WA Government Establishes Lithium Strategy Taskforce

COMMODITY CAPERS: The Western Australian State Labor Government showed it is prepared to listen to the mining sector with the announcement of a Taskforce to develop a Lithium and Energy Materials Strategy in consultation with an industry stakeholder reference group.

Western Australia-based mining lobby group the Association of Mining & Exploration Companies (AMEC) was one to the first with a friendly greeting to WA Premier Mark Mc Gowan’s announcement.

AMEC has released a couple of reports on the subject this year that have obviously resonated with the Premier and his Cabinet, which has responded by looking to develop a strategy to create a world-leading lithium and energy material industry in WA and, subsequently, the creation of some long-term employment opportunities.

The State Government has committed to facilitating the processing of lithium and other energy materials in WA in a bid to capitalise on the global demand for lithium batteries and WA’s large deposits of lithium and energy materials.

Lithium has quickly become a Western Australia story with the state currently mining over 60 per cent of the world’s supply of lithium, as well as being endowed with all the other minerals necessary to develop further down the battery minerals value chain.

In its A Path Forward report, AMEC estimated there to be a two-year window before the global battery supply chain solidifies.

The report outlined several recommendations for the Federal and State Government that will position Australia to take advantage of this once in a generation opportunity.

AMEC said the State Government’s announcement has delivered on the report’s first recommendation: leadership.

“The State Government has stepped up to clearly signal that WA is open for business and determined to play a much larger role in the lithium and battery minerals value chain,” AMEC chief executive officer Warren Pearce said.

“Today’s announcement is an important step to take leadership in a key global growth industry.

“A Ministerial taskforce will provide co-ordination for the multiple government departments that will be critical in planning and approvals.

“They will have a key role in ensuring there are no regulatory hurdles that slow the development of this new industry.

“Our Association looks forwards to engaging with the Stakeholder Reference Group and representing the views of emerging battery mineral producers and explorers.”

The WA Government said it was establishing the taskforce to capitalise on the state’s immense potential to produce and process lithium and other energy materials, signalling its thinking that there is plenty of potential to increase downstream processing of lithium and other energy materials.

The development of the Lithium and Energy Materials Strategy will consider how to build on WA’s competitive advantages, and to develop a world-leading energy materials industry that maximises benefits.

“The availability of lithium and other energy materials in Western Australia creates a once-in-a-lifetime opportunity for our State,” West Australia premier Mark McGowan said.

“My Government is committed to the development of this industry to boost our economy and create long-term jobs for Western Australians.

“’The taskforce will do the work, in consultation with industry, to ensure our State is front and centre in production of battery technologies, and will also work to make sure these materials can be processed here in WA to maximise local jobs.”

The Taskforce is to be chaired by WA Minister for Mines and Petroleum Bill Johnston and will consist of senior government representatives.

The taskforce will engage with key companies and will be informed by an industry stakeholder reference group.

It is expected the taskforce will present recommendations to the State Government in November with recommendations of how Western Australia should respond to the battery minerals opportunity.

“Lithium-ion batteries are among the most popular batteries in use today,” WA Mines and Petroleum Minister Bill Johnston said.

“Western Australia possesses all the elements required to produce these batteries such as lithium, nickel, graphite and cobalt, meaning we are in the box seat to capitalise on the growth of this industry.

“This isn’t just about extracting resources from the ground. It’s also about processing them here in WA to create jobs for Western Australians.

“We are determined to make the most of the opportunity, and the taskforce will set out a clear plan to establish Western Australia as a world leader in this industry.”

As part of the State Budget, the Government announced $5.5 million in provisional funding to the Minerals Research Institute of Western Australia (MRIWA), to support development and manufacturing of technology metals and renewable energy sources.

MRIWA will invest the funds, if successful, in its bid to establish a New Energy Industry Cooperative Research Centre (CRC) in WA.

