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Lake Resources (ASX: LKE; OTC:LLKKF) sends 20,000 litres of brine samples to Lilac Solutions
Lithium explorer and developer Lake Resources NL (ASX: LKE; OTC:LLKKF) can confirm that a further 20,000 litres of brine samples from a number of wells is being sent from Lake’s Kachi Lithium Brine Project to Lilac Solutions’ pilot plant in California.
This takes the total volume of Kachi brines to be processed at Lilac’s facility to 40,000 litres and ensures Lake will have continuity of supply of requisite sample sizes to meet the growing demand from potential off-takers.
Interest in the direct extraction process for the Kachi project using Lilac’s technology has increased from EV manufacturers, battery makers and others in the supply chain.
The second batch of 20,000-litre samples were pumped from a number of wells to provide a range of brine types and are being dispatched from site successfully. This process has involved using increased personal protective equipment (PPE) and under heightened security around travel and activities, following guidelines under COVID-19 set out by the federal and provincial governments in Argentina.
The samples have been collected and are being transported from Kachi (see Figs 1,2).
These samples will be processed similarly to current brine samples in the pilot plant modules using Lilac Solutions’ direct extraction ion exchange process into larger battery grade lithium carbonate samples with 99.9% purity. Processing of the first 20,000 litres is still ongoing but has understandably been slower than anticipated under initial COVID-19 guidelines. However, both the operations in Argentina and in California are considered essential services and work can continue.
Previously, the pilot plant was successfully commissioned using initially replicate brines and later smaller sample brines from Kachi. As reported, very high purity lithium carbonate was produced from both these brines.
Lake is also pleased to confirm that the Pre-Feasibility Study (PFS) of the Kachi Project using the direct extraction processing method is in the final review process and is anticipated to be released before the end of the month.
Lake’s Managing Director Steve Promnitz said: “Lake continues to be focused on delivering samples of battery grade lithium carbonate from Kachi brines from the pilot plant despite some of the inevitable delays under COVID-19. Naturally our first emphasis is on the health and safety of our team and the communities in which we work and the same applies for the pilot plant.”
We hope to be able to report results from the processing of the first 20,000 litres soon and we are encouraged by the fact that this work is ongoing at Lilac, albeit more slowly. The additional 20,000 litres that we now transporting to site and then testing will further validate that this technology works well and we can deliver high purity lithium carbonate from the Kachi brines.”
Although the lithium market can be tricky to understand, the payoff can be substantial, said John Kaiser of Kaiser Research.
John Kaiser: No Upside in Tesla, Lithium Juniors are the Future of the EV Story youtu.be
Tesla (NASDAQ:TSLA) may be at the center of the electric vehicle (EV) revolution, but the Elon Musk-led company has no upside left. That means investors need to look elsewhere for opportunity.
That's according to John Kaiser of Kaiser Research. Speaking at the Prospectors & Developers Association of Canada (PDAC) convention, he said that lithium juniors have become the place to be.
Referencing a report from Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO), Kaiser said that by 2035, roughy 1 million tonnes of lithium metal equivalent will be needed to support EV demand.
"The brines are going to come up with a big chunk, and Australia's pegmatites will add more, (but) that probably still will take care of only half," he said, noting that he expects companies working in Eastern Canada to step up.
Eastern Canada has suffered setbacks as a lithium jurisdiction due to past issues, including the downfall of Nemaska Lithium, but Kaiser said that the area is similar to Western Australia, where companies have seen success with pegmatite exploration. And in addition to that, it benefits from good access to water.
"Without this lithium becoming a reality, Tesla goes to a buck — it dies," he said.
Kaiser sees the lithium market as a gateway to the mining sector for young people, and said that although it can be tricky to understand, the payoff can be substantial.
"Play a statistics game. Look at the sector, see who's serious. Put together a basket of these lithium companies and treat it like a Silicon Valley startup portfolio where they have dozens of high-risk stories," he said, noting that while there will be failures, there will also be a handful of "superstars."
Don't forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Housing the world's largest deposits of lithium, Chile's unique geological landscape and climate make it ideal for lithium brine extraction
As the world continues on the path towards a future dominated by clean energy, lithium's importance only continues to grow. Demand for the battery metal has already reached an all-time high, increasing by 400 percent in 2021. What's more, there is every indication that this growth will continue in 2022, with prices increasing by 126 percent in just the first quarter.
Currently, Australia and Chile are the two leading producers of lithium, respectively accounting for 46.3 percent and 23.9 percent of worldwide production. Both countries are jurisdictionally inclined to support the mining sector. However, Chile's potential could one day see it outstrip even Australia where investment is concerned.
Housing the world's largest deposits of lithium, Chile's unique geological landscape and climate makes it ideal for lithium brine extraction. The country thus has a pivotal role to play in meeting demand and establishing a stable global supply chain.
A critical component of sustainability
Climate change is an undeniable problem, one which requires a collaborative effort to address. It is for this reason that governments around the world have all agreed to pursue full climate neutrality by 2050. Because combustion engines represent an inordinate percentage of greenhouse gas emissions, replacing them with electric vehicles (EV) is essential if any nation is to achieve their sustainability goals.
Given its cross-sector industrial importance, the battery metal was already in high demand.
The large-scale manufacturing of electric vehicles has caused this demand to increase exponentially. As multiple automotive manufacturers construct gigafactories to ramp up EV distribution, the need for lithium is growing well beyond our current production capacity.
Investors and mining companies can benefit by turning to jurisdictions like Chile to ramp up supply. The world's migration towards a sustainable future simply cannot occur without lithium.
Lithium: Australia versus Chile
Although Australia houses impressive lithium reserves, the majority of the country's stores occur in hard rock deposits. Mining these deposits is relatively inexpensive, but hard rock lithium operations also tend to have narrow margins compared to other methods. In particular, lithium brine extraction offers higher yields, greater efficiency and a lower overall environmental impact.
