Boosting lithium production in Western Australia


Boosting lithium production in Western Australia

Lithium is a soft, silver-white metal that has become increasingly important in recent years due to its role in the development of clean energy technologies. The race for lithium is on and companies are fighting tooth and nail to get the best mining deals to secure the future supply of lithium. The growth in lithium demand has pushed lithium prices at an all time high making Australia perfectly positioned to take advantage of this boom in lithium demand.

Growth in Lithium demand

Over the past decade, the demand for lithium has seen significant growth as it is a key component in the production of rechargeable batteries for consumer electronics and electric vehicles.

Till 2015, only about 15% of the total demand for lithium came from the electric vehicle sector and based on the report by McKinsey, by 2030 the electric vehicle sector is going to account for almost 95% of the total demand for lithium. According to the scenario based on current market conditions, the demand for lithium is expected to grow at the compound annual rate of 30% till 2030.

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Figure 1: Projection of Lithium demand

Figure 1 above shows the projected demand based on the base level scenario. Increased legislation and interest in clean energy can raise the demand further while supply constraints mean that the price of lithium is likely to go up as well.

Australia - The biggest producer of lithium

This puts Australia in the perfect position to become the biggest player in the growing lithium industry. Western Australia is home to some of the world’s largest lithium deposits and is currently the leading supplier of lithium to the global market, providing almost half of the global supply of Lithium with the majority of Lithium coming from the five biggest mines of Australia.

However in spite of providing almost half of the global supply of lithium, Australia still imports one hundred percent of its lithium ion batteries. This presents a clear opportunity to build a complete battery value chain starting from mining the hard rock to processing it into battery active materials and then setting up cell manufacturing plants. This could bring in $7.4 billion annually and create 34,700 jobs by 2030, as outlined in the 2021 report from the Future Battery Industries Cooperative Research Centre.

This is a serious opportunity for Australia as it will not only bring in billions of dollars in revenue but it will give Australia considerable leverage over the whole lithium supply value chain. As the world moves towards clean energy, Australia is in a prime position to take advantage of its large reserves of lithium and other minerals essential for the production of batteries and other clean energy technologies.

Big players interested in Australia

The electric vehicle industry is booming, and major players are looking to Australia for its abundance of lithium and low cost of extraction. The country already boasts several large-scale mining operations and has partnerships with major companies in the industry. With the push towards renewable energy and decreasing dependence on fossil fuels, Australia's lithium resources are becoming increasingly valuable.

Liontown Resources is listed on the ASX and is an emerging tier 1 battery minerals producer. In January this year, Liontown Resources signed an agreement to provide 100,000 tonnes of lithium spodumene concentrate to South Korea`s LG Chem.

LG Chem supplies lithium ion batteries to Tesla and General Motors. This is the first major deal for the Australia based Liontown Resources. This deal is expected to account for almost 30% of Liontowns`s annual production. Soon after the deal was signed, Liontown`s share jumped by almost 13%.

According to the agreement the raw material will be mined in the Kathleen Valley which is situated in Western Australia. Kathleen Valley has one of the largest deposits of hardrock lithium. This site is currently undergoing preparations, it is expected that once mining starts in 2024 this site will produce over 500,000 tonnes of 6% lithium oxide concentrate annually for the next 23 odd years.

The deal with LG Chem put Liontown on the map for other companies struggling to secure supply for Lithium. In February, Liontown signed its second major deal, this time with Tesla. According to the agreement, Liontown will supply over 150,000 tonnes of lithium spodumene concentrate to Tesla annually starting from 2024. This news saw Liontown`s shares jump up by 26%.

In a statement Tony Ottaviano, the CEO of Liontown said,

“We now have two of the premier companies in the global lithium-ion battery and EV space signed up as foundational customers, marking a significant step towards realizing our ambition to become a globally significant provider of battery materials for the clean energy market.”

The most recent breakthrough for Liontown came in June when it secured another deal, this time with the car making giant Ford. According to the agreement, Liontown will supply 150,000 tonnes of lithium spodumene per year for the next five years to Ford from the Kathleen Valley project.

The ASC filing report indicates that Liontown has secured up to AUD 300 million to develop the Kathleen Valley project. The company is now ready to engage contractors to start the development of this site so that production on all three contracts can begin by 2024.

“With high-calibre foundational offtake agreements now in place with Ford, Tesla and LG Energy Solution, and financing commitments secured … the Liontown board has made the final investment decision to proceed to develop Kathleen Valley,” - ASX filing report.

So far this year Liontown has secured binding offtake agreements totaling 450,000 tonnes per year or 90% of its initial planned spodumene concentrate production. Riding on the back of these contracts, Liontown has partnered with Zenith Energy to develop Australia's largest off grid renewable energy hybrid power station in the Kathleen Valley.

Investor Takeaway:

The lithium industry is currently enjoying a boom with the rise in electric vehicles. This has led to an increase in demand for lithium and a corresponding increase in prices. This has been a boon for companies operating in the lithium space, especially those in Western Australia which is home to some of the largest deposits of lithium in the world.

Liontown Resources is one such company which has benefited from the lithium boom. The company has secured contracts with some of the biggest names in the electric vehicle industry, including Tesla and Ford. This has put the company in a strong position to weather any future market volatility.

The success of Liontown Resources indicates just how much potential there is for other companies in the lithium industry in Western Australia. With the right partnerships and deals in place, these companies and their investors and shareholders can expect to see a significant boost to their operations.

Boosting lithium production in Western Australia

 



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