POSCO has agreed to finance the capital expenditures required for the initial phase of 2,500 tonnes commercial production, ahead of the Joint Venture Company raising project financing for 20,000 tonnes.
Commenting on the HOA, the Company's Executive Chairman, Tom Hodgson, stated: "We are very pleased to execute this agreement on the eve of our merger with Western Lithium. This memorializes our joint commitment to develop a lithium project in Jujuy, Argentina and is the culmination of over two years of working together with POSCO. We would like to congratulate the many people whose hard efforts made this achievement possible including the strong support from our local partners in Jujuy, Argentina."
Chinese electric vehicle market is expected to become the world’s biggest starting in 2016. In fact, the government says it plans to have five million electric vehicles on the road by 2020.
All those cars are going to need batteries, and it isn’t just Tesla’s gigafactory that’ll be producing them.
South Korea’s largest chemicals company, LG Chem (051910.KS), broke ground for an electric vehicle battery factory in China on October 30. The plant will have the capacity to produce 100,000 batteries annually.
LG Chem said at the groundbreaking that it expects the global battery market for electric vehicles to grow to $18.24 billion in 2020. That’s more than five times the size of the market in 2013, which reached $3.26 billion.
According to research from Benchmark Mineral Intelligence by Simon Moores, all of this demand will put stress on lithium hydroxide supplies.
2015. During
this period, over 20 tonnes of lithium compound was produced and subsequently exported to
POSCO’s facility in Pohang, Korea where it was further processed into battery grade lithium
carbonate and lithium hydroxide. POSCO advised Lithium Americas that initial test results
indicated that the Demo Plant achieved or exceeded all performance targets and that the
lithium products processed in Pohang were of very high quality. POSCO claims that its high
efficiency lithium extraction technology has numerous advantages compared to traditional
The Forgotten Lithium
Moores states that there are several factors contributing to the shortage.
From the perspective of Wall Street, there’s plenty of lithium on the market. But in reality, there’s only a surplus of lithium carbonate. Lithium hydroxide, in fact, is lacking.
You see, most supply expansions in lithium have occurred in the carbonate sector; hydroxide was forgotten. Reason being, there’s much more carbonate in lithium brine deposits (the source for various lithium types). Lithium hydroxide segments are also 2.5 times smaller than the well-supplied lithium carbonate segment. Thus, manufacturers need more deposits in order to get hydroxide, which makes production more expensive.
But with Tesla and others planning to use lithium in their batteries, Moores says the demand for all lithium chemicals used in batteries will increase by as much as 50%.
With little increase in lithium hydroxide supplies, shortages could occur as soon as next year. As a result, prices will increase by as much as 30% from current levels.
We could reach an all-time high for lithium hydroxide prices – the previous record was set in 2012 at $8,000 per metric ton.
And some increases look to be already underway.
This type of news is very good news for WLCDF it shows me that the market for Lithium hydroxide supplies is in such demand Tesla has to start Fishing around in projects that are not even able to supply at this time just provisional at best.I am sure with the storage Battery revolution on the horizon the outcome of Western Lithium and Lithium Americas and POSCO funding and technology its a nice looking outcome.
A long way to go
A deal with Tesla is a game-changing development for Rare Earth, but the company still has a lot to do before the contract translates into revenue. For example, today’s press release warned that:
“…the Sonora Lithium Project Partners will need to design and construct a suitable mining and processing operation. This will require the Sonora Lithium Project Partners to secure significant financing through debt and/or equity.”
What’s more:
“Bacanora and REM will be pursuing next steps to raise finances in order to achieve this goal. There can be no assurance that the conditions to supply product under the Supply Agreement will be met or that the agreement will prove to be economic.”
In other words, while Rare Earth and Bacanora may have a provisional agreement with Tesla, there’s no guarantee that the partnership will register any economic benefit from the deal.