Currently, the largest lithium producer in Australia is Pilbara Minerals (ASX:PLS,OTC Pink:PILBF). Its flagship project, the Pilgangoora operation, is situated atop one of the world's largest hard rock lithium deposits. It also jointly owns a pegmatite lithium project with Atlas Iron (ASX:AGO), the Mt Francisco project.
Geography represents Chile's first major advantage over other jurisdictions. Alongside Bolivia and Argentina, Chile lays claim to a geographic region known as the Lithium Triangle. Located in the Andes in South America, it contains an estimated 68 percent of the world's identified lithium resources.
The Lithium Triangle is home to a series of vast salt flats, beneath which sit incredibly lithium-rich brine pools. More promising still is the climate of the region, which is known for being incredibly hot and dry. This represents a considerable boon for extraction operations, which typically rely on evaporative processes.
A powerful investment opportunity
Chile's mining sector has leveraged its arid geography to great effect. The country's Salar de Atacama salt flat is the largest-producing brine deposit in the world. It is also home to several major lithium brine operations.
One of these is owned and operated by Albemarle (NYSE:ALB). Currently the largest business provider of lithium for electric vehicle batteries, Albemarle also operates a lithium carbonate plant at La Negra. According to an Albemarle spokesperson, the company has a long history in Chile backed by a unique contract.
SQM (NYSE:SQM) operates another major lithium brine operation in the salt flat. As the world's largest lithium producer overall, the company recently announced plans to reduce brine extraction in the region by 50 percent by 2030. This announcement came in tandem with a commitment to reduce water usage across all its operations by 40 percent.
Finally, just south of Salar de Atacama is situated the highest-quality lithium pre-production project in Chile. Maricunga is jointly owned by Lithium Power International (ASX:LPI), Minera Salar Blanco and Li3 Energy. Situated just 250 kilometers from Chile's coast, and 170 kilometers from the mining town of Copiapo, it's said to possess characteristics directly comparable to Atacama. Maricunga is also adjacent to Highway 31, which connects Northern Chile to Argentina.
The most significant challenge to Chile's growth, from an investment perspective, is sociopolitical. Although the country has a history of being relatively friendly towards the mining sector, its current government is exploring new legislation that could nationalize both copper and lithium. A new mining royalty bill is also in the works, which could increase tax rates by up to 80 percent.
It's worth noting that not every investor considers the current political climate to be a risk. South32 (ASX:S32), a spinoff of BHP (ASX:BHP), recently invested US$1.55 billion to purchase a 45 percent stake in the Sierra Gorda copper mine, and a lithium auction held by Chile earlier this year saw Chinese manufacturing company BYD acquire extraction rights for 80,000 metric tons of lithium.
Chile is home to the largest, richest and most valuable lithium deposits in the world. For many investors, the high margins and low cost of lithium extraction in Chile more than make up for the potential of a few political speed bumps.
This INNSpired article is sponsored by Lithium Power International (ASX:LPI). This INNSpired article provides information that was sourced by the Investing News Network (INN) and approved by Lithium Power International in order to help investors learn more about the company. Lithium Power International is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Lithium Power International and seek advice from a qualified investment advisor.
Experts in the field weigh in on Goldman Sachs' lithium oversupply call and whether they think it accurately depicts what's happening in the market.
Last week, the lithium market was shaken by a report from investment bank Goldman Sachs (NYSE:GS) saying that the bull market for battery metals was over for now.
Prices for lithium, which increased more than 400 percent in the past year, are expected to drop in the next two years, with a “sharp correction” happening by 2023, according to Goldman Sachs analysts.
They project that lithium prices will fall from current levels to an average of just under U$54,000 this year, from an average of above U$60,000. By 2023, the bank forecast is for an average price of just over US$16,000.
There’s been “a surge in investor capital into supply investment tied to the long term EV demand story, essentially trading a spot driven commodity as a forward-looking equity,” the analysts said. “That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend.”
Analysts at the investment bank said investors are fully aware that battery metals will play a crucial role in the 21st century global economy.
“Yet despite this exponential demand profile, we see the battery metals bull market as over for now,” they said, adding that the long term prospects for the metals remain strong.
Following the report, lithium analysts and experts shared their concerns over a call that they say misses the fundamentals of this battery metal market.
Commenting on the Goldman Sachs analysts call on lithium, Rodney Hooper of RK Equity said he strongly disagrees with their findings on both supply and demand.
“My biggest issue with the report is that it will discourage upstream investment in mining,” he told the Investing News Network (INN). “We clearly haven't seen sufficient upstream investment to meet current and future demand.”
Also speaking with INN, Daniel Jimenez of iLi Markets agreed, saying analysts at the investment bank are overestimating supply and underestimating demand.
Goldman Sachs analysts are expecting a global demand of around 1.2 million metric tons (MT) of lithium carbonate equivalent (LCE) by 2025.
“We think that lithium producers have better industry insights and truthful talks with most of the OEMs they supply,” Jimenez said. Top lithium producer Albemarle (NYSE:ALB) is calling for around 1.5 million MT LCE while Chinese giant Ganfeng (OTC Pink:GNENF,SZSE:002460) is expecting around 1.6 million MT during the same period.
“On the supply side they are extremely optimistic in terms of the lepidolite production that could come from China in the coming years, which is also not realistic,” Jimenez said. “Bottom line — we believe it will be just the contrary.”
Similarly, analysts at Benchmark Mineral Intelligence said the industry cannot rely on China’s feedstock to meet the needs of the market.
