Expert predicts meteoric price rise for lithium

Internationally recognised lithium expert Joe Lowry expects the price of battery quality lithium carbonate to continue its upward trajectory into 2027 before hitting highs of US$97,000 per tonne as the supply and demand curve starts to invert. Speaking at this year’s Lithium Update by the Experts put on by Latin Resources at Perth’s Hyatt Hotel, Lowry dubbed lithium the “irreplaceable element” in the new energy transition and says the balance of power in the industry has switched from China to Australia and South America.

Lithium Carbonate prices were cellar dwelling at just over US$10,000 per tonne back in 2019 however have hit highs of around US$80,000 per tonne more recently with the battery chemical’s price graph showing a remarkable hockey stick curve over the last 3 years.  Whilst the US$97,000 tag is the peak price predicted by Lowry, the Global Lithium LLC founder has identified a base value of just below $US80,000 and a potential 2027 low of around $US70,000.

The greater international focus on lithium-ion batteries for both electric vehicles and mobile devices over the past five years has created a demand that far outweighs current and projected supply.

Whilst mineral heavyweights in North America and Europe are busy exploring – and finding — large lithium deposits in their respective regions, Lowry believes the most positive timeline for these resources to reach production is at least five years away.

The “Lithium Triangle” of Chile, Argentina and Bolivia currently produces about 35 to 40 per cent of global lithium supply, mainly from the three nations’ lithium “brine” production. The majority of production has come from four major projects in Argentina and Chile that Lowry says have seen slow growth over the past decade.

However a host of new projects are scheduled to begin operations between next year and 2030 and are predicted to significantly boost lithium production in the region.

Whilst the upcoming projects will need time to ramp up and are likely to require about 10 years to reach steady state production levels, the South American lithium industry continues to operate at a strong and steady pace.

Australia currently contributes around 45 per cent of the global market through its massive hard rock spodumene resources with the Greenbushes deposit in the South West region of Western Australia still accounting for the majority of current supply. Australia has also seen massive growth in its lithium industry over the past five years but unlike its Lithium Triangle peers Australia is all about hard rock mineral deposits – not watery brines.

Major operations such as Pilbara Minerals’ Pilgangoora deposit and Mineral Resources’ Mt Marion operation have been exporting spodumene concentrate for a number of years and have an established supply chain to the international market. Australia has also seen a number of major lithium players develop lithium hydroxide processing plants as the industry starts to wake up to the exponential margins enjoyed by the downstream players.

Lowry predicts the current global lithium supply deficit to continue for some years and whilst there has been significant growth in potential supply with numerous projects being unlocked all over the world, demand is still growing faster.

Major original equipment manufacturers such as automotive manufactuers are now inking their own deals with potential lithium suppliers. In February Western Australia’s Liontown Resources signed a five-year offtake agreement with Tesla to supply lithium concentrate from its Kathleen Valley lithium mine near Leinster in the northern Goldfields region of Western Australia. The deal became a binding offtake agreement in June with Liontown agreeing to provide 100,000 tonnes of spodumene concentrate in the first year of production before rising to 150,000 tonnes for the next four years. Liontown has a similar deal in place with American car giant Ford. Kathleen Valley is forecast to produce about 500,000 tonnes of spodumene concentrate in its first year, expanding to about 700,000tpa over a 23-year mine life.

Some Chinese companies are also looking to secure lithium too. Askari Metals recently signed a strategic agreement with Shanghai-listed Zhejiang Kanglongda Special Protection Technology. The Chinese heavyweight will assist Askari with lithium chemical downstream processing techniques and opportunities in addition to providing access to capital for future development. As part of the alliance  Zhejiang Kanglongda will be provided with a preferred offtake position at market prices. The agreement relates to Askari’s lithium-stacked portfolio including a trio of projects in WA’s eastern Pilbara region and a single project in the Northern Territory.

Latin Resources is hoping to bring Brazil into the Lithium Triangle with its Salinas project.  The company’s wholly owned subsidiary Belo Lithium holds more than 6000 hectares in the spodumene rich district of Minas Gerais and is currently undertaking resource definition drilling at its Colina prospect where a number of hits have been recorded above 1 per cent lithium oxide including a peak grade of 3.22 per cent. Latin’s market cap has hiked from around $6m in 2019 to over $200m as the market switches on to the quality of its assets.

In North America former Pilbara Minerals Managing Director Ken Brinsden, another presenter at the recent lithium forum, has taken on the role of Chairman of TSXV listed – and soon to be ASX listed -  Patriot Battery Metals.  The company is busy exploring its Corvette project near James Bay in Canada where it has identified more than 70 lithium pegmatite outcrops along a 50km trend. The explorer has recorded some eye-watering drill hits including an 86.2m intercept going more than 2 per cent lithium oxide, in addition to a whopping 159.7m section at 1.65 per cent lithium oxide.

Exploration in Europe is also heating up and that message was not lost on the attendees at the Lithium update when European Metals’ Keith Coughlan took the podium. The company’s Cinovec project is understood to host the largest lithium resource in Europe whilst Infinity Lithium is working to develop the second largest resource at its San José lithium project near Cáceres in Spain. San José boasts a 111 million-tonne resource going 0.61 per cent lithium oxide. Cinovec has a JORC-compliant resource of 708 million tonnes at an average grade of 0.42 per cent lithium oxide.

Interestingly Infinity is one of a number of players now planning to build a lithium hydroxide plant alongside its mine.

Whilst some market analysts suggest the upcoming supply will exceed the future demand for lithium, Lowry predicts a continued growth into 2035 as the global appetite for lithium-ion batteries continues to feed the new energy revolution.

Notably Lowry says Western Australia is now the unofficial number one lithium jurisdiction in the world. 

Its lithium endowment continues to grow and unlike some other mineral rich jurisdictions around the world that are yet to turn out a tonne of spodumene, Western Australia is actually mining it.

With the automotive industry junking fossil fuelled cars at pace in favour of lithium driven models, lithium is set to be the “new oil” – and Western Australia in particular is set to enjoy a white knuckle ride the likes of which has not been seen since oil was discovered in Texas all those years ago.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au