Western Australia’s burgeoning critical minerals sector received a major shot in the arm earlier this year with the official launch of a fully integrated producer and supplier of premium, battery-grade lithium hydroxide for the global electric vehicle (EV) market.
An advanced lithium exploration play in WA’s Eastern Goldfields looks set to help consolidate the state’s spodumene production pipeline moving forward.
During the first half of March, Covalent Lithium Pty Ltd equal joint venture partners Wesfarmers Ltd and Sociedad Química y Minera de Chile opened their Mt Holland mine and concentrator located some 400 kilometres east of Perth and around 110 km southeast of Southern Cross.
The $2.6 billion project is expected to yield 100,000 tonnes of lithium hydroxide this financial year, while an associated refinery in the coastal industrial estate of Kwinana is scheduled for completion by the end of 2024.
Once fully established, it should generate enough battery-grade products to enable the manufacture of more than one million EVs a year.
Wesfarmers managing director Rob Scott said the JV was one of his company’s key growth platforms, which was set to “deliver long-term value to shareholders, benefitting from global efforts to reduce greenhouse gas emissions”.
“When we made our initial investment into Mt Holland four years ago, we saw an opportunity to enter the lithium market and leverage our expertise in chemical processing here in WA,” he noted.
“It’s pleasing to see the successful commissioning and ongoing ramp-up of spodumene production.
“We are continuing to advance studies to expand the Mt Holland mine and concentrator.”
WA Mines and Petroleum Minister David Michael said the state remained a globally significant battery and critical minerals processing hub and it was working hard to do all it could to further capitalise on “this incredible opportunity”.
This included a $60 million expenditure on a road upgrade to help facilitate the Mt Holland project.
“Lithium became WA’s second most valuable mineral in 2022–23, with sales of $20 billion and royalties of $930 million,” Michael said.
“This impressive increase in production has seen WA consolidate its position as the largest global producer of lithium – a rank we have held since passing Chile in 2012.”
No doubt this augers well for companies like Develop Global Ltd, which has the Pioneer Dome exploration project some 55 km north of Norseman and 130 km south of Kalgoorlie-Boulder.
Here, the mineral resource currently stands at 11.2 million tonnes at 1.2 per cent lithium oxide and is one of only a handful of ASX-listed lithium JORC-compliant resources that does not have a spodumene off-take agreement.
This should not be a problem, though, as the Australian product is highly sought after given it qualifies for significant flow-through offshore government subsidies.
In the June quarter, Develop Global announced the results of an updated scoping study for Pioneer Dome.
The revised mine plan demonstrated that the project was set to generate exceptionally strong financial returns based on two possible production scenarios.
The first involved the building of a processing plant, including a flotation circuit, accommodation camp and all associated infrastructure, for $285 million.
According to the operator, this scenario would generate significant free cash flow using a consensus price forecast of US$1,393/t.
This in turn is anticipated to generate $666 million in free cash flow and have a pre-tax net present value (NPV) of $373 million.
Develop Global said it would also consider adopting this option in the event that the price of 6 per cent spodumene concentrate rose to US$1,500/t. At this price, the project should deliver a free cash flow of $823 million.
The results in this scenario are significantly better than those contained in the previous scoping study of February 2023, due mainly to the operator’s decision to mine Pioneer Dome predominantly via underground operations.
In this regard, small, low-strip ratio pits are set to produce early ore and cash flow and create access points for the larger underground mines.
“This will deliver significant benefits, including an increased production profile compared to previous mine plans and the ability for fast and effective production ramp-up,” the company said.
Meanwhile, the second scenario is based on a mine gate sale or toll treatment arrangement. This includes a capital cost of just $35- 40 million, saving an estimated $250 million due to there being no need to construct a processing plant, associated infrastructure or an accommodation camp.
The main ore body in the mine plan outcrops and produces ore from month three of the schedule, meaning revenue should be generated very early in the project’s life – especially in a mine gate sale or toll treatment scenario.
Under this case, the NPV and cash flow increase significantly and the construction and operating risks substantially reduced.
Mining proposals for Pioneer Dome have been submitted to the appropriate WA government agencies and are expected to be approved in the September quarter.
In late 2022, former owners of the project, Essential Metals Ltd, said early due diligence had indicated a proposed plant throughput of 1.2 Mt per annum.
Essential Metals had sought expressions of interest from multiple industry participants which were expected to assist with financing in return for equity and offtake rights.
On a related note, two years ago Canaccord Genuity predicted that the electrification of light vehicles would continue to be the primary driver of lithium demand.
There were, however, other markets – including energy storage systems and trucks. Plus, the global production base had the potential to expand.
“Under our long-term supply forecasts, we anticipate a majority of supply comes from Australia and South America, noting also that by 2030 up to 57 per cent of our modelled supply comes from greenfields projects,” Canaccord said.
“Driving this is existing mining operations expanding and known resources being developed.
“However, the lithium battery revolution will require diversified production sources and (perhaps luckily) there are many potential sources globally of lithium.”