Investments target value add opportunities

An array of companies, from blue chip miners to SMEs, is pursuing downstream processing of WA’s battery minerals, despite the sharp downturn in the lithium market.

Timing has not been kind to the two men leading the Future Battery Industries Cooperative Research Centre.

When Tim Shanahan and Stedman Ellis signed up to lead the CRC in 2018, the lithium market was booming and billions of dollars were being invested in lithium processing plants in Western Australia.

There was also a growing recognition WA was richly endowed with the minerals needed to make batteries, such as nickel, vanadium and rare earths, as well as lithium.

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With demand for batteries expected to expand rapidly on the back of increased production of electric cars, it seemed all the pieces were falling into place for WA to host new industries manufacturing battery components (and possibly assembling batteries).

A collapse in the lithium market, as supply grew much faster than demand, has put a big dent in these aspirations.

Tianqi Lithium has halted commissioning of its lithium hydroxide plant at Kwinana, Albemarle Corporation has scaled down its project at Kemerton, and Wesfarmers subsidiary Covalent Lithium has deferred its project.

Despite all this, the CRC has funding commitments that would make other research and development organisations envious.

More than $110 million has been committed in cash and in-kind support over the CRC’s six-year program.

The cash support includes $25 million from the federal government, $6 million from the WA government, $17 million from 30 industry partners, and $5 million from research participants.

Mr Ellis acknowledges this is less than originally expected.

“In the middle of last year, we thought we had a pool of perhaps $130 million cash and in-kind,” Mr Ellis told Business News.

“That reduction reflects the ability of the lithium sector to commit at this time.”

Despite the shortfall, Mr Ellis remains strongly positive about the CRC’s prospects.

“The overwhelming feedback is that people remain committed to the work of the CRC,” he said, citing the recent decision by German manufacturer BASF to sign up.

“They have joined us as a contributor at the most senior level.

“They have reiterated the view that Australia is strategically important in the battery value chain.”

Mr Shanahan, who chairs the CRC, said it remained largely on track.

“We’re very confident we will meet all the milestones we set,” he said.

“There may be some re-sequencing of those [milestones] and some vulnerability to the market, which is self-evident.”

Strategic driver

Their positive outlook is helped by the growing international consensus about the strategic importance of battery minerals, also known as critical minerals.

“The disruption to global supply chains, and the questioning of our reliance on supply through one country, in the case of battery industries China, is clearly a very significant opportunity for the aspiration behind our CRC to grow a battery industry in Australia,” Mr Ellis said.

This strategic backdrop is a significant factor in new rare earth projects backed by listed companies Lynas Corporation and Iluka Resources.

Perth USAsia Centre research director Jeffrey Wilson said there were six minerals frequently identified as the core raw materials required for the battery manufacturing: cobalt, graphite, lithium, nickel, rare earths, and vanadium.

“Having a geological endowment of all of these commodities and significant existing production of three of them, Australia is uniquely positioned to capture more value in the midstream and downstream processing of battery materials,” Dr Wilson said.

Some of these minerals are also critical to high-tech defence and computing applications, hence the term critical minerals.

A single country accounts for between half and three-quarters of all global supply for each of these minerals.

For lithium this is Australia (58 per cent), and for cobalt it is the Democratic Republic of Congo (61 per cent). 

More significantly, Dr Wilson said, China was the dominant producer of three out of the six battery minerals: graphite (70 per cent), rare earths (80 per cent), and vanadium (56 per cent). 

“In fact, only in nickel production is there a diversity of supply options around the globe,” he said.

“The current concentration at the extraction stage exposes downstream manufacturers to a heightened degree of supply risk.” 

Dr Wilson said the critical minerals industry did not operate like a normal open market and therefore securing production and processing of these commodities under Australian ownership was important for this country’s future energy security, as well as that of its strategic allies.

He said the next step was to adopt policies to help de-risk investment by new market entrants.

“There is a pressing need for reform-minded governments to augment their efforts to improve security in critical material value chains,” Dr Wilson said.