The New Energy Industry CRC’s objective will be to create value, through industry-led research, and drive global demand for local products, services and solutions.

“The Lithium and Energy Materials Strategy is needed to attract international companies that hold the necessary technology to undertake further battery mineral precursor development,” Warren Pearce said.

“This is a once-in-a-generation opportunity, the sort WA hasn’t seen since iron ore in the 1960s – today’s announcement is a first step to positioning ourselves to work our way further down the value chain.”

 

AMEC Champions Local Battery Metal Industry Development

COMMODITY CAPERS: The Association of Mining and Exploration Companies has taken a front foot approach to encouraging State and Federal government participation in development of the Western Australia lithium industry.

The lobby group hopes its proactive stance on the issue will inspire State and Federal governments of all persuasions to do the same, rather than be reactive, while the global demand for lithium as a vital element of the global electric vehicle revolution is in a relatively embryonic stage.

AMEC pointed out that Western Australia mines 60 per cent of the world’s lithium and produces all the other minerals necessary to construct batteries, which it considers to be a genuine industry opportunity for Australia, and for Western Australia.

AMEC has released a follow-up report to its Future Smart Strategies Report from earlier this year saying that WA could become a leader in the downstream processing of battery minerals, which it believes could be worth $2 trillion by 2025.

In its The Path Forward: Supporting the development of a lithium and battery mineral industry in Australia report, AMEC has outlined the next steps it believes the State and Federal Government should be taking to make the most of this battery mineral processing and manufacturing potential.

“There is a two-year window for industry and both tiers of Government to act, this plan steps through what needs to be done to get further down the value chain,” AMEC chief executive officer Warren Pearce said.

“There is a clear need for both tiers of Government to provide leadership in the development of a domestic battery industry.

“A clear signal from Government has to be sent to attract investment to Australia.

“There must be a willingness to clearly plan and coordinate where a battery industry would be located, and deliberate efforts made to entice international companies to come and set up in Australia.”

The AMEC report outlines the importance of attracting an international battery producer to Western Australia to firmly establish Australia’s position in the global battery supply chain.

Currently technology and intellectual property for processing high-grade lithium hydroxide, and undertake further battery cathode development, is held by a tight enclave of companies based within the Asia region, primarily in Japan, South Korea, China, with others scattered around the European Union and the United States.

They also have well-established markets for their products that are generally earmarked for the burgeoning electric vehicle, computer screen, and phone manufacturing sectors.

“The necessary battery materials need to be readily accessible to make the decision to invest in Western Australia attractive,” the report says.

“This makes a concentrated single hub preferable, as it will help provide critical mass.

“While not all the precursors need to be domestically produced, there are obvious advantages if the majority are.

“A preliminary focus of engagement must be on ensuring Australia attracts the companies developing precursor materials.

“The next step is attracting the international companies that combine the precursor materials, make cathodes and eventually assemble batteries.

“A strategic approach is needed.

“We cannot wait for these countries and companies to come to us.

“We cannot expect them to understand the opportunities available in Australia; we must make the case.”

The argument hasn’t been lost on Western Australia Minister for Mines and Petroleum Bill Johnston.

Addressing the recent Paydirt Latin America Down Under Conference in Perth, Johnston highlighted the growing opportunities coming out of the emerging battery materials sector for both Western Australia and, due to the subject matter of the conference, South America.

Johnston said there was a genuine opportunity for WA to reap the rewards of the growing scale of the battery materials industry.

“We have the resources in the ground, we have the capacities and the technologies, and we believe with careful partnership between government and investors we can get a genuine long-term processing industry,” he told the conference.

“And indeed, given those in the successful industries in Argentina and Chile and elsewhere, there’s many things we can learn from our friends in Latin America so that we are all successful in this new industry.”

Johnston said one advantage held by Australia, and WA especially, was the greater expectations the discussion was placing on the establishment for local supply chains.

“The fact that we have very high standards in WA is now a competitive advantage for operators in this state,” he said.

