Lithium has undoubtedly been one of the hottest commodities in the world for some time now.
Demand from countries like China has grown significantly in the past two years as manufacturers look to increase output of lithium-related technology, such as li-ion batteries, in addition to its more traditional use for production of ceramics or glass.
Prices for lithium carbonate have skyrocketed as demand has risen, with its value around triple what was recorded in 2015.
The mineral has enjoyed a strong presence in Western Australia for more than 25 years. In the state’s south-west, the Greenbushes mine produces about a third of the world’s output.
Now, lithium is emerging as a hot prospect with potential of diversifying the mining industry in the Pilbara, with exploration continuing to show the region has the high-grade material to accommodate global demand.
Several prospects are being evaluated in the region with development in sight, including Pilbara Minerals’ Pilgangoora project, which is on track to start producing in the fourth quarter of 2017.
While the Pilbara’s lithium sector is obviously not on the same scale as its iron ore industry, it’s hard to ignore the parallels between the two commodities and how they are emerging in the region.
Pilbara Minerals chief executive officer Ken Brinsden believes the region is well positioned to play an important role in the development of lithium as a key commodity in Australia, as it did with iron ore.
“Of course, the Pilbara is very famous for its iron ore mining. I am convinced that it is soon to be famous for its lithium ore material supply because there are some amazing resources up there,” Brinsden told Australian Mining.
“Pilgangoora sits right at the heart of it. You couldn’t ask for a better place to be constructing a mine. It is so close to key infrastructure – the port of Port Hedland, power supply and the road networks.”
Energising China
Another parallel between lithium and iron ore in the Pilbara is the role of China, which is currently demanding lithium raw materials in record quantities in the same way it pursued iron ore.
Brinsden said while some sceptics may still view this surge in demand as a ‘flash-in-the-pan’, he believes this opinion could not be further from reality.
“It’s really phenomenal what is going on, especially in China. The speed with which they are building out their lithium ion supply chain and at the higher quality end is phenomenal,” Brinsden said.
“The evidence is not just in the growth of battery-making capacity but it is also the price they are paying for the raw material. The reason they are paying the high prices is because there is a fundamental shortage.
Brinsden added: “The phenomenon about the resources industry is that when it is put under pressure to grow, the supply will introduce new tonnes which are at higher costs than what was developed historically. As a result, the cost base shifts which means the price must also shift.”
Project progress
In 2016, Pilbara Minerals focused on de-risking the Pilgangoora project by securing several key milestones, including the native title agreement and mining lease.
These milestones led to another important achievement in January when it awarded the engineering, procurement and construction (EPC) contract to Australian services company, RCR Tomlinson.
The contract, which is worth a maximum $148 million, involves the EPC of Pilgangoora’s two million tonnes per annum lithium-tantalum processing plant, including wet-and-dry circuit with concentrator, associated plant and commissioning of the mine.
RCR selected sub-contractors – Primero and Minnovo – to provide it with technical and engineering support during the contract. Both subcontractors have previous experience in the lithium sector.
“We were very lucky, we had a competitive tender process and some tough decisions to make in how we would do it. The consortiums that were put together were very capable and cost effective…it was an embarrassment of riches really,” Brinsden said.
“The RCR consortium (of companies) are very capable operators and have a proven track record, even to the point where they are already operating in the lithium industry, which is very rare in WA.”
Brinsden said the company was working towards awarding additional services contracts for the development of Pilgangoora and beyond.
“That is all happening in parallel. There will be lots of minor contracts that relate to the balance of the construction on site – things like installation, road construction, road upgrades and rail crossings,” Brinsden said.
“Then, in addition, the one we have to work through is for the actual mining enterprise, including the mining contract.”
Post-boom Pilbara
Pilbara Minerals is also finding cost-friendly opportunities in the aftermath of the mining investment boom in the region.
Brinsden said Pilgangoora’s development process was being aided by the remnants of the wide-spread construction of mines during the past decade.
“It translates into some good opportunities for Pilbara in terms of pricing, the availability of the resources and even out-of-the-box opportunities like buying things second hand,” Brinsden explained.
“There are lots of things that are now available or redundant to previous activities that we are able to pick up very cheaply. We have bought a 300-man camp from the Roy Hill project and we have done that very cost effectively in comparison with buying new.”
Brinsden described the past decade in the Pilbara as an ‘extreme scenario’, which had left many redundant camps, building shed and even processing plants behind.
“Some of those things are a big advantage to the likes of Pilbara (Minerals) who are constructing. Having said that I think it is true that the whole industry has turned the corner and things are getting busier again,” he said.
“You would have to expect then that things will get a little bit more competitive, but perhaps nothing like that hyperinflation environment that existed in the Pilbara as recently as four years ago.”