(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Andy Home
LONDON, Jan 3 There's lithium in them there
News that a start-up, Cornish Lithium, is going to explore
for the "metal of the future" in Britain's historic tin-mining
region has been greeted with predictable national euphoria.
"Cornwall's mining industry set for 50bn pound revolution,"
proclaimed a headline in The Sun newspaper.
Which may be just a little bit premature.
The company, led by Jeremy Wrathall, a graduate of
Cornwall's famous Camborne School of Mines and now a banker with
Investec, is currently trying to raise 5 million pounds to start
an exploration programme. Any production of lithium is at least
five years away.
Finding the lithium is not going to be that difficult.
As early as the 19th century Cornish tin miners knew about
the lithium-rich spring waters underneath what, thanks to the
massively popular television series, is now known as "Poldark
That's the thing with lithium. There's a lot of it around
and it's not just in Cornwall that lithium prospectors are going
back down disused mines to find a mineral that had little
mainstream commercial use until the invention of the lithium-ion
Rather, the real challenge is to be able to extract lithium
in a form that is actually useful to anyone and to do so at a
price that is competitive.
Lithium has to be extensively refined until it is turned
into a form suitable for use in battery manufacture, either
lithium carbonate or lithium hydroxide.
Cornish Lithium is putting its faith in new technology to
make what tin miners used to call "lithia" into something that
meets the exacting specifications required by battery makers.
It will be competing with an existing well-established
supply chain, controlled by a small handful of players who have
no interest in seeing their market grip loosened.
This oligopoly's ability to meet expected demand growth for
lithium batteries from electric vehicles and grid storage will
be the real decider of whether Cornish mining dreams become
Graphic on lithium carbonate spot price in China:
Graphic on lithium carbonate price major contracts delivered
The established producers, most of them with operations in
the "Lithium Triangle" of salt lakes in Chile, Argentina and
Bolivia, were slow to wake up to the surge in battery demand.
That's why spot prices went supernova over the back end of
2015 and early 2016.
According to "Industrial Minerals", part of Metal Bulletin
Group, the spot lithium carbonate price within China rocketed
from an average $7.7 per kilogram (kg) in June 2015 to $26.6 per
kg in April 2016.
Which is when the world sat up and took notice of what was
happening in the small lithium market.
Most lithium is traded not on the spot market but rather
through quarterly or annual contracts between producers and
Pricing along these existing supplier networks is only now
starting to play catch-up with that Chinese spot price
Annual contracts for lithium carbonate have settled in a
$10-16 per kg range this year, which is roughly double the price
for 2016 deliveries, according to Industrial Minerals' December
"Battery Price Report".
The price of lithium hydroxide has also doubled to $14-20
per kg for annual contracts this year.
Back in China, however, a good deal of heat has come off the
market with spot prices for carbonate now back in a $18-21
That's in part down to a tightening of the subsidies offered
by the Chinese government on electric vehicles.
But it's also in part due to increasing supply from the
first wave of new lithium supply.
In Argentina Orocobre is ramping up output from its
Olaroz brine operations and is already looking at a second-phase
expansion and the construction of a battery-grade hydroxide
In Australia, Galaxy Resources has just announced
the dispatch of its first shipment of spodumene, the hard-rock
alternative to brine lithium, from its Mt Cattlin mine.
Another Australian mine, Mt Marion, owned by Neometals
, has also just entered production.
Spodumene also needs specialist treatment to be converted
into something usable by battery manufacturers and this part of
the supply chain is controlled by Chinese entities such as
Tianqi Lithium, which holds a stake in Australia's
existing Greenbushes mine, and Jiangxi Ganfeng,
which is an indirect owner of Mt Marion.
And both Chinese companies are actively investing in
preparation for the next wave of lithium demand.
Tianqi has announced both a hydroxide plant in Australia,
implying a lift in production at Greenbushes, and the purchase
of a small stake in Chilean brine producer SQM.
Ganfeng has similarly been wasting no time ensuring it
remains central to the existing supply chain.
It will buy a 19.9-percent stake in Lithium Americas
in return for a $174 mln investment which will finance
the development of a new Argentine brine operation,
SQM also has a stake in the project as does now too
Thailand's Bangchak Petroleum, which announced a similar deal to
Ganfeng's just days after the Chinese company's move.
This represents the second wave of lithium production
investment, bringing together an existing brine operator (SQM),
an existing lithium processor (Ganfeng) and two off-take
partners (Ganfeng and Banghcak).
First production at Cauchar is slated for 2019 with
first-stage capacity of 25,000 tonnes of lithium carbonate
doubling at a second phase.
Lithium Americas, by the way, is also sitting on the former
Kings Valley lithium prospect in Nevada, another potential
lithium hot spot, already home to a brine facility operated by
And Albemarle is itself a core member of the lithium
establishment. It has just got a sign-off from the Chilean
government to lift its production quota to 80,000 tonnes per
year as it too prepares to keep its grip on the fast-moving
TAKING ON THE ESTABLISHMENT
The lithium establishment got caught off guard by the 2015
price shock but it is showing every sign of having learnt its
Albemarle, SQM, Tianqi and Ganfeng are already planning for
the next stage of this market's development. Among the oligopoly
only FMC Corp has yet to show its hand.
These companies, it's worth repeating, already have
extensive knowledge of how to mine and process lithium and also
benefit from existing long-standing commercial relationships
with battery manufacturers.
If Cornish Lithium and the host of other lithium wannabe's
stand a chance, this is what they will be taking on.
Finding the lithium is the easy part.
(Editing by Elaine Hardcastle)