THE INSIDE STORY: Lithium hydroxide is fast becoming the battery maker’s commodity of choice and emerging producer Neometals (ASX: NMT) is keeping pace with development of the company’s Mt Marion lithium project in Western Australia.
For those who aren’t up to speed – lithium batteries are used in a host of modern-day gadgetry, including computers, cars and, dominate the mobile phone market.
The reason is simple. Lithium batteries are light, compact, quickly rechargeable, and long-lasting.
Lithium battery production is expected to almost triple over the next five to seven years.
The most common lithium compound used in lithium batteries is lithium carbonate, however this is quickly being replaced by lithium hydroxide in heavy duty applications like renewable energy storage and electric cars.
“Are lithium-ion batteries going to be replaced?” Neometals managing director Chris Reed rhetorically asked The Resources Roadhouse.
“Probably, but most likely by more lithium intensive batteries like solid-state lithium-sulfate and lithium metal batteries in 10 to 15 years’ time.”
Cutting costs have become front and centre to the collective psyche of the mining industry.
As commodity prices fell, companies took greater care spending their cash, leading to some superb research and development work, resulting in considerable improvement in the area of refinement.
One such advancement is the ELi Process, developed by Reed Advanced Materials Minerals (RAM), a subsidiary of Neometals.
RAM is owned 70:30 by Neometals and its partner, leading mining services provider Mineral Resources (ASX: MIN).
“The traditional process to produce lithium hydroxide is to causticise lithium carbonate, the ELi Process produces lithium hydroxide directly from lithium oxide or hard-rock lithum concentrates, removing a process step,” Reed explained.
Neometals proved up the ELi Process using a semi-pilot scale demonstration plant conducted by specialist chlor-alkali laboratory Process Technology Optimisation in Buffalo, USA.
The plant achieved 200 hours of operation at 80 per cent efficiency to demonstrate the technology’s reproducibility of purification and electrolysis of lithium chloride solutions, and the suitability and durability of the ion exchange membrane for commercial operation.
Basically, the ELi Process turns the lithium oxide into a lithium chloride solution which if fed into a traditional Chlor-alkali cell, becomes lithium hydroxide (like sodium chloride becomes sodium hydroxide in Chlor-alkali process).
The chlorine and hydrogen gas are combined to produce hydrochloric acid, which is used to produce the lithium chloride.
The process retains the flexiblity to produce battery-grade lithium carbonate by injecting carbon dioxide gas into the liquid hydroxide solution forming insoluble lithium carbonate.
A Pre-feasibily Study projected operating costs for the battery-grade lithium hydroxide in US Dollar terms at $3,900 per tonne, which stacks up well against recent median prices for battery-grade lithium of US$8,250 per tonne.
Neometals, through its subsidiary RAM, holds a granted Australian patent for the lithium hydroxide process, with other patents filed or under examination in the United States, Argentina, Canada, Chile, China, Japan, Malaysia and South Korea.
Australia already hosts the world’s largest supplier of lithium, the Greenbushes lithium project, as well as a number of hard rock lithium deposits in various stages of development that are ideal feedstock for the patented ELi Process, which is agnostic as to the source of feedstock.
Neometals believes the ELi Process has the potential to consolidate hard-rock lithium’s position as a major feedstock for lithium production to the world.
It also believes its Mt Marion lithium project, located approximately 40km south west of Kalgoorlie, Western Australia a “globally significant lithium deposit” that will become a major contributor to the global lithium market.
A recent updated Resource estimate compiled by Snowden for the project came back with Indicated and Inferred Mineral Resources of 23.24 million tonnes at 1.39 per cent lithium oxide (Li2O) and 1.43 per cent iron oxide (Fe2O3), at a cut-off grade of 0 per cent Li2O.
“The new estimate confirms the Mt Marion lithium project to be right up there amongst the world’s largest and highest-grade deposits,” Reed said.
“We expect in time to increase the mining inventory and potential processing rates for the project with the completion of a new drilling program and mining study running in parallel with the construction phase.”
Under a deal struck with Mineral Resources in October 2009, Neometals retained 100 per cent ownership of the project while MIN would fund all development costs and build, own and operate the processing facilities in order to earn a 40 per cent share of net profit.
This was revisited in 2011 so that instead of MIN having a right to 40 per cent profit from sales, it now has a direct 30 per cent ownership of the project.
“The build, own and operate deal with Mineral Resources is important as it totally removes any financial risk in regards to the construction of the plant facilities for Neometals,” Reed said.
“There is no construction funding or working capital required up to commissioning from Neometals because it is all being funded by Mineral Resources under a Build-Own-Operate model.”
In September, Neometals and MIN struck an offtake and equity investment agreement with major Chinese lithium player, Jiangxi Gangfeng Lithium Co.
Under this deal Ganfeng will come in with an initial 25 per cent shareholding in RIM, bringing Neometals share down to 45 per cent and MIN retaining 30 per cent.
The deal also swelled NeoMetals coffers with a payment from Ganfeng to the tune of US$19.75 million.
This enabled NeoMetals to announce the formal commencement of construction of the Mt Marion treatment plant, which is due to come on stream in mid-2016 and will produce more than 200,000 tonnes per annum of chemical grade spodumene concentrate.
The nuances of the deal seem to have eluded market experts, however what it does is effectively underwrite a life of mine offtake to Ganfeng.
The deal provides Ganfeng with a long-term offtake for 100 per cent of the spodumene produced from Mt Marion at benchmarked market prices subject to an agreed price floor.
“The upside of this deal is not well understood,” Reed said.
“The prospective cashflow Neometals is set to earn from its lithium business from 2016-17 are beyond significant.”
Neometals and MIN will both be able to claim their equity share of total mine production after the third year of production, which is dedicated to Ganfeng.
Should Neometals elect to do so, it would have access to feedstock for a value added lithium hydroxide processing facility utilising its patented ELi Process technology.
This is possible as the deal involving Ganfeng only encompasses the Mt Marion mine and concentration plant.
The 70:30 agreement between Neometals and MIN for on-processing of lithium concentrate using the ELi Process technology remains unchanged, which means the two companies will be able to process their share of the future Mt Marion production using whatever facility they may eventually develop together.
“This has been an overnight success – five years in the making,” Reed said.
“The ELi Process technology we can use to downstream some Mt Marion ore – we can use ore from other projects, it is capable of processing it all.
“The window for increasing hard-rock lithium feedstocks is open and we are well and truly ready to jump through to become a significant world market producer.”
NeoMetals Limited (ASX: NMT)
…The Short Story
Level 1, 627 Murray Street
West Perth WA 6005
Phone: +61 8 9322 1182
Fax: +61 8 9321 0556
DIRECTORS and MANAGEMENT
David Reed, Steven Cole, Christopher Reed
Melaid Holding Inc 7.86%
David Reed 5.35%