Lithium: Should we be excited?
THERE is a lot of excitement in Zimbabwe about lithium. The Minister of Mines, Mr Winston Chitando has announced that in four years, Zimbabwe will produce 10 percent of the world’s lithium up from the current 2,3 percent
Why is lithium so exciting?
The price of lithium has doubled in the past two years. Lithium is a key ingredient for a future where global warming is reduced, low-carbon economies thrive and everyone drives an electric car.
Lithium-ion batteries are rechargeable, lighter and more environmentally-friendly than the traditional lead-acid batteries. In addition, they make it possible to store energy from renewable sources such as hydroelectric, solar and wind.
In addition to its use in batteries, lithium is also used in the production of ceramics and glass, pharmaceuticals, and polymers as shown in graphs in this report.
Lithium is not as rare as widely assumed. According to the United States Geological Service (USGS), the global lithium resource is 39 million tonnes. Of this, the reserves (the part of the resource which has been shown to be currently economically recoverable) is 13 million tonnes. Over half of these reserves are found in Chile, while China, Australia and Argentina have a significant portion of the remainder. Zimbabwe has reserves of 23 000 tonnes, roughly 0,2 percent of the global reserves.
Lithium is produced from two types of geological deposits: brines (salt water) and a type of rock called pegmatite. Zimbabwe’s lithium is found in pegmatite. The top lithium producing countries in 2017 are Australia, Chile, Argentina, China and Zimbabwe as shown in the graphs in this report
In 2010, lithium was added to the United States governments’ list of critical minerals — minerals that are important to the country’s manufacturing and defence industries, highlighting its growing importance in the global economy.
In December 2017, President Trump signed an executive order that mandates the US Government to take measures to promote its domestic mining industry and find new supplies of critical minerals.
Lithium is traded in three forms — as mineral concentrate, mineral compounds and as refined metal, the prices of which are not published but can be derived from various sources.
Mineral concentrates are mainly derived from pegmatite deposits while higher-valued mineral compounds are mostly derived from brines.
Mineral concentrates include spodumene which sells at US$800 a tonne, petalite at US$400 per tonne and lepidolite at $600 per tonne. Zimbabwe’s current sole producer of lithium, Bikita Minerals, exports petalite and spodumene.
Lithium compounds are worth much more than lithium minerals — lithium carbonate is trading at over US$13 000 a tonne, lithium chloride at over US$19 000 a tonne and lithium hydroxide at over US$22 000. The United States’ Geological Service (USGS) reports that Japan imported refined lithium metal at US$73 500 per tonne in 2010. Zimbabwe does not currently produce the higher-valued lithium compounds or refined lithium metal.
Bikita Minerals is the largest lithium producer in Zimbabwe, producing petalite and spodumene concentrates.
It is the largest petalite producer in the world. According to the Reserve Bank of Zimbabwe, 38 000 tonnes of petalite concentrate were exported from Zimbabwe in 2014 at a price of US$249 per tonne, while no spodumene was exported between 2009 and 2014. Bikita Minerals’ ceo, Mr Grant Hudson, noted that by 2017 production had risen to 46 000 tonnes which at current market prices of US$400 per tonne are worth US$18,4 million.
There are reports of several new entrants into Zimbabwe’s lithium sub-sector.
Prospect Resources (a Zimbabwean owned firm listed on the Australian stock exchange, ASX:PSC) is establishing the Arcadia Lithium project which according to its Chairman, Hugh Warner, intends to produce high-grade, battery-quality lithium carbonate and will begin mining in 2019.
Chimata Gold Corp (a Canadian junior mining company listed on) has partnered Zimbabwe Lithium Company (a Mauritius listed company) to explore for lithium in the tailings (processing waste) of the now defunct Kamativi Tin Mine which belongs to the state-owned Zimbabwe Mining Development Corporation (ZMDC).
If successful, a joint venture with ZMDC will be created to mine for lithium. Another firm, Six Sigma Metals (an Australian listed firm, ASX:SI6) has reported encouraging exploration results in the Shamva area.
Should we remain excited?
The excitement around lithium is based on the meteoric rise in its price in the past few years. There are two threats to the price boom: substitutes and over-supply.
Substitutes for lithium exist. Calcium, magnesium, mercury, and zinc can substitute for lithium in batteries; sodium and potassium can substitute for lithium in ceramics and glass manufacturing; while composite materials of boron, glass and polymer fibres can be used in place of aluminium-lithium alloys. More importantly mined lithium is increasingly facing competition from recycled lithium, with lithium-ion battery recycling is expected to play a major role in the supply of lithium in the medium to long term.
The demand for lithium is expected to increase threefold over the next ten years.
There are however mixed opinions on whether or not supply will keep up with demand.
Morgan Stanley expects supply of lithium to quadruple over the next ten years, dwarfing demand and thereby causing prices to fall from their peak this year.
On the other hand, Benchmark Mineral Intelligence expects supply to lag demand, further fuelling the lithium price boom. Morgan Stanley’s forecasts are included in this report.
To answer this article’s question, the answer is yes. However, risks will persist — the key risk is the possibility of a price bust over the next three years which will require cost management to ensure mines survive.
Pegmatite mines, like those in Zimbabwe, dominate the highest cost quartile and will likely be the first to close if the price of lithium crashes.
There is reason to be excited if Zimbabwean operations can begin producing value-added lithium compounds.
A Zimbabwean scientist, Mr Onias Sitando has demonstrated that it is possible to produce lithium carbonate from petalite.
It is also encouraging to note that the majority of new entrants are publicly listed companies that follow good practice in transparency about their operations.
To make the most of the developmental opportunity that lithium presents, Zimbabwe’s Government would be well-advised to promote exploration for lithium, resist the urge to promote the sector by providing new entrants with tax breaks (reduces Government revenues) and avoid increasing royalties when production begins (further increases the vulnerability of mines to lithium price busts).
The lithium producers should also manage expectations to ensure Government and the public do not have unreasonable expectations of the sub-sector which may lead to political pressure for resource nationalism.
Most importantly, the lithium producers should maximise the benefits accruing to communities around their mines and local micro, small and medium scale enterprises (MSMEs) by maximising the local content of their procurement and investing in well-thought out community development activities.