Monsters of Rock: Sayona and Piedmont approve $110 million plan to restart Canadian lithium mine amid price boom
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Virtually all of the commercial lithium supply in the world comes from two major sources: brine producers operating in South America’s arid desert regions across Argentina and Chile, and hard rock mines located in the Western Australian outback.
Efforts to start up similar hard rock mines in Canada a few years ago ran aground when the market for lithium and the raw materials that feed into the electric vehicle supply chain dried up.
That came as Chinese and Korean chemical producers ramped up their capacity faster than the downstream market needed.
With EV sales rising exponentially that dynamic has changed, and despite some recent negativity about the future of lithium prices, the margins for miners are currently outstanding.
There is recognition as well that customers will need to look outside of traditional sources of the battery metal to secure supply needed for the future growth of the EV sector.
This graph from the International Energy Agency lays out the remarkable gulf between planned supply and forecast demand.
Yeah… Spodumene is currently trading at a mid-range price of US$6,625/t according to Fastmarkets, around 10 times the cost base of the major Australian producers.
With that in mind, operators in places like Canada and Africa where hard rock deposits similar to the Australian lithium pegmatites exist are working their way towards production.
The latest is Sayona Mining (ASX:SYA) and Piedmont Lithium (ASX:PLL), two Aussie listed companies who today approved a Canadian $98 million investment ($110 million AUD) to deliver a reboot of the North American Lithium operation in Quebec, Canada.
Sayona and Piedmont were both up on the news, with 75% owner of the JV Sayona rising by more than 21%.
It will be the first local source of spodumene concentrate in North America, one of the three key markets for the global EV industry alongside China and Europe.
“Our team in Québec has hit the ground running since our official takeover of the operation in August 2021. Progress to date has been excellent, including the recruitment of experienced operating personnel and the move to secure major items of equipment early, before recent cost hikes,” Sayona MD Brett Lynch said.
“Importantly, we continue to work closely with both the Québec Government and Piedmont to take the next step of downstream processing. This will maximise local value‐add, delivering increased returns to shareholders, enhancing local employment and investment and minimising the carbon footprint in supplying North America’s battery industry compared to current imports.
“All the key players in the North American auto and battery sector are moving to invest in local production in Québec, benefiting from its world‐class infrastructure, skilled labour, proximity to key battery markets and low cost, sustainable hydroelectric power.”
Piedmont is planning a lithium conversion facility in North Carolina near a proposed spodumene mine which has run into some community opposition along with another proposed North American plant for which it is yet to announce a site.
The company, which is dual listed in the States and Australia, will have offtake rights for the greater of 113,000tpa of spodumene concentrate from NAL or half of production.
It will also have rights to purchase 60,000t or 50% of concentrate from Sayona’s nearby Authier project.
Further down the line, Sayona says it is committed to developing a conversion facility in Quebec itself to produce lithium carbonate and/or hydroxide.
“Combined with our emerging northern lithium hub, NAL will ensure Québec is at the centre of lithium carbonate and/or hydroxide production in North America, becoming the axis on which a successful battery ecosystem can be built,” Lynch said.
The mine is funded after recent capital raisings from both JV partners, with concentrate production expected to begin in the first quarter of 2023.
It will produce 163,266tpa of 6% Li2O concentrate over a 27 year mine life, with a pre-tax NPV of $1 billion and IRR of 140% at a spodumene price of just US$1,242/t, well below the current market price.
Northern Star (ASX:NST) rose 5.98% after unveiling plans for a more than $1 billion mill expansion at Kalgoorlie’s Super Pit.
It was a rare spot of good news for the gold sector, after a number of players revealed production downgrades and cancelled projects in recent days.
The rest of the major miners and energy stocks were in positive territory, with the materials sector rising by 2.65%.