“This should involve deploying financial support mechanisms to help de-risk private sector investment, and strengthen the international cooperation required for cross-border value chains.”

Research priorities

Stepping down from that high strategic level, the CRC and its 48 members have spent recent months finalising their research priorities.

From a portfolio of 16, the CRC has commissioned initial investment on five projects.

These include a national battery testing facility, to be run from Queensland University of Technology.

“We’ve moved ahead with that project because we can see it’s foundational to a number of others and there is a strong degree of industry support,” Mr Ellis said.

The goal of the facility was to help industry participants seeking to produce battery materials get a better technical understanding of the market, he added.

“You are doing so in a value chain that is relatively opaque in terms of where the technology currently resides,” Mr Ellis said.

“Investing in battery testing capability can allow miners to better understand the capabilities of their raw materials, and shift some of the know-how to the miners.”

Another priority project is a pilot plant to produce precursor material for battery cathodes.

This will be undertaken at the facility in Waterford, near Curtin University, where BHP Nickel West did the development work for the commercial-scale nickel sulphate plant it is currently building at Kwinana.

The laboratory and pilot plant will be repurposed for the cathode precursor project. 

“From the outset and still today, that is one of the most strongly supported projects,” Mr Ellis said.

“It’s a large commercial opportunity and a large industry development opportunity.”

Mr Shanahan said the CRC’s work would encompass numerous opportunities across the battery industry value chain, including anodes, electrolytes, the life cycle of battery elements, and the provenance of the minerals.

“We’re awake to all of those opportunities,” he said. 

Mr Shanahan said the push from mining companies wanting to move downstream was opposed by a pull from battery manufacturers wanting to secure their supply chains.

“There are a range of battery manufacturers that would like to come to Australia to assemble batteries, even if it’s from imported materials in the first instance,” he said.  

Mr Ellis said there were some unique aspects to the value chain for battery minerals compared to other resources.

In iron ore and liquefied natural gas, more than half the value is made at the mine or well.

“Battery industries, by comparison, go something like $1 of commodity metal makes $1.50 of battery chemical, which makes $7 of battery precursor materials,” he said. 

Mr Ellis said battery grade chemicals were not a giant leap for the industry, and provided value add.

He acknowledged that while battery grade precursors would be more difficult to get right, they provided a very solid value add opportunity.  

“As the majority of the value add in battery supply chains comes at the midstream and downstream processes, these stages will offer the best returns for the Australian economy, instead of simply maintaining its historic reputation as a reliable exporter of raw or upstream-processed ingredients for manufacturing,” Mr Ellis said.

He commended the work being done by smaller companies in the sector, such as ASX-listed FYI Resources and EcoGraf.

West Perth-based EcoGraf is seeking to develop a vertically integrated business that includes production of high-purity graphite for the battery anodes.

It has plans to invest about $100 million building a manufacturing plant at Kwinana.

FYI Resources plans to invest a larger amount, $US189 million, on a project to produce high-purity alumina.

The feedstock for its refinery in Kwinana would come from a kaolin mine at Cadoux.

Processing rare earths 

Several larger ASX companies, including Iluka Resources, Lynas Corporation and Northern Minerals, are also investing in new projects, particularly in rare earths.

Rare earths are a group of 15 elements in the periodic table, including neodymium, praseodymium, dysprosium and terbium.

A single smartphone typically contains eight different rare earth materials.

Lynas operates the Mt Weld mine in the Mid West and is the only major producer of rare earths outside of China.

The company has run into political controversy in Malaysia, where its material is processed into end products.

The Sydney-based company plans to bring first-stage processing of its rare earth concentrate to Australia by building a cracking and leaching plant at Kalgoorlie.

It aims to have the plant operational by early 2023.

State and federal governments have enthusiastically embraced the proposal, even though the plant will have a modest economic impact, with about 100 ongoing jobs.

In contrast to the noise surrounding Lynas, Perth-based Iluka has quietly moved into rare earths.

Managing director Tom O'Leary said entering the rare earth industry represented a logical and important diversification for the company, which had extensive mineral sands mining and processing operations in WA.

