positive outlook for the price of value-added spherical graphite, which has increased from $3 000/t to $3 300/t this year and is expected to reach highs of up to $4 000/t in the next 18 months.
Despite raw material availability, Moores warns of a spherical graphite supply constraint in the next two years, owing to a current lack of capacity at spherical graphite processing plants across the world.
Meanwhile, Smith notes that the low price of oil is leading to questions about the projected high demand for EV sales, adding that the evolution of efficient mineral recycling and disruptive technologies, such as driverless cars will, ultimately, owing to fewer cars, reduce the need for lithium-ion batteries.
Consequently, not as much lithium needs to be mined for virgin, or raw, material, Smith suggests.
She points out that there were about 80 lithium projects worldwide in 2009 and less than half that number by 2011, as it did not appear that the lithium industry would take off as expected.
“Now, for the first time, it is valid to expect that EVs will be propelled by lithium-ion batteries. Consequently, more projects are starting up again . . . however, the majority of them will not be realised, as only low-cost, sizeable and quality-grade projects will be realised.”
More than half the earth’s identified lithium resources are in South America’s so-called lithium triangle – Chile, Argentina and Bolivia – as well as in Australia.
Nevertheless, current battery demand is driving interest and potential investment in regions including Africa, reflected in announcements of intended acquisitions of lithium and graphite projects in the past year.
Australian junior Auroch Minerals acquired the Hombolo project, in Tanzania, to take advantage of the strong outlook for lithium in the battery market, Mining Weekly reported in May.
Auroch has entered into a conditional agreement to buy an Australian company that, through a Tanzanian subsidiary, owned or had the right to Hombolo, which comprises 21 licences and applications and covers 1 700 km2.
The project is adjacent to ASX-listed Liontown Resources’ Mohanga lithium/ tantalum project, where grades of 5.2% lithium oxide and 0.11% tantalum in pegmatites have been announced.
Moores avers that there is yet to be a significant exploration boom on the African continent, but describes these developments as “interesting, as I have no doubt that Africa will have a large lithium deposit”.
Indeed, East African graphite projects currently show substantial potential, and Moores describes the deposits being scrutinised as being large and boasting high-quality grade flaked graphite deposits and lower potential production costs.
“The graphite industry hasn’t had a new big mine for 30 years . . . even in a depressed state, it is ready for a new, big, low-cost graphite mine. [And] it will probably come from East Africa,” he states. For such a mine to succeed, the production costs will have to be lower or on a par with China’s graphite production costs of less than $500/t.
Ongoing graphite projects in Africa include Syrah Resources’ Balama mine, in Mozambique, the industry’s most advanced, and projects in Tanzania, including Black Rock Mining’s Mehange project and Kibaran Resources’ Epanko project.
Syrah raised A$194-million for Balama, which has a maiden mineral resource of 16.3-million tonnes, and has updated the project’s cost estimates and development schedule. The project will produce its first ore in the second quarter of next year and will require $175-million to complete.
In addition, natural resources project developer Armadale Capital has entered into an agreement to acquire the Mahenge Liandu graphite project, in south-east Tanzania.
Armadale chairperson Justin Lewis suggests that, with the graphite market in a developing phase and production currently dominated by China, miners can secure market share for their product by entering into long-term offtake agreements prior to developing their mines. This will ensure that they do not rely on selling to an underdeveloped market, he adds.
Smith, however, points out that the concern with graphite is that it is expected to be the first casualty of the battery development saga. “In 2014, American news website Science Daily indicated that silicon can replace graphite. Most battery manufacturers agree that lithium as a play is more feasibile in the short term (five years),” she says.
Meanwhile, Botha believes exploration to be “a little divorced” from mining, as mining companies are still mitigating the significant slowdown and do not have access to finance to fund exploration.
Consequently, he suggests that existing mines can focus on running a very productive operation and look towards an incremental increase in production over the short term until they can build new mines or replace some production.
“Further, as mining majors are not focusing primarily on these minerals, it creates a good niche and opportunity for junior and midtier miners to take ownership and dominate the market for these technology minerals,” Botha says.
Serving the battery market entails value- add activities, with mining companies having to think like chemicals companies, Moores stresses, noting that lithium and graphite do not form part of a “commodity game”.
The minerals have to be physically and chemically processed for use as battery-grade material, with customers having different specifications for the product.
Moores believes that this is the key challenge for industries. “Having the money [to mine] does not necessarily equate to having the know-how [for processing],” he says, adding that mining companies often underestimate this challenge.
“It is a specialist minerals game and will be for ten years, until the industry, when significant enough, becomes commoditised,” he says.
Smith, however, does not fully agree, noting that, while it is indeed a chemical game and the ability to process is paramount, “we live in a world where everything is eventually commoditised”, especially technology and, by extension, all the components that drive this technology.
“Lithium/graphite plays directly into the technology story. Technology is becoming more ubiquitous and, therefore, cheaper. Everything that feeds into this technology . . . needs to become cheaper and more efficient. Ultimately, the cheapest producer with the most suitable grade will win. Further, as recycling becomes efficient at the downstream level, this will compete with virgin material. Producers need to apply commodity rules from the outset if they are to succeed,” she concludes.