Global lithium supply expected to take off as EV industry grows

JOHANNESBURG (miningweekly.com) – Rising prices, strong project pipelines and vast reserves in key countries are bolstering the rise of the global lithium mining sector, with lithium production set to “take off” over the next few years, a new BMI Research report has shown.

BMI Research’s ‘Road to unlocking electric vehicle (EV) potential December 2016’ report assessed the mining sector’s capability of meeting the demands of the strong projected growth in the lithium-ion battery and EV markets.

Rising prices for the ore were encouraging greenfield investment, with significant production growth expected in the next few years, as top lithium-producing countries “raced” to maintain market share, with Australia's strong project pipeline keeping the country “ahead of the field”, despite the higher cost of exploiting hard rock deposits, BMI noted.

In 2015, world lithium mine production totalled 325 000 t, with Argentina, Australia, Chile and China accounting for over 90% of output.

“We forecast Australia [which accounts for 41% of the total output] to remain the top producer over the next four years, with output rising sharply from 188 000 t in 2016 to 851 000 t by 2020,” the report noted.

While Australia held a strong project pipeline, a well-established mining industry and proximity to the ever-important Chinese market, Chile and Argentina are significantly ramping up lithium production and becoming strong contenders.

The two countries, respectively accounting for 36% and 12% of global supply, will add around 463 000 t and 577 000 t, respectively, over the four-year forecast period to 2020.

Argentina is expected to grow output from 66 500 t in 2016 to 643 700 t in 2020, while Chile will boost output from 12 870 t in 2016 to 591 900 t in the next four years.

In Latin America's so-called “lithium triangle” of Argentina, Chile and Bolivia, low-cost brine deposits and increasingly open economic policies would drive significant foreign investment in the region's nascent lithium sector, BMI said.

“While Bolivia and Chile hold larger lithium reserves, we expect Argentina's lithium production to outpace its neighbours [and overtake Chile as second-largest producer] based on the country's strong project pipeline, low operating costs and improving business environment,” the report added.

The report showed Argentina's 2016 year-to-date mining investment, merger and acquisition activity – nearly all of which involved lithium projects – reaching $44.2-million, a significant surge on the $7-million over the entire 2015, after steps to boost the mining sector were adopted, including the elimination of mining export taxes and proposals of a nationwide reform to allow openpit mining.

Chile will, however, remain a top lithium miner over the forecast period, despite growing environmental concerns over mining and bureaucratic delays posing a downside risk to project development.

Meanwhile, despite boasting the largest global lithium resources, at around nine-million tonnes, Bolivia’s lithium production outlook will remain limited as resource nationalism deters foreign investment and high levels of magnesium elevate operating costs.

“Given Bolivia's elevated production costs, compounded by regulatory uncertainty, we expect lithium mining foreign investment to favour neighbouring jurisdictions over the coming quarters,” BMI Research said in the report.

The report also noted that Chinese lithium producers would seek to secure ore supply through strategic acquisitions and investments, largely in Latin America and Australia, as China's demand for lithium accelerated rapidly on the back of growing battery storage use.

The Asian country will also grow its own lithium volumes from 24 200 t in 2016 to 188 100 t in 2020.