Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
AVZ Minerals’ (ASX: AVZ) Manono project became the world’s largest non-brine lithium resource after the Perth-based company released the maiden estimate for its 60%-owned project in the southern Congo in August of this year.
At the end of November, AVZ published the results of a drilling campaign that further increased Manono’s size – by more than half to just over 400 million tonnes grading 1.66% Li2O for 6.6m tonnes of lithium oxide.
State-owned Congolese company Cominiere holds 30% of Manono and the deposit was mined for tin for six decades, ending in 1982. AVZ’s latest resource estimate also includes 300kt of tin and 13.2kt of tantalum.
The company hopes to update its October scoping study before the end of year, and AVZ is now studying a 5mtpa and 10mtpa operation (up from 2mtpa) thanks to the expanded resource and offsets provided by tin and tantalum.
London-based research consultants Roskill reports an operation at Manono with a 10 million tonnes per year capacity has the potential to produce over 300,000 tonnes per year of lithium carbonate equivalent.
That’s a rate of production roughly equal to global output from all brine operations and hard-rock mines forecast for 2018.
Source: Roskill
Roskill compared Manono to other lithium projects and points out that “unlike some of its closest peers such as Clayton Valley, Sonora and Thacker Pass, which will require integrated plants, Manono hosts traditional pegmatite mineralization that can produce a spodumene-bearing concentrate for conventional conversion at existing refining facilities in China.”
“An expanded processing capacity will ultimately bring some cost saving to the project through economies of scale, however, in our view the project’s main hurdle remains its location and the costs involved with transporting its concentrate to market. “Furthermore, in the near to medium-term as projects such as Greenbushes, Wodgina and Pilbara Minerals’ Pilgangoora ramp-up production, the market should have an ample supply of concentrate.”
There is of course a long road ahead for AVZ at Manono and like many of its peers, the $110m stock has come under pressure from the fall in the price of lithium. The sector is also a crowded field, but AVZ does enjoy some high-profile backers with Citicorp, JP Morgan and BNP Paribas together holding some 30% of the company.
Unlike cobalt, lithium escaped being treated as a strategic mineral by the Congolese authorities and royalty rates for the battery raw material remains at 3.5%. Kinshasa recently imposed a 10% royalty rate on cobalt. Congo represents almost two-thirds of global output of cobalt used in cellphone and electric vehicle batteries and as an alloy in the aviation industry.
9 Comments
Geosteff
Before the herds get all excited about what is a true Tier 1 deposit, have you sat down and calculated the cost of getting >0.5Mt of spodumene concentrate to an African port on the Indian Ocean? Given the infrastructure hurdles, it’s enough to sober up the most inebriated investor!
John M
AVZ have yes and continue to do so. Problem for Roskill is they likely didn’t ask AVZ what there plans are.
As for sitting down and calculating,
It really depends on who you sit down with. If you’re sitting down with China majors, you’ll be discussing demand from offtakers: therefore the scale of mine and the logistics: what for example is feasible as per scale, the mtpa, initial and prospected. If it’s going to be huge 5 to 10mtpa to feed demand, then you’d be planning early on with the local authorities, and likes of Crec, CCECC, and top tier SOE like financiers backing them for any solutions not already discernible.
China thinks architectonically. All systems complement each other. And to this end. OBOR policy is being initiated in this region.
Manono will happen. As demand is happening for a long time
Maja
We agree with you 100%. People’s inclination to approach anything new with negativity clouds their view to see the larger picture. Also, this article is not well researched and leaves out so many details that have been developing. Manono will happen, that is what everyone is there for!!!
BigT Swim Guru
I hope that there is spinoff for the average Congolese. Not just a few hundred low paying jobs, but perhaps some schools, hospitals and infrastructure that this mining community is going to need anyway.
They should attempt to solve power problems with solar and wind where possible and lessen the importation of oil which is a big foreign exchange drain on this country ( yes, i know they have oil too but so far they are a net importer )
But most of all, the DRC needs to become a refiner and set up the long term infrastructure and schooling to support this alongside their investors.
We all know of a first world country that has sent ( probably ) 99% of their raw crude oil southward for other people to refine and make the money from.
Building project sustainability in a way that benefits all, not just the few means that a very long term relationship is much easier to maintain and guarantee for shareholders who have no idea of the 1001 things that can befall a mining operation in Africa.
Bob Hall
What a lovely story. Remote DRC. What can go wrong? It is the DRC where the government takes off the top (regardless of agreements) for the people. The people get little and the government officials get new cars, an opulent lifestyle and machine gun bullets. Sorry folks I am not in!
giantpaperclips
Interestingly despite being in a remote town, Manono has Africa’s largest off-grid solar power plant. Transportation of the photovoltaic cells were flown into the town’s airport on an Antonov cargo plane. There is sufficient solar power to light the streetlights at night for the residents, as well as the local church. There is also the main road that run south of the town, which currently has one final stage of rehabilitation to be completed before it connects Manono swiftly to Likasi via Mitwaba, Kiubo and Luambo. The Chinese construction, CRECG, who operate in the DRC have collaborated with local Congolese infrastructure/construction company ACGT with this road project. A few months ago, Zoe Kabila, President Kabila’s younger brother formally inaugurated the road project, which had been published in the Congolese media. The Manono Project has been inspected by the provincial governor and provincial minster of mines (Tanganyika province); and has ~350 local casual workers employed by AVZ Minerals. Big autos who want to play the EV game need to lock in supply for the long haul. The thick spodumene bearing pegmatite at Manono seems to also contain very low impurities as shown in a metallurgical analysis by Nagrom in Western Australia, which should make it favorable for refinement into battery-grade lithium hydroxide/carbonate. There is quantity and quality. Huayou Cobalt (cobalt exporter from southern Katanga) has already made an early strategic investment into AVZ Minerals in late 2017, ~ USD10 million. Will Manono be mined?…this is the billion dollar question. 100% forecast of the future is impossible and the DRC is not without it’s risks. What is your risk appetite? Is this a high risk investment? Will Manono truly be the “Saudi Arabia of Lithium” ? The scoping study recently published by the company has more information
about the capital costs of this lithium project, transportation options
and the historical hydroelectric dam within close proximity to the town, ~90km East.
Noxin
Bitcoin
Patrick McMullen
Congo; No go.
Belafrique
Who need you there ? With such stéréotype attitudes ?