Lithium 101: What should punters look for in a hard rock deposit?
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Former geologist and experienced stockbroker Guy Le Page is director and responsible executive at Perth-based financial services provider RM Corporate Finance.
We can describe lithium like most mining ventures, and something that the Romans (and their predecessors) were well aware of and that is net revenue per tonne of ore.
Put more simply, revenue per tonne of rock mined, less costs.
While the concept is a simple one, I think it is lost on many investors and with a paucity of resource analysts to unpack company announcements it may be time for investors to start doing a little digging themselves before making the plunge.
Pegmatites are coarse-grained intrusive igneous rocks formed from crystallised magma below the Earth’s crust.
Pegmatite lithium deposits can contain extractable amounts of a number of elements, including lithium, tin, tantalum and niobium.
Lithium in pegmatites is most commonly found in the mineral spodumene but is frequently contained in other minerals such as petalite, lepidolite, amblygonite and eucryptite.
Pegmatite deposits are very common in the US, Canada, Australia, Finland, and the DRC.
Hard-rock ore containing lithium is extracted via open-pit or underground mining using conventional mining techniques.
The ore is then processed and concentrated using a variety of methods prior to direct use or further processing into lithium compounds.
Extracting pegmatite lithium from hard-rock ore is expensive, meaning that such deposits are arguably at a disadvantage compared to brine deposits.
However, pegmatite lithium deposits have considerably higher lithium concentrations than brines, so deposits with extremely high lithium values may still be economically viable.
The production of other metals, such as tin and tantalum, can also help offset costs.
It is worth noting that hard-rock deposits are not subject to the sometimes 12-month long processing times currently seen at some brine deposits.
With hard rock lithium deposits, typically hosted by pegmatites, I like to start with grade.
Higher-grade deposits would include the likes of Allkem’s (ASX:AKE) James Bay project containing around 40Mt @ 1.4% Li02.
These deposits can also host commercially extractable tin, tantalum, and niobium, like at Greenbushes (TLEA (Tianqi, IGO) JV 51% Albermarle, 49%).
Aside from grade I am also interested in the width and depth of the mineralisation which affects the amount of waste that needs to be removed to extract the ore.
The low cost Mount Cattlin spodumene mine in WA is an open-pit mine that rests on a flat-lying, 1.6km by 1km pegmatite ore body.
Near surface deposits like these with greater width and strike extent would be cheaper to mine that deeper narrower deposits which tend to require the removal of greater volumes of waste to extract the ore.
As is the case with many mineral deposits, grade and width/strike extent is only a part of the story.
There are many other things to look out for, including identifying the presence of deleterious elements such as iron, phosphorus and fluorine that can lead to heavy penalties on spodumene concentrates.
As Andrew Scogings from CSA points out in an AIG Journal (N2016-001), omitting this type of information can be potentially misleading to investors as the presence of impurities will have a significant bearing on any concentrate price to be received.
Scogings highlights the case of a Mineral Resource Estimate of a pegmatite resource of 20Mt @ 1.5% Li2O containing 300,000 tonnes of Li2O.
At first glance this looks quite appealing, however there is no data on:
There could also be a bonus of cassiterite, tantalite and other metal credits, however what minerals can be extracted, or are saleable is another matter.
Importantly Scogings goes on to point out that many companies reporting lithium resources are making assumptions on the application of standard processing methods that are assumed will be applicable to their deposits, without adequate metallurgical and process engineering testwork.
There are many other technical matters Scogings highlights that could also affect recoveries (and therefore economics);
What minerals are present in the mineralised rock?
If there are a number of lithium minerals, can they be recovered and processed economically?
Are the minerals pure or are they interlocked with other mineral species (eg quartz) that could reduce concentrate purity? This often occurs with spodumene quartz intergrowths that replace petalite.
What processing methods can be applied e.g. gravity, floatation and cleaning to produce concentrates of acceptable size distribution and purity?
Will grind size affect the recovery of other minerals of interest, such as niobium and tantalum?
In the case of lepidolite or zinnwaldite, are there potentially deleterious elements (e.g. fluorine) that should be taken into consideration?
So, it is a case of “caveat emptor” (buyer beware) or maybe “cave canem” (beware of the dog) for investors reading stock exchange releases on pegmatite projects.
As you can see there are many variables to look out for, however companies are generally only releasing a fraction of the information required to make an informed decision.
Not surprisingly, Scogings is an advocate for more detailed reporting of mineral resources in the lithium space that will hopefully give investors a greater insight as to the real economic potential of spodumene resources.
Meanwhile, don’t be afraid to get on the blower and ask mining executives about some of the finer points raised above.
Unfortunately, there is no “ready reckoner” when it comes to pegmatite hosted lithium deposits so a little investigation may give you some insight as to whether the headline resource numbers are actually supported by other important technical data.
At RM Corporate Finance, Guy Le Page is involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting, and corporate advisory roles.
He was head of research at Morgan Stockbroking Limited (Perth) prior to joining Tolhurst Noall as a Corporate Advisor in July 1998. Prior to entering the stockbroking industry, he spent 10 years as an exploration and mining geologist in Australia, Canada, and the United States.
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed, or otherwise assumed responsibility for any financial product advice contained in this article.