In eucalypt woodlands not far from Darwin, a team of workers is clearing vegetation and preparing to blast an open pit that will soon become Australia’s newest lithium mine — a future source of the vital material in batteries, smartphones and electric cars.
To either side of the Cox Peninsula, where works will start in January, there are pristine waters well-known for fishing and postcard views of mangrove-lined beaches. But for mining company Core Lithium, it’s the promise of what lies beneath the ground further inland that’s most alluring. Exploratory drilling suggests up to 7.4 million tonnes of high-grade lithium-bearing rock are locked up in the Bynoe Pegmatite Field.
“We’re aiming for the start of plant construction in March, which should have us producing high-quality lithium concentrate out of Darwin by the end of 2022,” Core’s chief executive Stephen Biggins tells The Age and the Herald.
If all goes according to plan, says Biggins, by 2022, the ASX-listed company’s new mine — the Finniss Lithium Project — is likely to become one of the first stops in a far-flung value chain supplying raw ingredients that end up in the lithium-ion batteries of plug-in vehicles manufactured by Elon Musk’s Tesla.
“By building the first significant new mining project in the NT for many years, ourselves and the Territory will be contributing to the reduction of emissions from cars in big cities around the globe in the future,” Biggins says.
“The project feels good at a number of levels — and there are a lot of very happy shareholders.”
In the fight against climate change, the transport sector matters. Our use of petroleum-based fuel accounts for an estimated one-fifth of global greenhouse gas emissions — so powering vehicles with batteries instead will have a meaningful impact in avoiding catastrophic global warming.
But not everyone is as happy as investors in lithium stocks or Tesla, who have witnessed stunning share-price rallies this past year.
The natural resources needed for electric-vehicle technology like cobalt, copper and lithium will have to come from somewhere; and the reality is the vast majority will have to be extracted by mining, which comes with unavoidable impacts even when it is done responsibly. Increasingly among some communities in areas tagged for new mine development, worries are surfacing about the cost to their land, and questions are being asked about an often-overlooked trade-off of the clean-energy revolution: that manufacturing climate-friendly electric vehicles still takes a toll on the environment.
Rio Tinto, one of the world’s biggest miners, is finding this out first-hand amid an intensifying backlash against its plan to develop the $US2.4 billion Jadar lithium mine in Serbia. In recent weeks, campaigners have filled Belgrade’s streets in protest, leading to local authorities suspending an allocation of land for the project.
“There’s absolutely no doubt a need for lithium and other minerals as we transition to a renewables-based economy,” says Dr Kirstey Howey of Environment Centre NT, which has voiced concerns about the Finniss mine.
“But we would just say it’s imperative that all the safeguards that have been so hard-fought-for by generations of environmental groups for mining shouldn’t be dispensed with, and companies should be held to the highest environmental standards to ensure there isn’t environmental damage that could tarnish the social licence of the renewable energy sector.”
Powering the EV revolution
After a bumpy start, analysts in 2021 said it’s now safe to call it: the era of electric vehicles has finally begun to dawn. Electric vehicles —or EVs — might account for just 3 per cent of new sales today, but uptake is building strongly in China, the US and Europe.
More governments are setting deadlines to phase out combustion-engine vehicles. Some investment banks are betting EV sales will rise from 3 million to 30 million a year by 2030, comprising 40 per cent of new sales. And the global markets for the raw materials needed to make the batteries that will power them are deeply under-supplied.
“The pace of EV adoption in 2021 has beat even our above-consensus forecast — especially with regard to Europe and China,” says Lachlan Shaw, an analyst at investment bank UBS.
“US sales are also likely to rapidly accelerate with potential federal subsidies currently in the legislation phase.”
From Tesla to Volkswagen, car-makers worldwide are racing to secure reliable supplies of a range of key metals: nickel, cobalt, graphite and, most importantly, lithium.
Light enough to float on water, soft enough to cut with a butter knife, the silvery-white metal is firmly in the throes of an unprecedented boom. Prices for lithium products more than tripled during 2021 to end the year at record highs.
Lithium is in such high demand that some have taken to calling it “white gold”.
All of this means good news for Australia, says Keith Pitt, Federal Resources Minister in the Morrison government.
“We’ve got about 30 per cent of demonstrated [lithium] resources in the world … and we are already the world’s biggest producer,” Pitt says. “And there is a significant number of new mines in the pipeline — some more advanced than others — that will mean more jobs particularly in regional areas.”
Lithium resources occur in two categories: lithium minerals, which come mainly from lithium-rich hard-rock spodumene; and lithium from salts, largely brines in salt lakes. All of Australia’s lithium resources and production are from minerals, with several mines in WA, including Greenbushes, Wodgina, Pilgangoora and Bald Hill, sending exports to China and elsewhere in Asia for further processing.
Today, most of the lithium mined in Australia is loaded onto cargo ships and exported as spodumene concentrate, rather than as a refined product suitable for battery cells, called lithium hydroxide.
