Canada-based integrated engineering, managing and planning comp- any TRU Group, which serves the mining and manufacturing industries, reports that the steady global economic recovery will provide some sustenance for the production and consumption of niche metals such as magnesium, lithium and rare earths.

“However, growth for these metals, as well as for the main structural metals, such as steel and aluminum, is mitigated by the sluggish performance of the Chinese economy and the economic uncertainty and auste- rity in Europe,” says TRU Group VP John Roumeliotis.

Further, the company highlights that new oil and gas mining technology, notably fracking, will result in some major structural changes in the minerals and metals processing, smelting and refining industry.

“We believe that the lower natural gas prices in the US are here to stay and are a potential game-changer for American metal processing, particularly in processes where heat is the main consumable. Natural gas prices in the US are now competitive with those in Qatar,” notes Roumeliotis.

Meanwhile, TRU Group says, for mining projects, the primary challenges are to deve-lop the best viable mineral and chemical process, at the app- ropriate scale, within realistic financial projections.

“The hype surrounding lithium and rare earths has had analysts and project developers pro- moting scenarios where tight supply, shortages and high price escalations for these metals would be the new norm,” says Roumeliotis, adding that, for several of these prospects, profitability was based on inflated price expectations for their products.

A summary report of a market study conducted by the company in 2007 entitled ‘Shocking Future Battering the Lithium Industry Through 2020’ was presented at the Industrial Minerals Lithium Supply & Markets conference in 2011, in Toronto, Canada. It indicated that existing lithium producers had sufficient expansion capacity and that there was some space in the market to accommodate a few new lithium pro- ducers, which would mitigate against potential shortages and escalating prices.

TRU’s price projections for lithium carbonate made in 2007 ($4 500 about 20%) are reflected in the current export prices FOB Chile; in the last two year per- iod, prices were below $4 500/t and still remain within 10% of that price.

“The escalation and peak in rare earths prices in 2011 have largely been erased, with the realisation that supply constraints and price escalations would be eased when new resources were developed and new production came on line,” he says, adding that export prices FOB China for various rare earths oxides are indicative of this price trend.

The company highlights that each mining sector has its own challenges.
“In terms of lithium extraction and downstream production of primary derivatives, such as lithium carbonate and lithium chloride, brine-based projects are more economical than hard-rock mines,” says Roumeliotis.

TRU states that the lithium chemicals industry is domi- nated by the three South America-based major pro- ducers – Chilean producers SQM and Sociedad Chilena de Litio (Chemetall), both at Salar de Atacama, and Argentinean producer Minera Altiplano, at Salar de Hombre Muerto – which mine the richest and largest known brine deposits.

Meanwhile, leading glo-bal lithium minerals pro- ducer Talison Lithium, which mines Greenbushes’ deposit in Western Australia and also has exploratory projects in Chile, produces a chemical grade spodumene concentrate that is sold to China for conversion into lithium carbonate.

Talison’s Greenbushes deposit in the south-west region of Western Australia is the world’s largest hard-rock lithium mine, with the highest grading lithium ore, the currently mined sectors average 3.2% lithium oxide, while the larger resources base avera-ges 2.4% lithium oxide.

This is over two times the ore grade of historic hard-rock lithium projects in the US, which graded 1.5% lithium oxide, and three times the ore grade of more recent mining operations, namely Galaxy Resources’ Mt Cattlin deposit, in Australia, which was mined at 1.1% lithium oxide from 2010 to 2012 before its closure, and Canada Lithium’s Quebec Lithium project, at La Corne, Quebec, that is currently mined at 0.98% lithium oxide.

“All new projects must be competitive for the existing producers and they must also compete for market share that has been carved out by these majors,” says Roumeliotis, emphasising that new brine-based projects are likely to do better than new hard-rock projects with respect to production costs.

“However, these projects would need to pass a few major hurdles, including defining their economic reserve and resource base, extracting sufficient brine to reach production targets. A process to operate within the climatic constraints of the mine location would also have to be devised, since all brine-based projects rely on solar evaporation, to some extent, to produce an enriched lithium brine for conversion into lithium carbonate,” he adds.

