The demand rally this year is heralding the end of a three-year downturn, where oversupply sent prices plunging and stymied investment in new projects. We expect supply to grow at a lesser 16% CAGR, reaching 653,640kt by 2024, resulting in a dwindling of the surplus, which we expect to fall into deficit by 2024.

Looking over the long-term, the IEA forecasts lithium demand to grow 42-fold by 2040, compared to 2020, under a 'sustainable' scenario, or 13-fold over a 'current policies' model. Either way, it marks a massive tsunami of demand for the white metal.

This means supply has a lot of catching up to do. Miners are bullish on the sector's prospects, as they prepare to expand operations or bring online new ones to capitalise on soaring prices and rebounding demand from the EV battery sector.

Meanwhile, several trends are emerging, which are set to be key disruptors. These include de-globalization—against the backdrop of the West's increasingly fraught relationship with China—and a new focus on forging localised supply chains to drive economic growth. This will likely result in rising government intervention  and resource nationalism. Indeed, governments are looking to boost supply of this strategic material by rolling out supportive industry frameworks.

Australia in July announced A$50m in funding for eight projects, as part of the A$1.3bn Modern Manufacturing Initiative to help grow the battery and clean technology supply chain. In Argentina, state-owned energy firms, such as YPF, are entering the lithium business. Chile is drafting a new constitution that may lead to tougher rules for miners, including higher taxes. In Mexico, the government is considering public-private partnerships to develop lithium.

The rise of sustainability amid the broader clean energy transition and tightening government environmental regulations is impacting every aspect of a mining operation—from permitting to financing to the desirability of its final product.  

Most of the world’s lithium comes from brine deposits in South America’s “lithium triangle” of Argentina, Chile, and Bolivia; and hard-rock deposits in Australia. Top lithium resources by country are Bolivia (21Mt), Argentina (19.3Mt), Chile (9.6Mt) and Australia (6.4Mt), according to the USGS. Lithium is the world’s lightest metal, used in batteries that power everything from smartphones to electric cars.

Australia

Pilbara Minerals has approved plans for a staged restart of its Ngungaju operation in Western Australia. Set to commence operations during the December quarter, the plant has been in care and maintenance since October 2019. Full annual production capacity of between 180kt and 200kt is expected by mid-2022. This will take the overall production capacity of the combined Pilgangoora project—which comprises two spodumene processing plants Ngungaju and Pilgan—up to between 560-580ktpa.

The restart costs of A$39m will be funded through existing cash. Pilbara acquired the Ngungaju, which was previously called the Altura lithium project, in January this year. Meanwhile, Pilbara in May inked an MoU with Sydney-based technology company Calix Limited to undertake a scoping study to evaluate the viability of producing concentrate lithium salt from Pilgangoora, which could be further refined into li-ion battery raw materials. “The combination of unallocated spodumene offtake, burgeoning demand and a sophisticated sales channel in the BMX platform makes for a potent combination at Pilgangoora,' said MD and CEO Ken Brinsden.

Wesfarmers' Mt Holland A$1.9bn (US$1.4bn) lithium project in Western Australia has received all critical approvals and construction and project development has commenced. The integrated project, which is operated in a joint venture with Chile's SQM, is expected to produce spodumene concentrate from the mine and concentrator project, which would then be transported to the Kwinana refinery and processed to produce battery grade lithium hydroxide.

An updated definitive feasibility study saw an increase in production capacity from 45ktpa to 50ktpa of battery grade lithium hydroxide. Over an estimated project life of 47 years, the integrated project would deliver EBITDA of A$22bn (US$16bn), and average revenues of A$713m (US$522m) a year. First production is expected in the second half of 2024 and Wesfarmers’ share of capex is around A$950m (US$700m).

Core Lithium is aiming to make a final investment decision this year for its Finniss lithium project in the Northern Territory, with first production set for 2022. Finniss’ new DFS positions the project to turn out 7.4Mt of ore at 1.3% lithium oxide over an eight-year mine life, with average spodumene concentrate production at 173ktpa, grading 5.8% lithium oxide. Capex is estimated at A$89m (US$65.7m), while operating costs are US$364/t. The DFS outlined a pre-tax IRR of 53%, pre-tax NPV of A$221m (US$163.2m) and life-of-mine EBITDA of A$561m (US$414.2m) from revenue of A$1.3bn (US$960m). Stage two would further extend mine life and production.

Core has binding four-year offtake agreement to supply 75ktpa to China's Yahua, which accounts for around 40% of Finniss' Stage one production. Yahua recently announced a production expansion from 20ktpa to 50ktpa LCE. In December 2020, Yahua inked a five-year deal with Tesla to supply battery-grade lithium hydroxide. According to a report from the Shenzhen Stock Exchange, the contract is worth between EUR513m and EUR716m.

The federal government has awarded Finniss 'major project status', granting it A$6m in funding. Core will use the funds to build a pilot processing facility to produce battery-grade lithium hydroxide at Darwin Harbour’s Middle Arm Industrial Precinct—which would form stage three. Finniss lies just 88 kilometres from Australia’s closest port to China, meaning that it has the lowest Scope 3 emissions in Australia, the company said. Core touted a "substantial drilling budget" for 2021 and 2022 and is tipped to commence stage one construction at the project before the end of the year.

Chile

Albemarle, the world’s biggest lithium producer, is investing around US$200m in a yield improvement project at a Chilean salt flat. Albemarle is introducing a way of extracting more of the lithium from brine that’s normally captured in salts, thereby lifting yields to 80-85% from 50-55%, said CEO Kent Masters. The project will take about 18 months to implement and another six months to start hitting sales.

