Which ASX small caps could help make a lithium battery in Bill Shorten’s battery factory?

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“I’m so happy, ‘cos today I found my friends…”

Leader of the opposition Bill Shorten must have been playing Nirvana’s “Lithium” before his budget reply on Thursday.

The would-be (and likely next) prime minister of Australia made lithium a big focus in his response to Josh Frydenberg’s first federal Budget, saying he would boost the battery metals industry in Australia if elected. The ASX’s small cap lithium players — which number almost 120 — were certainly pleased.

Many of them are in Western Australia, the state that hopes to become ‘Lithium Valley’.

<<< Scroll down for a table of the ASX’s small cap lithium stocks >>>

“Here’s the remarkable thing, we already have every single resource to make a lithium battery right here in Australia,” Shorten said.

“So instead of the usual trope of shipping the minerals overseas and buying back the finished product at largely inflated prices, let’s make the batteries here and let’s do this with electric vehicles and charging equipment and stations too, supported by Australia’s first electric vehicle policy.

He added that his party would provide a $2,000 payment to families who “want to join the fight against climate change and the fight to lower their power bills” by installing a battery storage system.

So how exactly does lithium, a soft and lightweight metal that was first discovered back in 1817, become the batteries that are so popular today?

Spodumene and brine

Lithium is mined from two main sources — hard rock (hosted in spodumene ore) and brine (lithium-enriched salt water).

Lithium from hard rock deposits, like those found in Australia, can be more expensive to extract initially.

Found mostly in Chile, Argentina, and Bolivia, brine deposits – which produce a lithium carbonate — occur when underground lakes, geothermal waters or petroleum brines are enriched with lithium.

The lithium-rich salty water is pumped to the surface into evaporation ponds, before the concentrated solution is processed into carbonate.

Spodumene is the main lithium bearing mineral mined from most hard rock lithium mines around the world. Lithium mined this way has an important advantage in EV markets, because the lithium-bearing spodumene ore can be transformed into lithium hydroxide – which commands a higher price than carbonate — after a relatively simple process and can produce cathode material more efficiently.

<<< Read Stockhead‘s lithium primer here >>>

The typical grades of a hard rock lithium mine range between 0.9 and 1.6 per cent, while lithium concentrations from brines is between 0.07 and 0.16 per cent.

Mined material is processed into lithium carbonate or lithium hydroxide, which can be sold to make cathode material for lithium-ion batteries.

(Batteries include an anode [positive] and a cathode [negative] and the electrical current flows between the two.)

The cathode is then shipped to a battery maker, who sells the final battery product to car makers, stationary storage manufacturers, and other electronics manufacturers.

The players along the way

On the production side of the equation, you can (almost) count the number of ASX-listed lithium producers on one hand  – at the moment, they include Pilbara Minerals (ASX:PLS), Altura Mining (ASX:AJM), Galaxy Resources (ASX:GAL), Orocobre (ASX:ORE), Alliance (ASX:A40) and Mineral Resources (ASX:MIN).

Explorer AVZ Minerals’s (ASX:AVZ) Manono project is one of the few lithium projects globally that have low levels of impurities of mica and iron oxide.

This enables AVZ to meet the standards required of the next generation of lithium batteries, as requirements become more stringent.

Lithium battery manufacturers are demanding higher purity levels, as impurities can result in poor battery performance or battery failure.

In August this year the Manono project was confirmed as the largest hard rock lithium project in the world, and the second-highest grade.

Near term producer Kidman Resources (ASX:KDR) wants to start construction of its Mt Holland project, a joint venture with the world’s largest lithium miner SQM, in the second half of 2019.

ioneer (ASX:INR) is developing one of only two major lithium-boron deposits in the world.

Meanwhile, innovative companies like Lepidico (ASX:LPD) and Lithium Australia (ASX:LIT) are using their own technologies to produce lithium carbonate from non-conventional sources, including tailings — the materials left over after processing ore to separate valuable material from uneconomic material.

Lepidico plans to build a $3 million Perth-based pilot plant — or demonstration facility – to show off its technology to potential sales and finance partners ahead of development of its larger phase one processing plant.

The company is targeting commercial production for 2020.

Lithium Australia plans to be the first Australian company to do everything from mining lithium to making batteries.

Stage 1 of Lithium Australia’s Sileach pilot plant trial produced “outstanding results” in 2018 as the company aims to convert mine waste into lithium-ion batteries – a world first.

And this week, Lithium Australia announced it had bought a stake in Australia’s only lithium battery recycler.

Here is a table of small cap lithium stocks on the ASX, courtesy of leading ASX data provider MakCorp:

Stockhead is proud to use MakCorp as a provider of great value, accurate and reliable data on ASX-listed mining stocks. For more information head to MakCorp’s website.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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