eBusiness Weekly
Golden Sibanda
Australian battery minerals firm Prospect Resources, now investing in Zimbabwean lithium mining, has sold 70 percent of its initial production before the mineral has even been extracted from the Zimbabwean ground, a company executive has said.
Prospect, which is listed on the Australan Stock Exchange (ASX), said it had signed an off-take agreement with Chinese firm Sinomine and the arrangement entailed the supply of nearly three quarters of Prospect’s production in the first seven years or phase one of the Arcadia lithium project.
Prospect is still in the process of developing the Arcadia lithium project 35 km east of Harare. This is a globally significant mineral resource, which Prospect says has the world’s 6th largest joint ore resources committee (JORC) compliant hard rock lithium deposit.
Demand for lithium
So strong is the demand for lithion-ion batteries that the company has sold the bulk of the targeted output for the next seven years yet it only expects to go into full battery lithium production by the second quarter of next year, Prospect executive director Harry Greaves said.
“We have done our feasibility studies and have sold 70 percent of our production for the next seven years, that is pre-sold, and we are negotiating on the balance of 30 percent and that is signed off through the MMCZ,” he said.
In fact, Greaves said the company was overwhelmed by the demand for its lithium that it had to advice customers it will not sell all its produce as some of the production would be directed towards processing into value added lithium, which is battery grade lithium carbonate.
“We have catered for it in our off-take agreements to let our customers know that we are going to be diverting part of our lithium to our lithium carbonate plant.”
A report by Bloomberg New Energy Finance estimates worldwide demand for electric vehicles would rise to almost 1,6 million in 2018, up 45 per cent from a year ago.
The reports predicts global sales “to explode in the late 2020s as the technology establishes a cost advantage over internal combustion engine car,” reaching 30 million by 2030.
And the demand for lithium carbonate will soar in tandem.
Prospect recently successfully set up a pilot plant in Kwekwe, which is able to produce 99,5 percent battery grade lithium carbonate and will now move to build a bigger plant. The pilot plant once produced 99,8 lithium-ion carbonate.
Greaves said while Morgan Stanley recently predicted they will soon be over supply of the mineral given the number of projects coming up, others disputed that view based on evidence of the growing demand for electric vehicles.
He said that the projected demand for the battery grade lithium had grown almost 10 times compared to what the most optimistic growth projection was two years ago.
The firm’s feasibility study relates to about 23 million tonnes of battery lithium resource, which Greaves said represented a third of the company’s global resource of 72 million tonnes; the extent to which the firm drilled to ascertain the deposit, but the deposit is open on a rich strike.
The design of Prospect’s Arcadia plant has potential for 240 000 tonnes of lithium concentrate per annum, which can be upgraded provided the company secures markets for additional supply of the commodity, as well as the capital to further develop the project.
Lithium projects funding
Prospect says it expects to secure more than $55 million in funding for the first phase of its Arcadia lithium project in Zimbabwe that will see the battery minerals firm produce lithium concentrates for export by 30 June 2019.
Funding for the Arcadia lithium project is currently a mix of equity and off-take prepayment, but more financing options that are a mix of foreign debt and equity, off-take prepayment and local borrowings are under consideration.
While lithium has found fame from the astronomical growth in the mineral’s demand by electrical vehicle manufacturers, the popular mineral is also used in production of greases, foundries, ceramics and the medical field.
Zimbabwe has four lithium projects, but only Bikita Minerals is already producing while the other three are at various stages of development.
Current lithium projects include Prospect’s Arcadia, Bikita Minerals (in Bikita, Masvingo), Zimbabwe Mining Development Corporation (Zimbabwe Lithium) joint venture with Canadia Toronto Stock Exchange listed miner, Jimbata, at Kamativi Mine in Matabeleland North and AIM listed African Premier Minerals’ Zulu project (near Bulawayo).
Zimbabwe’s lithium production has averaged 1 000 tonnes a year since 2012, according to Statista, a reputable online statistics, market research and business intelligence portal. Australia, the world’s largest producer extracted 18 700 tonnes of the commodity last year, followed by Chile at 14 100 tonnes, Argentina at 5 500 tonnes and China at 3 000 tonnes.
Small window of opportunity
Players in the industry contend Zimbabwe has a small window of opportunity, of just about two years, to capitalize on the huge interest in battery grade lithium to tap into global capital markets and develop its assets.
Funding is required to undertake studies on deposits in line with professional codes of practice such as JORC that set minimum standards for public reporting of minerals exploration results, mineral resources and ore reserves. The data is also required to attract funding to develop the lithium projects, a process which is capital intensive.
Grunt Hudson, the chief of executive of the country’s only producing lithium mine, Bikita Minerals, said the producers require at least $75 million to develop the assets from resource technical compliance to plant construction.
Access to global funding had suffered from the high country risk premium investors placed on Zimbabwe, which has seen the market value of external listed local miners being significantly lower that the values of fellow ASX listed lithium miners of equal or smaller asset size, but which are domiciled in jurisdictions perceived to be less risky.
Generally, lithium extraction from brine sources has proven more economical than production from hard-rock ore, which is why Zimbabwe needs to move with speed to develop its assets before lithium extracted from the more economic brines in the America’s floods the market.
Continental brines and pegmatites (or hard-rock ore) are the main sources for commercial lithium production.