“Known domestic Chinese spodumene and other hard rock resources are low quality, a key reason why there has been an increasing reliance by Chinese converters on Australia for supply instead,” analysts said in a note. “China’s deposits of lepidolite may have the potential to help bridge the deficit in coming years, but are unlikely to lead to oversupply.”
Forecasting the lithium market not an easy task
Goldman Sachs analysis of the lithium market is not the first one to be called out by experts in the field. Back in early 2018, when prices had been interestingly also on the rise for a couple of years, Morgan Stanley (NYSE:MS) predicted a decline in prices by 2021, with escalating fears of an oversupply in the market.
“We’ve seen this before, we will see it again. Goldman Sachs: you can’t just add up all the lithium mine level potential and make an oversupply call … the speciality chemicals world is more nuanced than iron ore,” Benchmark Mineral Intelligence’s Simon Moores said in a tweet when the recent Goldman Sachs report came out. “It’s why the world doesn’t rely on investment banks for research any more.”
Predicting how the lithium market will perform in coming years is not an easy task. As a specialty chemical, not all lithium is created equal and not all auto and battery makers' needs are the same. There have been countless constraints to bringing supply into the market, and as analysts would often point out, delays are as common for new projects as for producers expanding existing operations.
For Hooper, it is both demand and supply that some analysts usually get wrong.
“The best indicator of battery-grade demand is cathode production,” he said. “Historical analysis shows that demand linked to cathode production has the highest correlation to lithium prices — this indicator flagged a demand/supply deficit in late 2020.”
When assessing the supply side, Hooper does not consider projects until they are fully permitted, financed and under construction. And even then, he allows for a long ramp-up phase and qualification timeline, especially if it's a greenfield project.
“What happens when you use these indicators is that cathode production brings demand forward 6 months and supply adjustments push qualified material out 6 to 12 months,” he explained. “The net result is a structural deficit as analyst forecasts of the supply/demand balance in the market are out by 12 to 18 months.”
In a market like copper, that could mean a few percent of total demand, Hooper added, but in a market like lithium, growing at 30 percent, the difference is “enormous.”
Commenting on the biggest challenge for analysts to determine what will happen in lithium, Jimenez, who before iLi Markets worked at top lithium-producing company SQM (NYSE:SQM), said there is clear excess optimism in capacity increases and production ramp up times.
“Feasibility reports are, based on past experience, very optimistic,” he said. “Furthermore, the confidence that new technologies or resource types will be able to deliver are overly optimistic. In many cases we are talking of unproven technologies that have not been scaled from lab to industrial yet.”
Is the lithium market really facing oversupply?
At the end of last year, INN talked to analysts and experts on the field to get a better understanding of the outlook for lithium, with most agreeing demand would outpace supply on the back of electric vehicle (EV) sales. What has changed since then? Not much.
For Benchmark Mineral Intelligence analysts, the lithium market will remain in structural shortage until 2025.
“The lithium market will balance over the next few years, but it’s unlikely that an unprecedented ramp-up of marginal, unconventional feedstock will fill the deficit,” they said. “It is also unlikely that demand will weaken significantly.”
Similarly, iLi Markets' Jimenez doesn’t think supply will be able to catch up with demand at least until 2026 to 2027 mainly because of the difficulty to bring greenfield projects into production at full capacity.
“Over this period of time, lithium should be the limiting factor in EV sales,” he said. “Even with demand growing very strongly, the investments the industry is making today might yield additional capacity in 6 to 10 years from now that we are not able to see today.”
Another expert echoing these thoughts was RK Equity’s Hooper.
“Aggregate supply may match demand in the years to come; however, battery-grade supply qualified into the battery supply chain won't match EV demand,” he said.
“If OEMs continue to ignore battery raw material supply risks, they will pay the ultimate price soon enough. Signing meaningless binding (but not really binding) lithium offtake agreements with no associated capital flows or permitting assistance attached to them will lead to disappointment.”
As EV demand from around the world enters its rapid growth phase, lithium quality will be critical.
“We haven't seen sufficient upstream investment to cause oversupply for some time,” Hooper said. “The only way we see the market being balanced in the near future is if there is EV demand destruction and that is unlikely.”
Lithium prices expected to remain at steady levels
The lithium price rally has made news headlines around the world since 2021, with the world's largest asset manager BlackRock’s (NYSE:BLK) Evy Hambro, who is bullish on metals needed for the green energy transition, talking about the essential need for lithium into the future.
Lithium pricing is usually a common concern for investors new to the space, with experts generally reminding anyone interested in the battery metal that there’s no single lithium price. Lithium traded at spot prices only reflects a portion of the market. In fact, most lithium is locked up in contracts, which in some cases include fixed pricing.
Combined with existing contracting arrangements set in 2022, prices are very unlikely to crash in 2023 and 2024, according to Benchmark’s Lithium Forecast.
“Benchmark’s view is that contract prices are likely to continue to rise as a lagged effect of the major step-change in spot pricing over late 2021 and 2022 while spot prices will fall, with the two prices coming into more of an equilibrium than they are now,” analysts at the firm said.
Structurally, prices will remain high through 2025 to 2026, at least, iLi Markets' Jimenez said.
“Now high means above US$40 per kilo, which is significantly higher than the incentive price to develop a marginal cost greenfield project,” he said, adding that whether the price will be U$40, U$60, U$80 or U$120 is a difficult call to make.
For the expert, each year the industry will need to grow supply by 200+ kMT LCE per year, which was the total demand of 2017.
“The possibility that greenfield projects suffer delays is high,” Jimenez said. “Probably lithium units will be the bottleneck of the lithium-ion battery supply chain.”
China’s measures to contain COVID-19 have recently hit EV sales, and as a result the need for lithium, although this pullback in lithium demand is seen as temporary.
“When EV demand resumes in H2 2022, as China lifts restrictions, I expect spot and contract pricing to remain firm,” Hooper said.