Iluka started production of a simple monazite concentrate (containing rare earth elements) in April.

Its deposit at Eneabba has a unique stockpile of monazite resulting from the company’s historic mineral sands processing operations. 

It has invested a modest $10 million so far in the project, while the next phase could include an investment of up to $40 million.

“Phase two would produce a higher value monazite, and we are looking to fast-track this development as a priority,” Mr O’Leary said.

“Beyond phase two, Iluka is actively exploring the possibility of producing refined rare earth oxide products.” 

This would require the establishment of a cracking and leaching plant, as well as solvent extraction.

Mr O’Leary said Iluka’s incremental approach provided the means to establish credibility in a market in which it had not participated for many years.

He said the company had received strong encouragement from governments.

“This is particularly the case for our rare earth projects, the development of which aligns with the Commonwealth’s critical minerals policy,” Mr O’Leary said.

He said he expected state governments across the country to refine their policy settings in support of more domestic value adding.

“Any measures that streamline approvals processes and reduce duplication between state and Commonwealth administrations are obviously welcome, and we strongly support the Commonwealth’s review of the Environmental Protection and Biodiversity Conservation Act,” Mr O’Leary said.

US-based mineral sands producer Tronox already has extensive experience in downstream processing and supports policy reforms that would encourage more investment.

“When we built the Kwinana pigment plant in the late 1980s, we were supported by a government that saw the benefit of a self-contained, vertically integrated value chain,” managing director Australia Russell Austin told Business News.

“Long-term strategic planning, as well as support on approvals and securing utilities, will go a long way to attract more organisations to process minerals right here in WA.”

Mr Austin said infrastructure planning was a key factor.

“The challenges around physical distances between mines and potential processing sites could be mitigated by improved infrastructure, or even industry cooperation,” he said.

“Let’s get some diverse minds on this problem.”

Specifically, he backed development of the outer harbour at Cockburn Sound.

“The development of the new land-backed port at Kwinana will enhance our capacity to export our product,” he said.

“We’re planning on being around for the long term, so any plans for significant infrastructure investment is welcome news to us.” 

Mr Austin is also focused on labour force development.

“It would be great to see more government and industry cooperation to encourage under-represented groups to join the STEM industry, or support to upskill and reskill,” he said.

Mr Austin said one of the keys to Tronox’s success in Australia was its vertically integrated structure, from mines through to production of titanium dioxide.

“China has inherent labour cost advantages over competitors, but the power of vertical integration along with technology helps us to be highly competitive,” he said.

“When other stakeholders realise this value, I think it’s natural that markets will be created within WA for more downstream processing and manufacturing.”

Chamber of Minerals and Energy of Western Australia policy director Rob Carruthers said the industry was developing policy proposals to support more downstream processing.

He said any strategy needed to build on WA’s competitive strengths.

“We’ve got long-term certainty, we’ve got stability from a political and regulatory environment, we have proximity to a lot of key markets, and an abundance of energy,” Mr Carruthers said.

He said the CRC provided an opportunity for better coordination.

“Where we’ve missed out in the last couple of years, when prices have been up for lithium and nickel, we’ve had multiple plans from multiple parties, whether it be from an industry side, from a state government side [or] from a national side, and there hasn’t been a tremendous amount of coordination through that,” Mr Carruthers said.

“That [CRC] gives us an opportunity for a much more consolidated push, to bring on that next phase of investment.”

Mr Carruthers called for better infrastructure planning, raising the example of transport links between the lithium mine at Greenbushes, Albemarle’s Kemerton processing plant, and the port at Bunbury.

“There hasn’t been a strategic overlay. At the moment we are looking at it in components,” Mr Carruthers said.

At a national level, he said the risk and high capital intensity in downstream processing meant financial assistance should be looked at.

“Maybe you have to pick winners in certain areas, but if there’s a strategic focus on critical minerals, why not have an investment allowance that will make it more attractive?” Mr Carruthers asked.

“There are always going to be particular opportunities that arise where assistance is required.”