Not all lithium is created equal: why AVZ’s Congo project stands out
Special report: AVZ’s majority owned “Manono” lithium, tin and tantalum project in the Democratic Republic of Congo is the world’s largest hardrock lithium deposit.
It’s also the second-highest grade discovered — with the lowest impurities as reported by official JORC compliant mining industry standards.
The brownfield site was discovered in 1910 and mined until 1982 for tin.
Fast-forward to August 2018 and AVZ has just reported a maiden mineral resource of 260 million tonnes of lithium graded at 1.63 per cent and 229,000 tonnes of tin. The resources will probably get bigger, given only half the total strike length at the Roche Dure prospect at Manono.
Only one of six massive pegmatites on the Manono-Kitotolo permits has been included so far.
What’s even more promising is AVZ has yet to go through the valuation uplift of JORC completion, scoping study, finance, mine development and cashflow production that many of its peers have received.
Does size matter?
Yes it does. However it isn’t just about the size of the deposit; it’s the quality.
Some lithium commentators such as Benchmark Minerals have begun highlighting pricing as well as quality differences as critical in meeting new battery raw material specification requirements.
As @benchmarkmin has said consistently, new #lithium chemical producers will take time to reach #battery specs. China's carbonate prices feeling short-term the strain of more low quality supply/below expected demand growth, but big challenges remain in meeting new demand
— Andrew Miller (@amiller_bmi) August 1, 2018
There are few lithium projects globally that have low impurities of mica or iron-oxide that can meet the quality requirements for the next generation of batteries.
The two highest grade in the world — as well as the largest hard-rock projects — are Greenbushes in Western Australia and AVZ’s Manono.
The Greenbushes pit is now more than 500m deep whereas AVZ is at surface — and has tin as a by-product credit.
Manono was highlighted by Deutsche Bank in the first major investment bank report on lithium (figure 172) in May 2016, prior to AVZ acquiring or completing a JORC compliant resource.
While AVZ has the largest lithium and tin JORC compliant resource, this is expected to expand as the company has a 1 billion tonne-plus exploration target.
AVZ consultant Airguide, which regularly works alongside Chinese battery majors, believes “the market does not fully understand the specifications or requirements for raw materials required by the battery sector”.
That’s also reflected in recent comments by lithium majors. “Battery requirements are becoming more stringent and there is a definitive move towards higher energy density batteries,” Albemarle spokeswoman Hailey Cobb said.
This begs the question: what lithium impurities are okay for batteries, and what impurities may make the raw material unusable?
“[Battery makers such as] EVE and other companies are telling us that they can no longer use lithium that is derived from high mica sources, as they can’t produce a lithium concentrate suitable for the next generation of batteries,” Airguide says.
Mica is a mineral name given to a group of minerals that are physically and chemically similar. Lepidolite is a member of the mica group of minerals and is the most abundant lithium-bearing mineral.
The table below, taken from a Deutsche Bank 2016 report, illustrates the significant differences in conversions to lithium carbonate or lithium hydroxide based on sources with high mica (lepidolite) compared to spodumene.
The importance of the above table is it is not just about comparing lithium companies on operating cost to produce lithium concentrate.
What also matters is understanding the impurities, as this can have a significant impact on how many tonnes of concentrate are required to make one tonne of lithium carbonate or hydroxide.
AVZ’s spodumene from Manono has no mica issues as was reflected in AVZ’s metallurgical report.
AVZ’s recent metallurgy test work produced a 5.8 to 6.3 per cent concentrate, without any type of beneficiation processing or optimisation. Thats all very positive for AVZ.
This was also historically independently verified in a Belgian Government study of the Manono project, which produced a 6.82 per cent lithium concentrate.
Older lithium batteries are running lower energy density requirements, which means they can use lithium sources with higher impurities.
However, impurities in the next generation of batteries results in battery failure or underperformance.
This is a key reason battery manufacturers need a high purity source of lithium.
“Right now, when everyone is doing their lithium supply analysis they are making the mistake of saying that all lithium is equal in its ability to supply the battery sector; and it absolutely is not,” according to AirGuide.
“It is more than just a matter of better pricing for high grade concentrate”.
Even if you did not believe this, the conversion table of quality spodumene to lithium carbonate or lithium hydroxide is clearly compelling.
“In our opinion, what we are hearing is over the next one or two years those companies that produce concentrate with lower mica will command a higher premium compared to the operations that have a high level of mica in their raw material.”
This special report is brought to you by AVZ Minerals.
This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.
If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.