Even for Wood Mackenzie analyst Allan Pedersen, who sees lithium prices declining by the end of 2022, a “sharp correction” like the one called by Goldman Sachs is not coming.
“We do not forecast a sharp correction but more a 'softer landing' as demand remains strong, providing a cushion for prices,” he told INN.
The research firm is expecting additional supply entering the supply chain both from brine and mineral concentrates to increase supply beyond demand in the short term.
“It is worth noting the surplus is fragile and small changes in electric vehicles forecasts can have a significant impact on the demand for lithium and therefore on the market balance,” he said. “We forecast that the supply surplus for battery-grade lithium chemicals will be less than the market in general as producing high quality battery grade lithium chemicals is difficult.”
Growth in the lithium industry is happening at a rapid pace, with changing market dynamics expected to emerge as a result.
“As the market wrestles between long-term supply security to fuel the lithium-ion economy, and increasingly market-led pricing mechanisms to incentivise supply growth, the era of lithium market volatility is likely just beginning,” analysts at Benchmark Mineral Intelligence said.
Lithium stocks hit — now what?
Following last week’s Goldman Sachs report, top lithium producers saw their share prices plunge. Chile’s SQM was down 5 percent, rival Albemarle declined more than 7 percent and Argentina-focused Livent (NYSE:LTHM) fell around 14 percent following the oversupply and sharp correction in price calls from the bank.
Despite the recent slump, looking at how lithium stocks have performed in the past year paints a different picture — many lithium stocks in the US, Canada and Australia have been on the rise year-on-year on the back of improved market conditions, as the price rally for the battery metal saw many investors turn to the space.
For RK Equity’s Hooper, there is still value in the current market.
“My suggestion would be to look at current or near term producers that have been hit in the latest downturn,” he said. “Shares that are pricing in spodumene or chemical prices that align with Goldman Sachs outlook — which by 2023 sees spodumene concentrate at $1,100 and lithium carbonate ex VAT at US$15.6k/t. We see 2023 average pricing well above those levels.”
Giving his best suggestion for generalist investors who have jumped to the lithium market in recent months, Hooper said they would do well to look at history and decide for themselves how supply and demand have and will evolve over time.
“Will internal combustion engine vehicles sell in any great volumes after 2025 to 2027 given legislation and consumer preferences?” he said. “Then load in a realistic long-term price for lithium chemicals and decide if the company has a low enough valuation multiple and some room for error.”
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Lithium demand has surged over the last couple of years, attracting investor attention. Before jumping in, learn about the top Australian lithium stocks by market cap.
The rise of the worldwide electric vehicle revolution has brought ever-increasing interest in lithium, which is used in the lithium-ion batteries that power these machines.
Many market experts anticipate that lithium demand will increase in coming years, which is why it’s good for investors to have an idea of the biggest ASX-listed companies that are focused on the battery metal.
Here the Investing News Network lists the top five ASX lithium stocks by market cap. The following information was generated using TradingView’s stock screener and was correct as of May 17, 2022.
1. Mineral Resources
Market cap: AU$10.38 billion; current share price: AU$60.08
Mineral Resources (ASX:MIN) is a Perth-based mining services company with a particular focus on the iron ore and hard-rock lithium sectors in Western Australia. The company's current lithium projects include Mount Marion and Wodgina. The Mount Marion lithium project — located in Kalgoorlie, Western Australia — was upgraded in April 2022 to a production rate of 600,000 tonnes per year of mixed-grade product.
2. Pilbara Minerals
Market cap: AU$7.74 billion; current share price: AU$2.82
Western Australia-based Pilbara Minerals' (ASX:PLS) main Pilgangoora operation produces spodumene and tantalite concentrate. Pilbara also has the Mount Francisco joint venture with Atlas Iron; there is still significant drilling to be done at the project as many targets are untested.
Pilbara has garnered the attention of many global partners, and together these partners hope to support production and a Stage 2 expansion at the company’s Pilgan plant. Following the successful completion of Stage 1, Pilbara is expecting to increase its production by 10 to 15 percent.
Market cap: AU$7.29 billion; current share price: AU$12.24
Allkem (ASX:AKE) is a specialty lithium chemicals company based out of Brisbane. Orocobre merged with Galaxy Lithium and underwent a formal name change in November 2021 to create the entity. Allkem currently owns and runs operations for seven different projects worldwide in Argentina, Japan, Australia and Canada.
Allkem presented its growth strategy in April 2022. Under this plan, it plans to triple its production by 2026, while maintaining a position of 10 percent of the world’s lithium production for the next 10 years.
4. AVZ Minerals
Market cap: AU$2.75 billion; current share price: AU$0.78
AVZ Minerals (ASX:AVZ) is an explorer whose main focus is the development of its Manono lithium-tin project in the Democratic Republic of Congo. Manono is located at one of the world’s largest lithium, cesium and tantalum pegmatite deposits. Manono is also a historical site that was mined for its tin content for over 60 years.
A definitive feasibility study published in 2020 shows a 20 year mine life with an output rate of 700,000 tonnes per year of high-grade spodumene concentrate, and 45,375 tonnes per annum of primary lithium sulphate.
5. Liontown Resources
Market cap: AU$2.73 billion; current share price: AU$1.28
Liontown Resources (ASX:LTR) has two projects located in Western Australia, a resource-rich area of Australia. The Kathleen Valley project is expected to become a top battery metals provider, and is projected to begin development in Q2 2024. Meanwhile, the company's Buldania project is an emerging second project with an initial mineral resource of 15 million tonnes at 1 percent lithium oxide.
In February 2022, Liontown and US carmaker Tesla (NASDAQ:TSLA) entered a five year agreement for the supply of lithium from the Kathleen Valley project. Commercial production is planned for 2025, at which time the asset will begin the sale of over 100,000 tonnes each year.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Marlee John, hold no direct investment interest in any company mentioned in this article.