“We can go to end users of materials and make the point that we can guarantee the environmental impact and social impact of projects in WA that may not be able to be done in other jurisdictions.

“It is our relationships with indigenous people, our high environmental standards, our health and safety standards, and our work and labour standards.

“These are all now competitive advantages in these types of supply chains.”

It’s not as if this is suddenly a new thing.

The AMEC report acknowledged the number of battery minerals and processing research activities and projects already underway

Regional Development Australia (RDA) Perth is preparing a detailed report for consideration by the Federal Government that outlines the advantages of developing a ‘lithium valley’ in Australia.

The Silicon Valley reference is cute, but it the report is serious in outlining the development of a focussed lithium processing and battery minerals hub.

The Chamber of Commerce and Industry Western Australia commissioned a Business Case looking at investment in Western Australia for lithium and battery minerals aimed at determining the economics of developing a lithium battery industry in Australia.

The WA State Government, WA Universities and industry have combined to support a bid for a New Energy Industry Co-operative Research Centre (CRC) bid for Energy Minerals to support ongoing research into the potential of battery minerals development and processing and will further enhance the long-term development and attractiveness of the industry.

“Each breakthrough in technology and innovation could drive Australia further down the cost curve, further down the value chain, or both,” the AMEC report concluded.

“State and Federal Government backing of the New Energy Industry CRC bid will support initial academic and industry funding to grow a domestic research capacity to support a battery minerals industry in Australia.”

 

The Association of Mining and Exploration Companies (AMEC)

 

Email: info@amec.com.au

Web: www.amec.org.au

Aussie Juniors on the Cobalt Trail

COMMODITY CAPERS: The search for new cobalt resources in on in earnest with several ASX-listed explorers conducting greenfield exploration and revisiting previous results across their tenements.

Jervois Mining (ASX: JVR) has developed its Nico Young cobalt-nickel project into a core asset, with cobalt-nickel resources becoming increasing valuable due to the forecast acceleration in demand.

The Nico Young exploration licenses, held by Jervois, contain published JORC Inferred resources of:

167.8 million tonnes at 0.59 per cent nickel and 0.06 per cent cobalt (using a 0.6% nickel equivalent cut-off), including a higher-grade zone of 42.5 million tonnes at 0.8 per cent nickel and 0.09 per cent cobalt (using a 1% nickel equivalent cut-off).

Within this mineral resource, focusing upon cobalt leads to JORC Inferred resource of:

99.1 million tonnes at 0.58 per cent nickel and 0.08 per cent cobalt (using a 0.05% cobalt cut-off), including 33.4 million tonnes at 0.66 per cent nickel and 0.12 per cent cobalt (using a 0.08% cobalt-cut off).

The company is currently undertaking a drilling campaign with the view to define an Indicated Resource.

The intention of the infill drilling is to consolidate current nickel-cobalt mineralisation and delineate the extents of high-grade cobalt zones.

Jervois considers that expanding the size and geological confidence of shallow cobalt rich zones will assist early mining studies, which will be reviewed as part of a Preliminary Feasibility Study.

Corazon Mining (ASX: CZN) has recently extended the cobalt footprint of its Cobalt Ridge prospect within the company’s Mt Gilmore project near Grafton in north-eastern New South Wales.

Corazon claimed discovery of four new cobalt-copper-gold anomalies at the Cobalt Ridge prospect.

The new geochemical anomalies have extended the known cobalt-mineralised system at Cobalt Ridge to an area of approximately three kilometres in strike and one kilometre in width, which remains open in all directions.

The company said the newly-identified cobalt-copper-gold anomalies strengthen its exploration model for the entire project area to potentially host cobalt dominant sulphide deposits, in addition to the known mineralisation at the Cobalt Ridge prospect.

The new anomalies were identified via results from a recently completed geochemical soil-sampling program at Cobalt Ridge testing for extensions to previously defined mineralisation.

