Lithium speculation plays out in WA

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 14 Apr 2016   Posted by admin


Tesla has 325,000 pre-orders for its new Model 3 electric car. Source: Tesla Motors.

By Cameron Drummond

THE use of lithium in industrial batteries has seen the popularity of the rock-bonded soft metal skyrocket. These batteries out-perform their predecessor, the traditional nickel-metal hydride unit, for use in clean energy technologies such as electric cars and home energy storage.

Lithium as an industrial commodity has gone from strength to strength on the back of these exciting technological shifts, most notably through tech-entrepreneur Elon Musk’s Tesla electric-powered cars and home battery storage units.

The Tesla Motors (NASDAQ:TSLA) share price enjoyed a steep ascent from a February 2016 low of $185 to $326 on 11 April, when it announced it had received US$1000 deposits for each of the 325,000 pre-orders of its highly anticipated, more affordable Tesla Model 3 electric car. That’s nearly $426 million of working capital for the company to use at no cost, for a car touted to start shipping from late 2017; even later here in Australia. The Model 3 will be sold at an average price of about $55,000, with Tesla planning to boost production of the car to 500,000 by 2020.

Tesla’s other flagship product, the Powerwall, utilises lithium-ion storage technology to not only store incoming solar power, but also energy incoming from the grid during off-peak usage hours. It’s starting price  for Australian homes is an estimated $9,500 for dwellings with pre-installed solar systems.

WA Lithium Production

The clean-energy revolution has burgeoned lithium production in Australia, with 2015 seeing the world’s top producer delivering 13,400 metric tonnes. Australia has the fourth-largest reserves of lithium at 1.5 million tonnes (mt), following Argentina, China and Chile. Talison Lithium’s Greenbushes mine in WA’s South West has been operational for the last 25 years and hosts the world’s largest known lithium reserves.

The Pilgangoora region in WA’s Pilbara boasts the second-largest lithium reserves and has led to an influx of smaller lithium hopefuls to the region in the last two years. Pilbara Minerals (PLS) and Altura Mining (AJM) own high-grade lithium projects in the region and have both recently released positive Project Feasibility Studies (PFS) of their respective tenements.

Pegmatites at Pilbara Minerals' Pilgangoora project. Source: www.pilbaraminerals.com.au

Pegmatites at Pilbara Minerals’ Pilgangoora project. Source: www.pilbaraminerals.com.au

AJM announced on April 11 that it will be looking to produce an average of 215,000tpa of 6 per cent spodumene concentrate for an initial mine life of 12 years, at a spodumene price of $US494/t. This forecast is an upgrade from a previous outlook of 150,000tpa over an initial 19 years. The total project EBITDA has increased 27 per cent from $609m to $774m, with payback now 354 per cent sooner at 1.7 years, from projected annual cash flows averaging $73.9m for the first 11 years and $64.1m over a 14 year life. AJM intends to develop its 1.4mtpa Pilgangoora project for first production in the third quarter of 2017 from a single open pit mine, on site processing plant and site facilities.

Similarly, the PFS for Pilbara Minerals on 10 March confirmed the viability of a 2mtpa mining and on-site processing operation at its wholly owned Pilgangoora project. The study forecasts production of 330,000tpa of 6 per cent spodumene concentrate for an initial mine life of 15 years at an average spodumene price of $US456/t, with a five year EBITDA of about $120m per annum.

“While the PFS – which will assist in ongoing finance and off-take discussions is based on an initial mine life of 15 years, we are confident that [figure] will be further extended with additional drilling of the current inferred resource base as well as exploration drilling outside of the known resource envelope,” Pilbara Minerals chief executive Ken Brinsden said.

Production from the Altura mine is expected to start in the third quarter of 2017, while Pilbara Minerals plans a start in the fourth quarter of the same year.