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Experts believe the positive long-term outlook for electric vehicles means lithium demand’s breather could just be temporary.
Lithium prices climbed over 400 percent last year, with other key battery raw materials such as cobalt and nickel also seeing prices rally as demand from the electric vehicle (EV) industry picked up pace.
But by the end of the first quarter, prices started to stabilize as demand took a breather, particularly in China, where the government has imposed lockdown measures to contain a new wave of COVID-19.
“We expect lithium and cobalt prices to peak this year, from dented but still strong demand and supply chain challenges,” Alice Yu of S&P Global Market Intelligence said at a recent webinar.
For the past year, the sharp rise in prices, which has seen lithium increase almost 130 percent year-to-date, according to Benchmark Mineral Intelligence data, has pushed major lithium miners to restart idle capacity and outline expansion plans, with juniors also moving ahead with their projects.
For Yu, supply should ease in H2 and into 2023 as new capacities commission and ramp up. “These will pressure larger price corrections,” she said, adding that she expects the annual price to drop by a third in 2023. “Lower lithium prices will be good news for the downstream and lift some of the demand resistance we have seen so far.”
COVID-19 restrictions are behind the recent demand pullback seen in China, where the measures have impacted the entire supply chain, from the closing of factories to shipping and transportation networks.
“There are also constraints on Chinese lithium chemical exports to Japan and South Korea due to port and logistical challenges stemming from the lockdown,” Yu said.
Overall, Chinese vehicle sales for April plunged almost 48 percent compared to a year earlier due to lockdowns, as per data released by the China Association of Automobile Manufacturers. Meanwhile, sales of EVs and plug-in hybrids in the country plunged 38.3 percent compared to the previous month, but jumped 45 percent year-on-year and more than doubled over the first four months of the year from 2021 levels.
According to the S&P Global Market Intelligence, plug-in EV sales across key markets China, Europe and the US were up 96 percent year-on-year in the first quarter of 2022, despite weaknesses in the overall vehicle market caused by the ongoing computer chip shortage.
The long-term EV sales outlook is positive, which means lithium's recent demand breather could be temporary.
“We don't know how long the lockdowns are going to last in China, but the underlying fundamentals are still there,” William Adams, head of base and battery metals research at Fastmarkets, said at a recent webinar. “The lithium market is very tight. We don't see that easing anytime soon.”
In fact, he added that to some extent the market may have seen some destocking coming into the pullback in prices. “So we could be set up for quite a sharp rebound once we see the end of lockdowns.”
Looking further ahead to mid-decade, in the period between 2023 and 2026, lithium prices are expected to remain above historical levels, and above prices in and before 2021, according to the S&P Global Market Intelligence.
“This is because the market expects a lithium deficit from 2024 onward, so a strong price environment will be needed to incentivize supply,” Yu said.
The high lithium price environment is accelerating product development and restarting idle operations, but whether they will be up and running fast enough is yet to be seen.
“One of the things which has surprised us is how long it has taken for some of the idle supply that was closed down during the weaker period into 2019 and 2020 to be reactivated,” Adams said.
Australia, Chile and Argentina dominate lithium production today, and they will lead the supply expansions, according to S&P Global Market Intelligence.
“At the same time, there'll be more diverse locations of lithium production,” Yu said. “We expect Mexico, Canada and Finland to start or restart lithium production over the next five years, especially as North America and Europe and their PEV supply chains in these regions seek more localized sources of lithium.”
But it has been stated time and time again how long lithium projects can take to ramp up, and how many delays they can suffer, with COVID-19 restrictions just adding to the mix of challenges.
“There's no shortage of lithium, it's all about can you get it? Can the supply chain keep up with the demand side of it in the time that is needed?” Adams said.
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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.
Latin Resources Limited (ASX: LRS) (“Latin” or “the Company”) is pleased to advise the latest assay results from diamond drilling at the Company’s 100% owned high-grade Colina Lithium Prospect (“Colina”), one of several prospects within the Salina Lithium Project in Brazil, has confirmed the previously reported visual spodumene estimations in hole SADD016. These results have surpassed all previous intersections, returning 25.24m @ 1.25% Li2O1 from the central area of the Colina Prospect. Mineralisation remains open to the south.
- Drilling at Colina has confirmed the presence of additional wide, spodumene bearing pegmatites below any previously reported intersections, with recent drill hole SADD020 intersecting 7.46m of pegmatite with estimated 15-20% spodumene.
- The latest results from diamond drilling in the centre of the Colina Prospect have confirmed the previously reported wide spodumene pegmatite intersection in drill hole SADD016, returning 25.24 m @ 1.25 % Li2O from 94.14 m.
- The Company will undertake preliminary Dense Media Separation (DMS) metallurgical test work on the Colina Prospect drill core as a part of the Company’s fast-track strategy.
Latin Resources’ Exploration Manager, Tony Greenaway, commented:
“Our drilling at Colina continues to return excellent results, with these latest assays from drill hole SADD016 being our best intersection to date, further highlighting this central zone of Colina as a priority area for the Company.
“The discovery of a new spodumene pegmatite at depth in hole SADD020, below all our previously reported pegmatites, has highlighted the upside at Colina. We know we have additional pegmatites to test further out to the west of Colina, and now we have proven the potential for additional stacked pegmatites at depth. The more we drill at Colina, the better this prospect seems to get. Based on this newly discovered pegmatite, the Company will continue to push our drilling below our previous target depths to fully evaluate this emerging new zone.