Corazon owns a 51 per cent interest in the project, and the exclusive right to earn up to an 80 per cent interest.

Recent drilling by Corazon at Cobalt Ridge has validated historical mining and exploration results and confirmed the presence of multiple zones of cobalt-copper-gold sulphide mineralisation over a strike length of at least 300 metres.

The mineralisation remains open along strike and at depth.

The Main Cobalt Lode has been the primary target of the company’s recent drilling (and much of the historical drilling).

This lode is up to 25m in true width and contains multiple narrow zones of higher-grade mineralisation.

Of course, Australia is not the only country to be blessed with attractive amounts of cobalt endowment, which is why some ASX exploration plays are active overseas.

Blackstone Minerals (ASX: BSX) recently commenced a maiden drilling program at the company’s high-grade Little Gem cobalt-gold project in British Columbia, Canada.

The first diamond drill hole of the program tested the upper portion of the alteration zone.

Although the hole was terminated (due to mechanical issues) halfway through the mineralised target, it had managed to intersect massive, semi-massive and disseminated mineralisation with results including:

4.3 metres at 1 per cent cobalt and 15 grams per tonne gold, including 1.1m at 3 per cent cobalt and 44g/t gold.

The initial results Blackstone achieved from the maiden drilling at Little Gem are consistent with historic drilling and adit channel sampling, which returned average grades of 3 per cent cobalt and 20g/t gold.

Azure Minerals (ASX: AZS) is currently drilling its second diamond drilling campaign on the company’s 100 per cent-owned Sara Alicia gold and cobalt project in the northern Mexican state of Sonora.

The drilling is following up Azure’s 2017 maiden drilling program, in which all six drill holes intersected high-grades of gold and cobalt mineralisation at shallow depths, returning a best intersection of:

26.2m at 9.5g/t gold and 1.26 per cent cobalt from 0.60m depth, including 12.6m at 16.8g/t gold and 6.35m at 3.57 per cent cobalt.

The new drilling has been designed to target along-strike and down-dip extensions of the high-grade mineralisation intersected in the 2017 program.

Based upon anticipating further success, Azure is already planning a second phase of drilling to complete a 50m by 50m drill pattern over the mineralised body.

 

 

Cobalt Firms into Battery Favouritism

COMMODITY CAPERS: Try striking up a conversation about lithium-ion batteries without cobalt eventually featuring.

The reason is simple, cobalt contributes up to 60 per cent of the value of lithium-ion batteries, which in turn accounts for 42 per cent of demand for cobalt.

Cobalt’s other main use at 16% is in superalloys which compliments the battery demand as high-tech industry grows.

Therefore, there is little surprise that cobalt represents similar percentages of any discussion of lithium-ion batteries, electric vehicles (EVs) and all the other electronic paraphernalia that rules our modern world.

We have spoken in previous articles on how the lithium-ion battery is projected to become the world’s most significant source of power with their use in EVs being a key driver.

Bloomberg forecasts 35 per cent of vehicles sold by 2040 will be electric.

Those of us who remember the seventies know that isn’t far away and the fact that currently only one per cent of global car sales are EVs means they will be an omnipotent presence on our roads sooner rather than later.

One only has to recall how cool it was to have been the first kid in class to own a Casio digital watch to understand.

The number crunchers have determined cobalt demand is expected to rise at five per cent compound annual growth rate (CAGR) over the next four years.

Cobalt has been something of a poorer cousin in recent commodity terms, especially when compared to the battery markets eponymous metal, lithium.

Lithium kicked off all the excitement – and it took a long time to take off as crusty old exploration company executives struggled to come to the realisation that gold, iron ore, and uranium may have been losing the appeal, and importance, they once exerted over the rest.

Cobalt is expected to have a supply deficit as currently mining is only just meeting demand.

This has been reflected in a rise in the cobalt price which Deloitte, in its recent WA Index March 2018, said had,” increased by 1.4 per cent to US$81,000 per tonne as a beneficiary of bullish global demand for lithium.”

