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.