“We are also very pleased to get some initial metallurgical test work underway. We have had very productive discussions with a number of specialist consultant groups during the recent PDAC conference including metallurgical, mining, and environmental permitting consultants. We outlined and have initiated some dense media separation test work, which will provide the Company with preliminary recovery and potential lithium concentrate grades, as well as providing guidance for a more detailed metallurgical test work program to be undertaken as part of the Company’s strategy to fast-track our exploration activities to a Maiden JORC Mineral Resource.”
Colina Prospect – Resource Definition Drilling
Latest assay results from diamond drilling at the Company’s 100% owned Colina Lithium Prospect, part of the broader Salinas Lithium Project in Brazil, have confirmed the grade of the previously reported wide pegmatite in hole SADD016 (Figure 1 and Figure 2) including2:
- SADD0016: 25.24m @ 1.25% Li2O from 94.13min
including: 7.00m @ 1.52% Li2O from 97.00m
and: 9.19m @ 1.51% Li2O from 109.00m
Visual logging of hole SADD017 drilled down dip to the east of hole SADD016, has shown multiple separate wide pegmatites (Figure 3), with the Company’s on-site field teams estimating significant zones of spodumene in the logged pegmatites (Refer to Table 1 for details).
In addition to these two results, SADD020 drilled approximately 260m to the south of SADD016, has uncovered a new thick pegmatite below any previously reported intersections, with a zone of 7.46m of spodumene bearing pegmatite at a depth of 207.08m own hole (Figure 2 and Figure 4), with logging estimating between 15-20% spodumene3.
Figure 1: Drill section A-A’ showing completed and planned drill holes, and results for SADD0164and logged pegmatite intersections for SADD017 (results pending)
These results highlight the significant upside potential for the discovery of new pegmatite zones within the Colina Prospect. With the imminent arrival of additional, larger drilling rigs capable of reaching greater depths, the Company continues to push drilling beyond previously planned depths to fully evaluate this new zone.
This article includes content from Latin Resources Ltd (ASX:LRS), licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
Australia is rich in gold, and is home to many major mines. Here's a look at the top Australian gold mines flush with the yellow metal.
With Australia earning more accolades within the gold space and the price of gold hitting record highs in the last two years, investors may want to find out more about gold mines in the country.
Currently the second-largest gold-producing country in the world, Australia is home to top producers and gold mines.
Read on for a breakdown of the Australian gold market, as well as the largest gold mines that can be found throughout the area.
The region of Australia
As previously mentioned, Australia is currently the second-largest gold-producing country across the globe.
Global gold consumption is expected to rise annually at a rate of 5.7 percent until 2023, when it’s expected to reach 4,535 tonnes. Australia’s continued expansion projects and new developments in the gold sector will improve output and help the country maintain its position as a key player in the gold production market.
One of the more prolific gold mining areas in Australia is Western Australia.
Recent exploration activity in the Pilbara region of Western Australia has renewed interest and helped increase the country’s consistent gold output. While the Pilbara region is typically known as one of the world’s largest producers of iron ore, the region is currently in the midst of a small gold rush thanks to a major discovery in 2017 by Novo Resources (TSXV:NVO,OTCQX:NSRPF) and Artemis Resources (ASX:ARV,OTCQB:ARTTF).
In fact, gold was the second largest commodity in Western Australia by value in 2020 to 2021, behind iron ore, at a record of AU$17.3 billion in sales in 2020. In 2021, the metal saw sales of AU$16 million in the state.
The Fraser Institute also named Western Australia one of the best mining jurisdictions in the world, coming in first in 2021. The area has attracted major miners like Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and BHP (ASX:BHP,NYSE:BHP,LSE:BLT) to the region. Covering more than half a million square kilometres (km), Western Australia’s Pilbara is one of the most resource-rich regions in the state.
Western Australia itself represents close to 60 percent of the country’s total gold output and some geologists have compared the geology of the Pilbara Craton with South Africa’s Kaapvaal Craton and Witwatersrand Basin. Witwatersrand is home to the Earth’s largest known gold reserves and is responsible for over 40 percent of worldwide gold production. Both the Pilbara and Witwatersrand are similar in age and composition, sitting on top of the Archean granite-greenstone basement. The Pilbara area hosts numerous small mesothermal gold deposits containing conglomerate gold — mineralization known to hold large, high-grade gold nuggets.
What are the top Australian gold mines?
Below is a guided tour of the top 10 largest gold mines in Australia in terms of gold output, according to the Aurum Analytics quarterly report on Australian and New Zealand gold operations.
1. Cadia Valley
Owned and operated by Newcrest (ASX:NCM,OTC Pink:NCMGF), Cadia is officially the biggest mine in Australia in terms of production. During the second quarter of 2021, the asset had an output of 194,757 ounces of gold.
The mine is made up of the Cadia East underground panel cave mine and the Ridgeway underground mine (currently in care and maintenance), which produce gold doré bars from a gravity circuit and gold-rich copper concentrates from a flotation circuit.
In October of 2019, the company announced approval of the Cadia expansion project, bringing it to the execution phase. This stage involves beginning development for the next cave (PC2-3). In December 2021, the company received approval to expand production to 35 million tonnes a year.
Newmont (TSX:NGT,NYSE:NEM) became the sole owner of this open-pit mine in 2009.
The mine is located 16 kilometres from Boddington, Australia, and has an annual gold production of 709,000 attributable ounces. The mine is Western Australia’s biggest gold producer. In 2020, the asset produced 670,000 ounces of the yellow metal.
In addition to gold, the mine also produces copper, and at the end of 2020, it provided an output of 56 million attributable pounds of the base metal.
In 2021, the company announced that Boddington would have the industry’s first autonomous haulage fleet.
Fosterville is a high-grade, low-cost underground gold mine located in the state of Victoria, Australia. The Fosterville mine features growing gold production at increasingly high grades, as well as extensive in-mine and district scale exploration potential.
