Looking at lithium
Jon Hykawy, from Canadian financial company Byron Capital Markets in Toronto, discusses market demand for lithium batteries.
The increased need for batteries to power consumer goods, and particularly, automotives, have raised the profile of mining and processing lithium. Today there are a number of commercially-available electric and hybrid electric vehicles with many more in the manufacturing pipeline. Early hybrids, such as the Toyota Prius, use nickel hydride batteries, while newer models, such as the Tesla sportscar, the forthcoming all-electric Nissan Leaf and the plug-in version of the Toyota Prius, will all use lithium-ion batteries.
Forecasts suggest that demand for lithium over the next five years will increase by almost 60% from 102,000t to 162,000t, with batteries accounting for more than 40,000t of that growth. These values are for lithium carbonate or equivalent (LCE), as lithium metal is too reactive to transport.
Lithium ion batteries offer exceptional power-to-weight ratios, ideal in small applications such as laptops and digital cameras. Conventionally, cobalt is combined with lithium to make the catalyst in a lithium-ion cell, but carries the risk of a fire, a serious constraint for automotive use. Fortunately, there are a number of elements that combine with lithium to make a safe cathode for automotive applications. Vanadium is one such material, with Li3V2(PO4)3 providing the highest voltage and specific energy.
A good battery is measured by its operating life, its output voltage and its specific energy. Power generally scales as voltage squared, so a higher voltage can mean the ability to accelerate faster. Specific energy defines how much energy can be crammed into a given size of battery, and the more the better, as the major concern regarding electric cars right now is whether they can be driven far enough to suit the average consumer.
The main drawback to the use of Li3V2(PO4)3 is the volatility of vanadium pricing. Vanadium is most commonly used as a steel hardener and strengthener, and is added to construction and other steels at a level of from one to four per cent.
While vanadium has a lower price than cobalt, it also provides far superior results, and, as the demand for strong steels rises, vanadium prices have the potential to jump. The battery in the new Nissan Leaf contains roughly four kilogrammes of lithium metal, worth roughly US$100 at present prices. But if made using a lithium-vanadium cathode, this same battery would contain about 20kg of vanadium metal. If all the lithium is assumed to be in the cathode and if Li3V2(PO4)3 were the cathode material, increasing the vanadium value in the battery to US$1,800 could make gross margin on the battery disappear. Nissan management has hinted that the Leaf battery will have a cost of perhaps US$10,000 out of the total vehicle price of US$33,000. The only solution is to stabilise vanadium prices, through properly negotiated off-take agreements between junior vanadium companies and battery makers.
Sourcing a solution
Entering minor metal markets can be a risky business, as the small market size can become dominated by a swing producer. However, there is no shortage of lithium in the geological inventory. Lithium can be obtained from evaporated brines, hard rock minerals and clays. In the past, the majority of lithium was obtained from the silicate mineral spodumene (LiAlSi2O6) found in pegmatites. This is probably the most expensive route to make lithium carbonate, but the conventional end product of hard-rock mining, a lithium oxide concentrate, is exactly what is demanded by the glass and ceramic industries and as such a perfect fit.
According to Atacama Desert producer Sociedad Química y Minera de Chile S.A. (SQM), the split of global production in 2008 was 31% glass/ceramics, 23% batteries, 10% grease, with the remaining 36% going into continuous casting, air treatments, and other uses.
The least expensive source of lithium carbonate is brine recovered from salars in the Andes of South America, where high winds and solar energy evaporate brines to economic levels. Of critical importance are low concentrations of magnesium and sulphate in the brines. These are unwanted in lithium carbonate production and costly to remove. For example, the industry widely acknowledges that SQM produces LCE with the lowest cash costs today from Salar de Atacama in Chile.
Byron Capital Markets estimates this cost to be less than US$1,600/t. Much of that cash cost is due to process chemicals. We believe that, depending on local costs, each unit integer increase in the ratio of magnesium to lithium content in the brine costs the company an additional US$180 per tonne of LCE.
With the Mg:Li ratio standing at roughly six to one at Atacama, this process chemical could cost Chilean producers more than US$1,000/t of LCE. But the lithium content in Atacama brine is very high, the required evaporation ponds are relatively small and therefore inexpensively constructed, and the overall cost remains low. Selling prices can be upwards of US$4,000 per tonne of LCE, and so SQM earns very substantial margins on what should be a commodity chemical.
Perhaps the least expensive source of battery-grade lithium will come from clays. One company, Western Lithium Canada Corporation, Toronto, has already released a scoping study outlining a cash cost of US$1,967/t of LCE. This cost is lowered due to the sale of potash produced during the lithium extraction process, providing a credit of roughly US$2,400/t LCE.
However, Byron Capital Markets believes that the purity of the LCE produced via this process will be high, and that the company may yet be able to claim a credit for hydrofluoric acid that may take its cash costs to perhaps US$800/t of LCE, or lower. This would be the lowest LCE production cash cost globally.
Lithium is the key to a revolution in vehicle technology, one that promises to significantly curtail the amount of energy used to move people and material down the road. Vanadium may significantly aid in that effort.
To remain cost-effective, both metals require junior exploration companies to reach market with their production to augment supply.