In 2012, China’s Ministry of Science and Technology set an ambitious target – 5 million cars on Chinese roads to be powered by ‘new energy’ by 2020.
The announcement was well received by lithium producers around the globe, already cashing in on rapidly increasing demand for the material as lithium-based batteries have become a ubiquitous aspect of life, powering personal electronics from smartphones to tablets to laptop computers and even electric bicycles.
Adding to the increased demand from electric car manufacturers are rapid advancements in large-scale energy storage technology, pioneered by Elon Musk’s Tesla, which is building a 100-megawatt lithium ion battery that will act as a back-up for South Australia’s renewables-powered energy grid.
The surging need for lithium is clear validation of the vision shown by Tianqi Lithium chairman Jiang Weiping, who saw value in the world’s lightest metal when few others did 25 years ago.
In 1992, Tianqi Lithium Corporation began constructing its first lithium carbonate plant in Shehong, Sichuan Province, at a time when lithium miners collectively battled to find takers for the mineral, the industrial applications of which were not yet well understood.
Fast forward to 2017, and the lithium sector is one of the hottest areas of international mining.
Research by international consultancy firm Roskill shows that around 200,000 tonnes of lithium carbonate concentrate (LCE) was consumed worldwide in 2016.
Surging demand from the uptake of electric vehicles and the increased production of lithium-ion batteries is expected to increase that consumption to at least 600,000 tonnes of LCE by 2025.
However, capitalising on the rapidly increasing demand is not a simple proposition.
While there is no shortage of lithium deposits around the world, or in Western Australia, there is a shortfall in processing capacity.
Lithium is present in several different minerals, but there are only two types of mineralisation currently considered suitable for commercial extraction.
Extraction from pegmatites, the mineralisation most commonly found in WA, takes around three years to produce battery-grade lithium from the ore that is mined, known in the industry as spodumene.
To extract from brine deposits, commonly found in Chile and Argentina, it takes around seven years to produce lithium suitable to be made into batteries.
Roskill estimates that 785,000 tonnes of LCE will be needed each year by 2025, amounting to a 26,000-tonne shortfall from anticipated supply.
That shortfall has led Tianqi to invest heavily in WA, with a $400 million lithium hydroxide plant under construction in Kwinana, and plans to invest another $300 million into that facility to double its capacity have already been formalised before the first stage of building is completed.
Once the second stage is completed, the Kwinana plant will be the world’s largest lithium processing operation, with an annual capacity of around 48,000 tonnes of lithium hydroxide, equivalent to around 40,000 tonnes of LCE.
Tianqi is also planning to build two additional plants in China of similar size to the Kwinana facility, as it seeks to solidify itself as a global leader in lithium processing.
The construction of the Kwinana plant follows Tianqi’s 2012 takeover of Talison Lithium, a deal worth $815 million.
Talison, now a 51:49 joint venture between Tianqi and US-based chemical conglomerate Albemarle, is the operator of the world’s biggest and highest-grade lithium mine, located about 250 kilometres south of Perth.
The Greenbushes mine currently produces around 80,000 tonnes of spodumene concentrate annually, while Tianqi and Albemarle, plan to double that capacity by 2019.
In Perth recently to present at the Sino-Australia Economic and Trade Forum, hosted by the University of Western Australia, Mr Jiang said Tianqi’s latest spending was the culmination of 20 years of investment in WA.
“The facilities in Australia we are now constructing will be our flagship facilities, and will also be a strong demonstration to the world that we are going to build our competitiveness and bill ourselves as an international leader in the new energy and new materials industry going forward,” Mr Jiang said via his interpreter, Tianqi president Vivian Wu.
“Tianqi Lithium’s future supply will be fully secured, and WA’s lithium will be provided to international new energy markets, especially the electric vehicle industry.”
Tianqi Australia general manager Phil Thick told Australia China Business Review the decision to invest in WA, rather than China, gave the company several operational advantages over its competitors.
The first advantage, Mr Thick said, was the proximity of the plant to the Greenbushes mine.
“Instead of shipping spodumene concentrate to China as we currently do, we’ll truck it to Kwinana and convert it into lithium hydroxide, then bag and containerise it and ship it from Fremantle to the end customer,” he said.