The mine has been operational since 1989, with a lifetime production of over 16 million ounces of gold. Additionally, in terms of scale, it is Australia’s largest mine and its pits encompass more than 5 square kilometres. It’s also one of the lowest cost gold mines in the world.
The asset, which is owned by Agnico Eagle Mines (TSX:AEM,NYSE:AEM), is the third-largest gold-producing mine in Australia, producing an impressive 157,993 ounces in Q2 2021.
Northern Star (ASX:NST,OTC Pink:NESRF) owns Kalgoorlie Consolidated Gold Mines (KCGM), which includes the Fimiston open pit, Mt Charlotte underground mine and Fimiston and Gidji processing plants.
Northern Star refers to the Fimiston open pit as a super pit because it has produced more than 50 million ounces of gold in the last 30 years.
The asset is located in the legendary Golden Mile, which was once reputed to be the richest square mile on earth. When fully developed, Kalgoorlie will be 3.6 kilometres long, 1.6 kilometres wide and up to 650 metres deep.
Another mine owned by Newcrest, Telfer is located in the eastern Pilbara and is one of the oldest in Australia. Between the years 1975 and 2000, the asset produced approximately 6 million ounces of gold until operations were suspended due to high operating costs.
Fortunately, production was able to restart in 2004, and the mine has since produced over 5 million ounces, with 416,000 ounces of gold in the 2021 financial year alone. The mine also produces copper, with an output of 16 tonnes in 2019.
In 2015, the company signed a land use agreement with the Martu people, which enabled work at the mine to continue in exchange for the Martu receiving AU$18 million over the course of five years with the addition of a further revenue-sharing agreement.
Tanami has been fully owned and operated by Newmont since 2002, and it is located in the remote Tanami Desert of Australia. Additionally, both the mine and the plant are located on Aboriginal freehold land that is owned by the Warlpiri people and managed on their behalf by the Central Desert Aboriginal Lands Trust.
Tanami is a fly-in, fly-out operation in one of Australia’s most remote locations. The asset is 270 kilometres away from its closest neighbours, the remote Aboriginal community of Yuendumu. In 2020, Tanami produced 495,000 ounces of gold and reported 5.9 million ounces of gold reserves.
The Tanami Expansion 2 is currently underway to secure its future, potentially extending the mine life to 2040 and increasing annual gold production by an approximate 150 to 200 thousand ounces.
7. St. Ives
Owned and operated by Gold Fields (NYSE:GFI,JSE:GFI), St. Ives is both an open pit and underground mine, with two main open pits, and three underground mines.
In one of Gold Fields’ latest quarterly reports, it was revealed that St. Ives produced 393 tonnes of the yellow metal in 2021, up 2 percent from 385 tonnes in 2020.
The mine spans 3,600 square kilometres, stretching over close to 160 kilometres in strike length along the Yilgarn Craton and Fraser Range mobile belt collision zone. The regional geology is dominated by granitoid rocks; it is a rare example of a large gold deposit within high grade metamorphic rocks that have undergone widespread recrystallisation and melting.
In 2021, Tropicana produced 265,000 ounces of gold with an all-in sustaining cost of AU$1,326 per ounce.
Jundee is located in the increasingly sought-after Western Australia region and is owned by Northern Star after the miner purchased it from Newmont in 2014 for AU$82.5 million.
The project is well-known due to the fact that it solely uses underground mining and not the often utilized open pit mining. Jundee produces around 1.8 million tonnes of ore per year.
Most recently, the asset produced 83,562 ounces of gold in Q2 2021.
10. South Kalgoorlie Operations
The South Kalgoorlie Operations were acquired by Northern Star (ASX:NST,OTC Pink:NESRF) in 2018.
In the second quarter of 2021, the South Kalgoorlie Oerations produced 76,175 ounces of the precious metal.
How can you invest in Australian gold stocks?
Like all publicly listed stocks, gold companies issue shares that are available for investors to trade. When you purchase shares of a gold stock, you are essentially purchasing a stake in the company, making an investment with financial returns or losses from its profits.
There are two main ways that an investor can invest in gold mining stocks. The first way is when market participants purchase through a major mining company; the other way of trading on the stock market is by investing in a gold mining stock through a junior miner (a small cap stock).
Although no gold stock investing is 100 percent foolproof, backing a successful mining company in the precious metals space can alleviate some of the stress of a down stock market when you keep in mind that if a company’s share price goes down, it becomes more affordable to purchase and investors can more than likely anticipate that it will rise again and turn a profit.
While gold stocks are affected by some of the same factors that shape and shift the price of precious metals, they keep some distance from a direct correlation because it is possible for a gold miner and its stocks to be in a sound financial situation, even in a down market.
This is an updated version of an article first published by the Investing News Network in 2019.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Matthew Flood, currently hold no direct investment interest in any company mentioned in this article.
What is decentralised finance and what should investors know about this space in Australia? Find out here.
DeFi, short for "decentralised finance," is a promising component of our brave new crypto world. The DeFi sector in Australia is here to stay, but what should investors know about this space?
DeFi offers an alternative to traditional financial services and institutions by bypassing banks, brokers, exchanges and other "middlemen" that serve as financial intermediaries that regulate the markets. In effect, DeFi is evolving into a parallel financial framework that facilitates and records transactions involving financial instruments and payment mechanisms chiefly related to trading and lending operations.
The DeFi market is currently expanding at an explosive rate. According to figures released by DeFi Llama, cryptocurrency investors have put up US$250 billion worth of assets as collateral in various DeFi projects, funds which are then lent out in the form of cryptocurrency loans. As more and more institutional investors enter the DeFi sector, the market is expected to expand to US$800 billion by the end of 2022.