Deloitte claimed that electronics giant, Apple had been the subject of reports suggesting it was, “Entering into talks to secure long-term supplies of cobalt directly from cobalt miners amid fears of a looming shortage attributable to what has been coined the electric vehicle boom, has seen the metal’s price increase across February.”

The current price is heading in the right way, but it is still shy of the heady days of 2008 when it was sitting at US$52/lb (US$115,000/t), which was coincidently, also the last time global supplies of cobalt were in deficit.

The reason global cobalt supply is as tight as it is stems from approximately 98 per cent of the world’s supply being produced as a by-product of copper and nickel production with 15 mines representing half of the world’s supply.

Not only does this make supply tight, it also exposes it to any supply stream disruption, such as the shutdown of copper mining in the Katanga Province in the Democratic Republic of Congo (DRC) slicing off three per cent of cobalt supply.

Sixty per cent of global production comes from the DRC, which has a reputation as a politically unstable country and is thought by many to be somewhat unethical in its approach to the mining industry.

In the Fraser Institute Survey of Mining Companies, 2017, DRC was rated amongst the bottom ten jurisdiction in the world for investment according to the survey’s Policy Perception Index (PPI), a composite index that measures the overall policy attractiveness of the 91 jurisdictions in the survey.

That means the good corporate citizens of the world are looking elsewhere for their cobalt supplies to produce ethically-cleansed products for their equally ethically-minded customer base.

At the recent RIU Explorers conference, Patersons senior resources analyst Simon Tonkin declared cobalt as being the best performing commodity over the past 12 months.

“Cobalt is a critical metal in terms of lithium-ion batteries and it is very difficult to secure supply,” he said.

Tonkin suggested there was potential for the demand for cobalt to double by 2022 and that by 2030 some estimates are for 47 times the current cobalt demand.

“Australia has the second largest cobalt reserves in the world, he said.

“Hopefully we can look to exploit that position.”

 

 

Old Campaigners on Standby for EV Revolution

COMMODITY CAPERS: Some analysts suggest that EV sales will be responsible for around 25 per cent, and more, of total vehicle sales by the end of 2035 from the current levels of around one per cent.

Coming off a relatively low base the projected growth could have a significant effect on markets for certain commodities.

Nickel and copper are two traditional commodities that have found the running comfortable with the upsurge in interest for battery metals.

Although lithium and cobalt have been sneaking away with the bulk of the headlines, nickel and copper are also integral parts of the lithium-ion battery make-up, and as such are enjoying some new-found fame.

In his presentation to the 2018 RIU Explorers Conference, ANZ senior commodity strategist Daniel Hynes said investors have woken up to the impact lithium-ion batteries have had on these two markets.

“Environmental issues have evolved from being secondary policy targets to one of the top priorities for many countries over the past few years,” Hynes said.

“Certainly, China has been quite important in driving this dynamic over the past few years and clearly all the headlines have been focused on sectors such as the Electric Vehicle market and what that can do for commodity demand.

“No-one really knows the level of adoption that the market place will take.

“That certainly has been a big reason behind the rebound of nickel prices, even though the volumes are going to be relatively low.

“It is interesting to note the differences in the amounts of copper used in a conventional car as opposed to a battery EV.

“Essentially nine times the amount of copper is used.

“The dynamics are quite strong, and we do expect to see the markets turning.”

Currently, the EV/ lithium-ion battery chatter is creating a strong global market interest for nickel, which is receiving support, albeit in the short-term by higher stainless-steel production.

Australian mine production is expected to fall to 176,000 tonnes in 2017–18 before recovering slightly to 183,000 tonnes in 2018–19 while the country’s nickel export earnings are expected to fall slightly to $2.1 billion in 2017–18, before rebounding to $2.3 billion in 2018–19.

