Construction activities underway at the Pilgangoora project in early August. All images: Pilbara Minerals.
BY ELIZABETH FABRI
THE western world “grossly underestimated” the speed at which the lithium ion supply chain has to grow to meet demand, Pilbara Minerals chief executive Ken Brinsden has said. Addressing delegates at last month’s Diggers and Dealers Mining Forum, the man behind the world-class Pilgangoora project has made it his mission to convert those still on the fence about lithium’s long-term future.
Lithium ion is set to become the battery of choice as new technologies such as electric vehicles hit the mainstream market.
“Lithium ion in essence is the ‘go to’ rechargeable battery,” Mr Brinsden said.
“The technology has been developed over 30 years and commercialised in the last decade and now starting to generate some serious scale.
The reason that it has become the preferred platform for battery technology is because of its light weight, its high power; it is relatively green and going to become a very low cost technology.”
Based on conservative electric car uptake of 8 per cent, modelling from metal consultancy firm Roskill estimated the market would see a ten-fold increase in lithium raw material consumption between now and 2026, from 100 gigawatt hours to 1000 gigawatt hours.
“To put that in context, that’s five million Tesla vehicles,” Mr Brinsden said.
“Every year 90 million cars are sold, so for this technology there is massive potential for there to be requirements for a lot more lithium. It’s a pretty amazing story,” he said.
Acknowledging Tesla was the “poster child” for lifting lithium’s profile, referencing the electric vehicle manufacturer precisely 20 times in his speech, Mr Brinsden said this was far from the only story.
“The lithium ion batteries are finding their way into lots of new technologies; drones are being powered by lithium ion batteries, electric lawnmowers and mobile phones,” he said.
“For those that are sceptical, it’s happening right now.”
As one of the WA companies bringing new lithium projects online over the next few years, Pilbara Minerals’ Pilgangoora lithium-tantalum project will begin production at an opportune time as demand from China skyrockets.
The $234 million project will be developed over two stages with concentrate already sold out for the first phase.
“We’ve got people knocking our door down saying: ‘can we secure more supply?’ Unfortunately you can’t, we’re sold out in Stage 1, but we’d love to talk to you about Stage 2 of our project,” Mr Brinsden said.
A lot more lithium was required to catch up with global demand.
Pilgangoora was an important part of the supply solution, with an estimated ore reserve of 1 million tonnes of lithium oxide and 22 million pounds of tantalum pentoxide, with a mine life of about 40 years based on a 2 million tonne per annum (mtpa) operation.
Mr Brinsden said the project, scheduled to begin first concentrate shipments in the second quarter of 2018, was “absolutely fit for the times we’re in”.
“China is going to dominate lithium raw material purchasing and ultimately the lithium ion supply chain; the battery factories,” he said.
“It’s already happening; between 2015 and 2016, raw material supply consumption grew by 30 per cent in China and the same thing is happening today in 2017.
“Unfortunately for the Chinese they don’t have any natural competitive advantage, they don’t have any high grade (in mass) spodumene.
“They have been very heavy reliant on imported sources of supply and especially spodumene.
“Spodumene is almost becoming the preferred source of lithium units, because it immediately upgrades to battery-grade carbonate or battery-grade hydroxide.”
Mr Brinsden said the lithium supply chain had moved a lot faster than the industry had anticipated.
“I think everybody will continue to be surprised to the upside,” Mr Brinsden said.
“China has a history of outperforming in the commodities that it chooses to invest- solar for example.
“We think that same phenomenon is happening now and expanding much faster than the western world is currently assuming.”
Pilbara Minerals has already executed a number of offtake agreements, including an agreement with General Lithium for the supply of 140,000tpa of 6 per cent chemical-grade spodumene concentrate from the first quarter of 2018 for an initial six year period with the option to extend for another four years.
It has also secured an agreement with Chinese lithium producer Jiangxi Ganfeng Lithium and its subsidiary Ganfeng Lithium for 30,000tpa for Stage 1, with a further off-take agreement for future production from the proposed expanded Stage 2 operation.
Countdown to production
In June, the company’s received the green light to commence major site works after announcing a final investment decision, and in July awarded four key construction contracts.