The new hard rock mines with standard ore grades of 1% to 1.5% lithium oxide, will be challenged by higher mining costs and more energy-intensive processes to convert spodumene concentrate into downstream primary lithium products, with costs generally twice as much as those of brine-based lithium carbonate production. Subsequently, these projects will have smaller operating margins to buffer against any drop in the lithium prices.

Meanwhile, TRU says that China’s dominance in magnesium and rare earths can be attributed to producers having historic- ally benefited from several distinct economic advantages; low-cost labour, an artificially devalued Chinese currency and less stringent environmental laws. Additionally, for magnesium production the facilities are located near iron and steelmaking facilities, where excess coal gas fuel is transferred at low to negligible cost.

“Some of these advantages, such as neg- ligible- or low-costing coal gas fuel transfers from nearby steel plants, and the artificial devaluation of the Chinese yuan, can be considered as subsidies, which have led to antidumping duties for Chinese magnesium, particularly in the US,” says Roumeliotis, adding that market intervention in rare earths by the Chinese government has destabilised prices and tended to encourage foreign competition.

Meanwhile, the company notes that diversity and security of supply are concerns for the producers of magnesium and rare earths, owing to the overwhelming concentration of the extraction and production base of these metals in China.
“China altered the paradigm for dominating global magnesium production by adopting the thermic Pidgeon Process over any established electrolytic routes,” he says.

Roumeliotis explains that the robust Pidgeon Process uses simple, inexpensive retort technology that is easy to operate, but labour and energy intensive. The tradi- tional electrolytic routes, although more auto- mated and energy efficient than any thermic processes, are more complex, use sophisti- cated technology and are more capital intensive and difficult to operate, with comparatively much less flexibility.

“From a perspective of industrial effi- ciency, the decision taken by China to adopt the labour intensive Pidgeon Process to expand its magnesium industry may have appeared counterintuitive, however, China possesses large coal and dolomite magnesium resources and a large pool of low-cost labour which the country can exploit,” notes TRU.

“In recent years, there has been a drop in natural gas energy prices, which would allow competitive Pidgeon Plants to operate outside China. The Middle East and the US where TRU is currently involved are potential sites for these types of plants, which present a lower financial risk than electro-lytic plants,” says Roumeliotis.

In the case of rare earths, developing known resources where there is good energy and transport infrastructure could also allow for competitive production outside China.

The company notes that projects that can capitalise on the production of critical, or strategic, rare-earth metals, used in the production of magnets, will have a competitive advantage, but must enter the market at a reasonable production rate that would not flood the market, which could negatively affect prices and operating margins.

“Tailings from other mining activities, and deactivated mines and new resources in North America and Africa would be of primary interest for development,” says Roumeliotis.

“The best known lithium resources in the world are already in production or under development. New areas of potential production could be brine waters located in oilfields or at other chemical installations where other elements are currently extracted from brines,” says Roumeliotis, adding that speciality chemical company Albemarle, in South Arkansas, has announced such an initiative and patented molecular sieve technology to extract lithium from brine that is currently used to produce bromine.

Meanwhile, TRU is focusing on evaluating new technologies for extracting lithium from more challenging impurity-laden resour-ces; on coal gasification to produce cleaner energy, compared with coal combustion; and on assessing renewed magnesium extraction and production, in North America. It is also establishing new magnesium production capability in the Middle East.

“We like to work for clients that have innovative ideas or face a particularly challenging technical issue. In the resource or extractive industries, TRU’s primary focus in the last several years has been on lithium, magne-sium and rare earths, as well as clean coal gasification,” says Roumeliotis.

The company assists the project deve- lopers, such as mining or chemical com- panies, and the larger investors.

TRU Group prepares feasibility studies for project developer clients, investigates the due diligence of projects for investor clients, and performs market assessments or broad strategic studies for others.

Lithium and rare earths have been strategic elements in which certain companies wanted to invest to secure supply sources for their manufacturing base, or to exploit, owing to favourable market conditions.