In The Sweet Spot

Lithium production is forecast to increase sharply in the coming years. In fact, the Swiss Resource Capital AG Lithium Report 2017 states that global lithium production was around 175 000 tonnes lithium carbonate equivalent (LCE) in 2015 with an expected increase to 360 000t LCE by 2020 and over 650 000 tonnes LCE projected for 2025.

The report cites battery storage demand as the driving force for rising lithium demand. “Today, one third of the lithium demand comes from this sector; by 2025 it will probably reach 75%,” the report states.

According to Prospect Resources head of marketing David Miller, supply deficit is reflected in the lithium carbonate price which has more than doubled in the past two years. “Chinese import prices are currently trading at $12 000/t compared to less than $6 000/t two years ago. Likewise, lithium mineral prices have increased from about $400/t to over $900/t for 6% Li2O spodumene concentrate.”

In fact, Prospect Resources executive director Harry Greaves expects lithium demand to be further accelerated – this as countries experiencing heavy pollution look to mitigate excessive pollution levels.

“The high pollution levels experienced in China and more recently India will be the key driver for accelerating the demand for lithium as industry looks to adopt cleaner options. In fact, China is pushing for increased adoption of electric vehicles,” he explains.

The rosy lithium outlook has subsequently seen a number of new entrants make inroads into the lithium arena, including Prospect Resources, a Southern Africa-focused lithium and gold exploration company based in Perth with operations in Zimbabwe.

Prospect Resources’ flagship project is the Arcadia Lithium Project located on the outskirts of Harare in Zimbabwe. The project represents a globally significant hard rock lithium resource which is being aggressively developed with a clear focus on near-term production of petalite and spodumene concentrates.

Prospect Resources, which owes its shareholding to African, Australian and Chinese investors, expects to be in lithium production by as early as March 2019. According to Greaves, the mine was initially operated during the 1950s and 1960s for beryl and abandoned once the resource was mined out.

Most recently though the mine’s lithium-bearing orebody is the point of interest which, after delivering an aggressive drilling programme, the initial 15mt to 18mt resource has been upgraded to a 72mt asset.

“Following the recent 25m drilling programme, the resource has been upgraded and is now the sixth-largest Joint Ore Reserves Committee (JORC)-compliant hard rock lithium resource in the world,” enthuses Greaves.

Given the project’s attractiveness, Prospect Resources recently inked an off-take deal with integrated geo-tech services company Sinomine International Exploration (Hong Kong). Apart from a AU$10m investment in Prospect Resources, Sinomine will fund the construction of the project. Sinomine will also construct, build and commission the mine, tailings facilities, plant and equipment and all associated infrastructure for the project.

As part of the off-take agreement, Prospect Resources will sell 390 000t of spodumene concentrate and 1 097 000t of petalite concentrate over a seven-year period at market-related prices to China.

Greaves explains that a final plant design, build and transfer agreement will be signed off and project construction will start as early as March 2018. “To date, we have all the required project approvals, including environmental impact assessments and community development agreements, in place. Following an aggressive project development programme, we aim to be in production by the beginning of 2019.”