Bitcoin and Ethereum, the world's two leading cryptocurrencies with market caps of US$882 and US$421 billion, respectively (as of the beginning of April), are digital assets whose ownership is documented in a public transaction ledger known as the blockchain. A traditional financial institution such as a bank, credit card provider or payment facilitator like PayPal maintains its own private records and uses its own servers to process transactions. Cryptocurrency transactions, by contrast, are processed on the computers of a global network of users and recorded publicly (though pseudonymously) for the entire network to see.
As currently constituted, the emerging DeFi sector provides holders of cryptocurrency the ability to bypass the world's traditional network of bank and other financial gatekeepers by means of independent, self-regulating computer programs that rely on blockchain technology.
These decentralised applications (DApps) of blockchain technology offer a more efficient and streamlined mechanism to access financial services by creating an alternative ledger system known as "distributed ledger technology" (DLT) as opposed to VISA, PayPal or other legacy digital payment services. By harnessing the power of blockchain, a new global ledger system has taken shape that relies on a global web of interconnected computers to record and tracks all transactions. Not only does DLT store such transaction data but it also identifes the parties involved in any transaction.
This allows anyone with a crypto wallet and an internet connection unlimited access to DeFi services. Users can trade currencies and move assets whenever and wherever they want and avoid antiquated and cumbersome bank transfer protocols and related fees. DeFi users are, however, required to pay "gas fee" charges for crypto transactions in many cases.
DeFi is thereby expanding the fundamental premise of digital money — bitcoin and other cryptocurrencies — by allowing individuals and companies alike to execute financial transactions by means of a new and fully transparent system.
The DeFi market is currently expanding at an explosive rate. According to figures released by DeFi Llama, cryptocurrency investors have put up US$250 billion worth of assets as collateral in various DeFi projects, funds which are then lent out in the form of cryptocurrency loans.
Parallel to the expansion of the cryptocurrency market, DeFi will become increasingly able to provide loans via the various lending platforms that are popping up around the world. In effect, DeFi lending platforms are digital banks, taking money from cryptocurrency depositors and lending it out to borrowers.
Instead of traditional bank loans, the DeFi platforms rely on "smart contracts" — primarily the Ethereum blockchain — which uses computer code to authorize, execute and verify transactions.
Lending markets serve as one of the most intriguing and promising applications of DeFi by connecting borrowers to lenders of cryptocurrencies by means of platforms that enable individuals or companies to either borrow cryptocurrencies or provide crypto loans.
In order to obtain a loan, borrowers must put up collateral — usually ether, the crypto currency issued by Ethereum, the principal system on which all cryptocurrency applications are based. Borrowers tend to receive loans in the form of stablecoins pegged to traditional currencies like the dollar.
Alternatively, borrowers can post collateral in the form of bitcoin, which then gets deposited in a crypto pool that is overseen by a smart contract. Should the price of bitcoin take a precipitous fall, the smart contract automatically liquidates the collateral to protect depositors who have provided the loan funds in the form of stablecoins. Meanwhile, lenders earn money from the interest rate the platforms charge for lending out their funds.
Decentralised exchanges use smart contracts to enable traders to execute orders without an intermediary. Users trade directly from their wallets by exchanging one currency for another, for example Bitcoin for US dollars or euros for Ether, by means of the smart contracts behind the trading platform. Traders are solely responsible for managing and securing their funds and risk losing their holdings if they lose their private keys or send funds to the wrong addresses. The advantage of bypassing financial intermediaries and preserving anonymity is offset to a degree by the lack of security a bank or a centralized exchange provides.
A stablecoin is a cryptocurrency pegged to the value of a non-crypto asset (i.e. the US dollar) that offers price stability, which in turn provides greater security for DeFi collateralized lending. Tether is one of the leading stablecoins.
Australia: Making a splash in DeFi
Australia currently ranks 12th out of 154 countries according to the Global DeFi Adoption Index published by Chainanalysis. This index uses three metrics in its assessment of DeFi adoption: on-chain cryptocurrency value received by DeFi platforms weighted by public private partnership (PPP) per capital, total retail value received by DeFi platforms and individual deposits to DeFi platforms.
Australia's DeFi sector is currently experiencing a boom led by various companies such as Synthetix (SNX), which hopes to become a decentralised version of derivatives exchange BitMEX; Maple Finance (MPL), which offers loans for crypto institutions; and newly launched tiiik, which offers a digital wallet that allows investors to earn interest on DeFi products. Other new Australian DeFi players include Thorchain, Ren and mSTABLE.
While the DeFi sector is currently in its first developmental phase much like Bitcoin in its early days, individual investors have three main ways of investing in this evolving industry. First, one can obtain cryptocurrency-based loans; second, one can earn interest by lending (staking) their crypto holds, looking to invest in DeFi coins. Block Earner, for example, is an Australian fintech outfit that provides a DeFi online savings platform, which pays 7 percent interest on deposits. Third, investors can simply invest in DeFi coins in the same way that one can purchase cryptocurrencies.
Investors willing to take a plunge in DeFi should be aware that the underlying volatility of the cryptocurrency markets can rattle the DeFi sector in the event of sharp declines in bitcoin, Ethereum and other cryptos. There is also the added spectre of rug pulls, a relatively rare but catastrophic form of fraud.
Rug pulls see unscrupulous DeFi developers create a new token, pair it to a leading cryptocurrency such as tether, set up a liquidity pool, and then use secret back doors encoded into the coin's smart contract to mint millions of new coins before liquidation. This was the case in 2020 when SushiSwap developer Chef Nomi cashed in his SUSHI tokens after raising over $1 billion in collateral finance, which caused the price of SUSHI to crash to near zero.
Don’t forget to follow us @INN_Australia for real-time updates!
Securities Disclosure: I, Harold Von Kursk, hold no direct investment interest in any company mentioned in this article.