The North-Carolina based company said it doesn’t see a big risk for the lithium industry from Chile's proposed tax changes and is looking for additional resources to satisfy demand beyond this decade. The company aims to double its production capacity to 175ktpa by the end of the year when two construction projects in Australia and Chile are complete.

Chile's SQM, the second biggest lithium producer, aims to reach 180kt of lithium carbonate and 30kt of lithium hydroxide in Chile by the end of 2022. SQM said soaring demand growth would boost its sales of lithium carbonate equivalent to more than 85kt this year, 30% higher than 2020. The company reported March quarter earnings of US$68m, or 0.26 cents per share, jumping 51% from the same period last year. SQM inked a lithium hydroxide supply agreement with British chemicals firm Johnson Matthey in April, to last through 2028. “The agreement between the companies contemplates the supply of lithium necessary for some 500k fully electric cars,” SQM said.

Argentina

Neo Lithium Corp has produced 99.9% pure battery grade lithium carbonate at its pilot plant for its 100%-owned Tres Quebradas (3Q) project in Argentina. This purity level, achieved using an upgraded alkali methodology, is acceptable by Chinese battery maker CATL for its LFP batteries. A feasibility study, being carried out by Worley, is expected to be completed by the end of the September quarter.

Lithium Americas expects to start phase-one production at its 49%-owned Cauchari-Olaroz project in Argentina in mid-2022. The project,  located in Jujuy province, is a 40ktpa conventional brine project with a project life of 40 years. Ganfeng Lithium, the largest lithium producer in the world, owns the remaining 51%. Government-owned JEMSE exercised is entitled to 8.5% of the future dividends from the project. TSX, NYSE-listed Lithium Americas said in July that 81% of the US$641m capex budget has been committed, with 66% spent. Annual average EBITDA is estimated at US$308m with operating costs estimated at under US$3,600/t. Offtake agreements are in place for over 90% of stage-one production at market prices.

The phase-two expansion, which would boost output by at least 20ktpa, is expected to start construction after phase-one is commissioned and come online in 2025. “Caucharí-Olaroz is on track to become the largest new lithium brine operation in over 20 years,” said Chairman George Ireland.

China’s Ganfeng Lithium has been given the green light to build a 20ktpa lithium chloride plant for its Mariana project in northern Argentina, where it intends to use solar power. Lithium chloride, produced at lithium brine projects, can be used to make battery-grade lithium carbonate or lithium metal. Ganfeng, which said last month it would use a 120MW solar PV system to power the plant, had previously said lithium at Mariana could be extracted through solar evaporation, reducing emissions and costs. The Mariana project has (as of November 2019) measured and indicated resource of 4,410,000t of LCE and an Inferred resource of 786,000t of LCE. This makes it one of the biggest lithium deposits in the world. Ganfeng holds an 82.5% stake in the project.

Australian exploration company Galan Lithium said that a new review showed production at its Hombre Muerto West (HMW) project in Argentina could ramp up to 25ktpa of LCE.  ASX-listed Galan said earlier this year that it was looking at options to expand output from the 20ktpa evaluated in the project’s preliminary economic assessment. That assessment estimated an initial capex of US$439m, with cash costs of production at US$3,518/t of lithium carbonate, with a mine life of 40 years. The project has resources of 2.3Mt at a grade of 946mg/L lithium. The Hombre Muerto district is proven to host the highest-grade lithium with the lowest impurity levels within Argentina and is home to Livent Corporation’s El Fenix operation and Galaxy Resources and POSCO’s Sal de Vida projects.

The company said “proof of concept” laboratory tests have achieved 99.88% LCE product purity. Battery-grade LCE must be at least 99.5% purity. Galan said it was working on different alternatives to optimise combined outcomes for brine pond and lithium carbonate plant design. Apart from HMW, , the company owns 80% of the highly prospective Greenbushes South lithium project in Western Australia.

Bolivia

Bolivia has launched a second international call, after a first attempt failed in 2019, to seek potential investors for its huge lithium resources. The call is aimed at companies that have direct lithium-extraction technology (EDL) and that can conduct pilot tests at the Uyuni, Coipasa and Pastos Grandes salt flats, the Bolivian government said.

Salar de Uyuni is the world’s largest salt flat that spans 4,000 square miles. It hosts massive lithium deposits, which comprise about 50% of the earth’s total.

Unlike Chile and Argentina, which are large producers with years of experience, Bolivia faces the challenge of government intervention as the country’s laws mean that this resource must be exploited by the state. International players such as Russia's Uranium 1G, China's Gangfeng Lithium and TBEA, and US-based EnergyX recently participated in an online meeting that YLB and the ministry held with potential investors. 

Bolivia, long troubled by political instability and poverty, needs significant financial and technological investments to capitalize on its abundant natural resources. In 2018, YLB found a partner in Germany's ACI Systems. A high-tech complex costing US$1.3bn was planned at the Uyuni salt flat, with the main product to be lithium-ion batteries. The JV did not appear to take the form of a true partnership, with few jobs offered to local workers. These concerns led to protests in demand of higher royalties and share of the revenue. In November 2019, the government rescinded the legislation by decree. 

Bolivia’s state-owned mining firm YLB earned a record US$11.6m from selling 6kt of lithium carbonate and potassium chloride in the first six months of 2021. Marcelo Gonzales, president of YLB, said the firm aims to make US$23m this year.