The price of spodumene cargoes delivered to China, which averaged $US420 a tonne in 2020, are now expected to fetch an average of $US1185 in 2022, government trade data suggests. One cargo delivered to China during the September quarter by ASX-listed Pilbara Minerals sold for a staggering $US2240 a tonne.
With the value of Australia’s lithium export earnings forecast to rise nearly 300 per cent from $1.1 billion during 2020–21 to $4.2 billion in 2022–23, Pitt says this a “good start” but he wants Australia to seize more opportunities to grow its lithium-hydroxide refining capacity that could open the door to even greater economic prosperity.
“There are expectations around the battery sector of an up to 100-fold increase in the next 10 years,” he says. “We’ll want to get as big a part of that into the Australian economy as possible.”
It’s not the first time there has been such buzz around lithium. Back in 2015, prices more than tripled in three years as the EV transition picked up pace and showed signs of taking off amid a shortage of lithium. However, as a relatively small and highly speculative market, it went from boom to bust in 2018 as a rush of new mines came on too soon and tipped the sector into oversupply, while reductions in Chinese subsidy programs put a pause on the electric vehicle revolution.
Lithium mines were mothballed. Some companies even collapsed into administration. But this time, a consensus across the industry is that things are decidedly different. Producers are exercising greater discipline now, and the EV market is much bigger. Industry players and analysts note that there are simply not enough future sources of supply to meet demand to 2030, and there are expectations the market will consistently be in deficit until then.
“The [lithium] supply side has taken two or three decades to get to this level of supply, but, based on demand-growth rates, the supply side needs to grow another three times in the next four years,” Biggins explains. “Then it needs to grow eight times by 2030 to meet EV demand because we are now dealing with a much larger sector.”
Approvals and social licence
The EV mega-trend is not going unnoticed by Australia’s three biggest mining companies — BHP, Rio Tinto and Fortescue — all of which are increasingly pushing into what they call “future-facing” commodities that include nickel, copper and lithium.
However, Australian miners’ ability to deliver on their strategic push is no sure thing in the face of what appears to be a rising tide of community opposition to new mines going ahead. Uncertainty shrouds BHP and Rio Tinto’s proposal to build a huge new copper mine in the US state of Arizona amid objections by the San Carlos Apache tribe which fears it will impact sacred and actively utilised religious land.
And now, with Rio’s latest plans for its lithium mine in Serbia facing rising scrutiny, the risks surrounding industry’s challenges to obtain social licence are being noted.
“We are wary of how permitting/regulation risk could blow out timelines or nullify projects altogether,” UBS analysts told clients in a recent report.
Back in the Northern Territory, Core Lithium has gained all the necessary environmental and regulatory approvals for works to begin on the Finniss Lithium Project. Still, conservationists hold misgivings and are raising a series of questions they say remain unanswered about the project’s impacts, particularly regarding possible impacts on groundwater.
“When you have a mine in the tropics, whether that’s in Darwin or Kakadu or Gove, water management is the No. 1 issue,” says Howey, the Environment Centre NT’s co-director. “We have regular cyclones in the wet season, mining infrastructure can be very easily inundated and that can cause a range of accompanying issues.”
An area of concern across other NT mine projects in the past has been acid mine drainage – the outflow of acidic water from waste rock dumps – leaching into and contaminating water systems including the Finniss River.
Howey argues the NT’s environmental assessment process provides insufficient transparency about how the miner intends to remedy a range of environmental concerns and lacks detail about the mine’s closure and rehabilitation plan.
“In the willingness to see this mine approved, we potentially have some pretty important safeguards not necessarily being dispensed with but with real questions around whether they are actually being implemented,” she says. “We just don’t know.”
I think the market will find there will be projects that disappoint
Core Lithium chief executive Stephen Biggins
It’s not only environmental campaigners applying such scrutiny to lithium mine projects. Carmakers are also focusing on sourcing their raw materials as sustainably as possible.
For its part, Core says it is confident in the environmental, social and governance (ESG) credentials of the Finniss project and support among the wider NT community.
Core has been involved in a number of community consultations, Biggins says, and has identified and worked to resolve key issues surrounding the management of groundwater run-off.
“We’ve spent a number of years investing in good environmental science and engineering to manage those sensitivities and substantial engagement at a community level to get social licence,” he says. “Those things are important … you’ve got to bring the community and stakeholders around you along.”
As well, the Finniss project’s proximity to Darwin’s port – the closest port to key markets in Asia – means its lithium will have a much shorter distance to travel and therefore a cleaner carbon-emission footprint than supplies from other projects, the company says. Core is also working on longer-term plans to process lithium hydroxide in the region, which would strip out an entire leg of overseas transport and enable the NT to harness the economic benefits of downstream chemical processing.
In the race for more lithium, Biggins says, not all projects will be created equal. And in an era of a heightened ESG scrutiny from investors and customers, there will be a “huge difference” between projects that have all regulatory approvals in place and strong social licence versus those that still face significant challenges to overcome.
“I think the market will find there will be projects that disappoint,” he says.
Extracted from The Sydney Morning Herald