In a metals&ROCK research note released in April, Morgan Stanley noted that the main driver to global nickel demand to be, “any change in the level of activity in China’s stainless steel industry”.

Seventy per cent of the world’s primary nickel supply is gobbled up by Chinese smelters as they produce 54 per cent of the world’s total 46 million tonnes of stainless steel.

“And so far in 2017, China’s SS-output rate’s up (+23 per cent year-on-year, Jan-Feb),” Morgan Stanley reported.

“Roughly in line with the general lift in output of its +820 million tonnes per annum carbon-steel industry – buoyed by Q1’s credit surge, and a central government sponsored infrastructure program.”

The Department of Industry, Innovation and Science noted a recent rise in nickel prices attributing markets factoring in growing demand linked to lithium-ion batteries, however it also said that it was not clear that the immediate boost to prices will persist.

“Although sales of electric vehicles are rising sharply, at this stage, batteries still account for a small share of nickel sales, and stainless steel is still estimated to account for around two-thirds of nickel consumption over the outlook period,” the department said in its December Quarter Resources and Energy Quarterly.

Although copper does have a part to play in the EV revolution, currently it is its older stomping grounds that are contributing to its recent positive run.

Source: DIIS

DIIS cited the London Metal Exchange (LME) copper price estimate to have averaged US$6,810 a tonne in the December quarter, the highest level since September quarter 2014.

Credit for this rise was given to growth in global industrial production and several supply disruptions, including incidents at KGHM’s Glogow smelter in Poland and Rio Tinto’s Garfield operations in the US.

Although copper inventories on the major global exchanges fell by 6.4 per cent quarter on quarter, contributing to higher prices in the December quarter these are expected to wane in 2018 with the LME copper price forecast to average US$6,340 a tonne as supplies increase.

A pick up in consumption over supply has forecasters predicting a rise in copper prices to US$6,490 a tonne in 2019.

“Global copper consumption is forecast to rise from 24 million tonnes in 2017 to 25 million tonnes in 2019, representing an average increase of 3.2 per cent each year,” DIIS said.

“Higher copper consumption will be supported by firm growth in global industrial production and higher investment in energy infrastructure.

“Emerging economies are expected to drive much of the growth in copper consumption over the next two years.”

China is expected to lead this copper consumptive period.

The country already accounts for around 50 per cent of global demand and looks to increase that number as it makes improvements to the nation’s power grid and enjoys further growth in the construction and manufacturing sectors.

The coming shortfall will kick in once global demand for electric cars and renewable energy takes off, leading to stronger growth in copper consumption over the next two years.

“Increased global production of electric vehicles…is expected to raise copper consumption by around 300,000 tonnes annually in 2018 and 2019,” DIIS said.

“Copper is used extensively in renewable energy technology and infrastructure, spending on which is expected to increase strongly over the outlook period.

“Global electricity capacity from renewable sources is expected to increase by 4.4 per cent annually over the outlook period.”

 

 

Electric Vehicles Driving Nouveau Commodity Rush

COMMODITY CAPERS: While scientists debate whether climate change is a real/false, natural/man-made phenomenon, countries with large populations have realised opening a window does not necessarily provide its people with fresh air.

Keeping people breathing has become a major concern for the larger countries, China is the first that comes to mind.

It’s extremely rare to see vision of a Chinese populace going about their daily routines without seeing high numbers wearing face masks to minimise the effects of the air pollution the country endures.

But the Hidden Kingdom is not alone as many European and North American centres also move to diminish the effects of long-term air pollution.

Electric Vehicles (EVs) have become the touchstone of the new environmental times and are expected to dominate the market sooner, rather than later, due mainly lower costs for battery manufacturing and commitments from car companies to establish themselves as market leaders.

In its Electric Vehicle Outlook 2017 report, Bloomberg New Energy Finance noted just how quickly EVs will start to dominate the global car market.

“By 2040, 54 per cent of new car sales and 33 per cent of the global car fleet will be electric,” Bloomberg said.

