Battery grade lithium hydroxide can finally be produced in Australia

IGO’s Kwinana plant has successfully produced lithium hydroxide
Cost blowouts and delays meant the refinery cost 10x more than a Chinese plant
The lithium hydroxide price is $US70,625/t and not showing signs of slowing down

In an Aussie first, IGO (ASX:IGO) has hit a major milestone for its lithium joint venture with Tianqi Lithium Corporation, producing battery grade lithium hydroxide from its Kwinana refinery.

The JV has successfully and consistently produced battery grade lithium hydroxide from spodumene sourced directly from the Greenbushes mine 250km southwest of Kwinana (Albemarle 50%, Tianqi Corporation 25%, IGO Ltd 25%).

“Vertical integration into downstream processing is a key plank in IGO’s strategy and we are proud to be involved in the first production of lithium hydroxide in commercial quantities in Australia,” IGO MD and CEO Peter Bradford says.

“The joint venture’s interest in both the upstream mining asset at Greenbushes and the downstream refinery at Kwinana is emerging as a globally significant, integrated lithium business.”

Producing lithium hydroxide in commercial quantities is kind of a big deal. It’s a key component in electric vehicle high nickel battery cathode chemistry, delivering higher energy density and longer driving distances between charges.

But it’s been a rough road to get to this stage

Tianqi faced cost overruns and delays at the refinery in Australia which started construction in 2017 and was supposed to be commissioned by 2018.

The refinery was originally meant to cost $299 million. By 2019 Tianqi increased investment to $525 million and postponed it to 2020, then by August 2020 Kwinana Phase 1 was put on hold as costs doubled.

It turns out the company’s investment per ton of lithium hydroxide ($/tLiOH) for Kwinana was 10 times higher than a similar converter Ganfeng developed in China.

So, in December 2020 Tianqi teamed up with IGO in a $1.4 billion deal to provide the $200 million needed to finish Phase 1 by 2022 – which was four years behind schedule.

But the delays didn’t end there.

In March 2021, MSP Engineering shrunk to 400 employees as Tianqi refused to pay the company for building the plant – and the dispute was dragged through the courts.

Then in April, IGO announced a new contractor had been engaged to restart work on the refinery.

And by the September quarter last year, commissioning had finally begun with the first lithium hydroxide produced from Kwinana – plus the soaring prices probably helped.

Prices increased, and kept on increasing

Lithium hydroxide increased 32% to US$9,400/t in Q1 2021, to above US$12,750/t by May and US$17,369/t by the end of 2021.

The Office of the Chief Economist predicted in its March Resources and Energy Quarterly that lithium hydroxide prices would surge to US$27,260/t in 2022 before falling gradually back to US$14,855/t by 2027.

And currently the price is $US70,625/t – and it’s not showing any signs of slowing down.

Despite many attempts to misinform public opinion by biased analysts, everything indicates that #lithium hydroxide will dominate the world for at least the next 15 months with prices at an incredibly high level, US $ 80,900 / ton.
Look at the following LME price chart: pic.twitter.com/5SC1CHszUe

— Juan Carlos Zuleta (@jczuleta) May 17, 2022

From ‘dig it and ship it’ to downstream supplier

Tianqi COO Raj Surendran said the milestone demonstrates that “Australia can value add to its minerals onshore as it enhances its reputation as a critical contributor to the production of batteries for electric vehicles and energy storage, which are absolutely vital for the decarbonisation of the world’s economy.”

He also said proves Australia has the capability and expertise to transition from a ‘dig it and ship it’ minerals supplier to a downstream supplier of value-added product.

“However, we also remain acutely aware that there is more work to do to establish the Kwinana plant as a reliable, significant producer of battery-grade lithium, starting with customer acceptance,” Surendran said.

The next step in the plant’s ramp-up process is the product qualification process with offtake customers, which will be completed over the next four to eight months.

IGO says that during this time, the plant will continue to focus on stable, consistent, and reliable production of battery-grade lithium.

Ramping up to 24,000 tonnes nameplate capacity

Surendran said the first train at the Kwinana Plant will now continue its ramp-up towards its nameplate capacity of 24,000 tonnes of battery grade lithium hydroxide per annum.

The aim is to recommence construction of Train 2 during 1H23 – with an $18m early works budget already committed.

Royal Bank of Canada analyst Kaan Peker forecasts that commercial production in the September quarter this year, battery-grade hydroxide at ~50% by the December quarter, with a six-month accreditation process for the hydroxide – and Train 1 ramping up to nameplate by September quarter 2023.

“We view this as a key de-risking milestone for the plant and Lithium Joint Venture,” Peker said.

“In general, liberating lithium/producing hydroxide is a difficult process and we view the largest operational risk for the Lithium JV being the Kwinana plant’s ability to produce battery-grade hydroxide at nameplate (design recovery rate, production and cost).

“Producing battery-grade hydroxide from the plant for a limited period is the first step of ramping up towards nameplate.”