Speaking on the sidelines of the Kalgoorlie conference, Mr Brinsden said the company was well and truly into the commencement of site works.
“We’ve finished all of the final environmental approvals, we’ve raised all the money to develop the mine, and we’re now flat out in construction,” he said.
“Some reasonably major contracts have already been let, RCR Tomlinson is the designer and constructor of the processing plant and that contract is worth $140million/$150million. “We’ve also done the civil earthworks package for the commencement of the site infrastructure, which was won by NRW.”
A Camp Stage 2 expansion contract was also awarded to Njamal Services and Pilbara Resource Group (NPJV), and camp services contract to Action Industrial Catering in a joint venture with Njamal Services.
“We are taking the first stage of the camp from 60 persons to 300,” Mr Brinsden said.
“Civil works have begun and concrete will be poured in the next couple of weeks, so we’re really very much into it now.
“It is very exciting, a lot of hard yards to get a project to that point, it’s not easy but we have a great team at Pilgangoora, and a really supportive board and the market of course has been pleasing.”
All going well, the project will begin commissioning in March and shipments in the second quarter of 2018.
“We will be ramping up the overall mine capacity from late 2019 and it looks like it will be a really good opportunity because it’s got some very strong economics and the market is just ready for it,” he said.
“We’re getting to the expansion as soon as we can.”
The expansion would involve doubling production capacity to 4mtpa, however based on the strength of the increased ore reserve, studies were now underway to evaluate increased capacity to 5mtpa.
Pilbara Minerals was hoping to finish a definitive feasibility study on the expansion to 5mtpa in the first half of next year.
Under the current pre-feasibility for a 4mtpa expansion, average annual production was about 564,000tpa of 6 per cent spodumene concentrates inclusive of technical grade product, and 579,000 pounds of tantalite in concentrate.
Once in production, the project was set to deliver lucrative cash flow for Pilbara Minerals.
“Our location in the Pilbara so close to Port Hedland and quality of product all translates to a very low cost operation,” Mr Brinsden said.
“Our cost base is $US220/tonne. Today that product is selling for a minimum of $US820/t.
“If you’re making a cash margin of $US600/t over 350t sold, that’s a serious cash flow, and we’re not that far away from producing it from the second quarter of 2018.”
While Pilgangoora was Pilbara Minerals’ primary focus over the next few years, the company also had its sights on its newly acquired Mt Francisco project.
On 29 March, the company inked an agreement with Atlas Iron to acquire an initial 51 per cent interest in the lithium, tantalum and tin mineral rights for Mt Francisco project, just 50km from Pilgangoora.
As part of the deal, Pilbara Minerals can earn up to 80 per cent of Mt Francisco in stages by funding $1 million worth of exploration and completing a definitive feasibility study until a decision to mine.
“We’re really looking to getting into Mt Francisco, because we’ve obviously learnt so much about Pilgangoora,” Mr Brinsden said.
“We’re really optimistic there’s going to be a lot of spodumene there too; of course it has got to be proven, we’ve got to get in there and drill, which will be begin before the end of the year, so we’re looking forward to that, and hopefully our shareholders have got something to look forward to there to.”
The deal followed the company’s December 2016 purchase of the high-grade Lynas Find project from Dakota to further bolster its pipeline of exploration targets in the North Pilbara region.
Mr Brinsden said while his focus would be on developing Pilgangoora and later Mt Francisco, he didn’t rule out any future acquisitions.
“It’s hard to look past your own backyard; it’s such a good place to work in, but that doesn’t stop us from keeping an eye out in the industry as a whole and what’s happening elsewhere,” he said.
“We’re so lucky with Pilgangoora, and now Mt Francisco, so that’s a really good position to work from to see the company continue to grow.
“We like the idea of being able to participate a bit more downstream as well in the refining piece, so that’s a future initiative that we’re continuing to chip away.”
He added it should not be underestimated “how important” WA was for lithium mining.
“The natural endowment of lithium raw materials- It’s absolutely amazing,” he said.
“Some of the quality of those resources is just phenomenon.
“WA will do well, Australia will do well as a whole, and I think we’re an incredibly lucky country.”