“Falling battery prices will bring price-competitive electric vehicles to all major light-duty vehicle segments before 2030, ushering in a period of strong growth for electric powertrain vehicles.

“While EV sales to 2025 will remain relatively low, we expect an inflection point in adoption between 2025 and 2030, as EVs become economical on an unsubsidized total cost of ownership basis across mass-market vehicle classes.”

Green politicians may have struggled to capture voter attention of late, but the green economy is running at a much faster pace.

Speaking at the recent 2018 RIU Explorers Conference in Fremantle, Patersons senior resources analyst Simon Tonkin said the Green economy has been a key driver for resources over the past 12 months.

Tonkin went all the way back to 2014, when, he said, China announced it wanted to reduce pollution and it wanted 20 per cent of its energy needs to come from renewables by 2030.

“China’s energy needs are currently around 13 per cent renewables, but it is amazing how much China is building in terms of the world’s solar panels,” he said.

“It is installing two-thirds of the world’s solar panels and around half of the world’s wind turbines.

“There are currently 3.5 million clean-energy jobs in China and this is expected to grow to 10 million jobs by 2020.”

Like the Chinese, it didn’t take Tonkin long to set his sights on the EV and associated lithium-ion battery market, where he indicated technology was gaining traction, noting that Tesla, and others, are currently building giga-factories.

“There is a shift to new-age metals, such as lithium, nickel, cobalt, manganese and graphite – we could also add vanadium and zinc into the mix,” he said.

“Australia has plenty of these metals to supply to the world.”

According to Tonkin, the best performing commodities over the past 12 months is dominated by the battery metals of cobalt and lithium with those trailing the pack being the sector stalwarts of iron ore, silver, and gold.

The importance of lithium batteries to modern living has increased with their use in such high-demand devices, such as phones and computers and the growing EV market.

A lithium-ion battery lives in a category of itself with around four diverse types of batteries in use, utilising a mixture of commodities, including aluminium, cobalt, manganese, graphite and nickel

Demand for these commodities is expected to increase exponentially over the next ten years to meet the increased demand for batteries and EVs towards 2030

“Our (Patersons’) view on lithium with the emergence of electric vehicles, we are going to see a significant increase for lithium demand as soon as the mid-2020s,” Tonkin said.

“However, in the short-term we could see supply outstrip demand as the spodumene producers ramp up.”

Tonkin is not alone in his view of a possible lithium glut.

In its recent report – Lithium: The long-term pain of new supply, Morgan Stanley suggested that should the current pipeline of planned projects goes ahead the result will be substantial, and sustained, market surpluses from 2019 onwards.

“We forecast 2018 to be the last year of global lithium market deficit,” Morgan Stanley analysts said.

“Beyond that, we expect global lithium prices to correct as the market moves into a period of sustained surplus.”

Morgan Stanley noted that the Chilean Economic Development Agency (Corfo) has granted additional production quota to SQM.

Another lithium producer, Albemarle also requested an uplift to its quota for production from La Negra in late2017.

The analysts have forecast these expansions to add 200,000 tonnes per annum to Chile’s lithium output by 2025, bringing the country’s total output to 255,000 tonnes LCE – a third of global supply.

“We’ve also increased our supply forecasts for Australia and Argentina,” Morgan Stanley said.

“Combined we forecast cumulative supply growth of 3.9 million tonnes from 2019-2025 (vs. our previous estimate of 2.9 million tonnes supply additions, a change of +35 per cent).”

Although lithium powerhouse SQM intends to increase lithium production by four to six times, it is likely to take years to eventuate and will come at a much higher cost than current production, possibly making it less competitive.

Australia has the third largest lithium reserves behind that of China and Chile – a position the country is starting to exploit with production coming on line from companies such as Pilbara Minerals and Pioneer Resources as well as lithium extraction technology plays such as Lithium Australia and Neometals.