“That’s a significant saving from that perspective.”
Another advantage, according to Mr Thick, was to provide a source of battery-grade lithium originating outside of China.
“Certainly, the big customers like Tesla, Panasonic, LG, and the car manufacturers are all very keen to get some diversified supply sources,” Mr Thick said.
“Building in WA and exporting out of Australia, versus being totally reliant on getting product from China, is seen by them as an advantage.
“And we think that building in this sort of environment, to Australian standards, will guarantee that we will get the highest-quality lithium available in the world, and that’s really important to customers.
“Quality is becoming a key driver for success, particularly in the development of lithium batteries.”
Tianqi is not the only China-based lithium processer seeking to shore up its supply by investing in WA mining operations.
In 2015, Jiangxi Ganfeng Lithium Company, which was established in 2000, acquired a 43.1 per cent stake in Neometals’ Mt Marion lithium project near Kalgoorlie-Boulder.
The deal also included an offtake arrangement, with Ganfeng taking 100 per cent of the lithium concentrate produced at the mine for processing in China.
In 2016-17, 116,298 tonnes of lithium concentrate was shipped to China under the arrangement, according to Neometals’ annual report.
Last year, Ganfeng added to its WA investments with another offtake agreement, this time a 10-year deal with Pilbara Minerals.
The deal, which is subject to two separate five-year extensions, will see Ganfeng take 160,000tpa of chemical-grade spodumene concentrate from Pilbara Minerals, underpinning the development of the Pilgangoora lithium operation.
Pilbara Minerals’ Pilgangoora has also attracted the attention of China’s General Lithium Corporation, which is listed on Beijing’s National Equities Exchange and Quotations.
In July last year, General Lithium signed a deal to take 140,000tpa from the Pilgangoora operation, representing 40 per cent of the mine’s output.
Another of China’s leading battery producers, Shaanxi J&R Optimum Energy Co, has a 19.9 per cent stake in Altura Minerals, which is commissioning a lithium operation in the Pilbara, also called Pilgangoora.
Altura also has an agreement in place to supply a minimum of 100,000tpa of spodumene concentrate to Chinese downstream processing group Lionergy.
WA-based Galaxy Resources is another with significant offtake arrangements with Chinese buyers, with its first shipment of 10,000 tonnes of spodumene concentrate sent to Lianyungang Port in Jiangsu Province in January this year.
Since 2016, Galaxy has inked deals covering around 120,000 tonnes of spodumene concentrate with Chinese customers.
Despite the increasing and intensifying competition, Mr Thick said Tianqi was well placed, based on its status as one of the industry’s first movers.
“There are companies talking about building the same sort of plant that we’re building in Kwinana, and they don’t have any experience in that area,” Mr Thick said,
“We think that they are all underestimating how difficult this is, even the plant that we’re building with all of our experience will have an extended ramp-up.
“Our experience says that you don’t switch it on and on day one it produces 100 per cent, there is a lot of tweaking and de-bottlenecking required to reach your optimum, and that can take 12 to 18 months.
“For people who have never done it before, it’s a pretty challenging process.”
The other crucial differentiating factor for Tianqi, Mr Thick said, was its commitment to WA.
Instead of simply investing in mines, or signing an offtake arrangement, Tianqi established a WA subsidiary late last year to develop the Kwinana plant.
Tianqi Australia has a 100 per cent Australian workforce, while its commitment to the state was underlined by its recent commitment to provide $5 million in funding for the new WA Museum, currently under construction at Perth Cultural Centre.
The funding will allow the museum to host travelling exhibitions of Chinese culture over the next 10 years.
Mr Thick said Tianqi Australia’s aim was to be seen as part of the WA community, in part to try to break down the often-xenophobic reactions to Chinese investment in Australian assets.
“We are trying to break down the paradigm that’s obviously there and that perception, and even when we announced that we were going to build this plant and invest $400 million into WA, we got some of that reaction, of people saying ‘the Chinese are taking over another asset in Australia’,” Mr Thick said.
“They don’t understand that it’s the exact opposite of that, it’s actually $400 million being invested here and creating jobs for local people, not the other way around.
“We really want to be seen as a contributor and part of this community, and not an outsider, I think that’s really important.”