Wednesday, 12 July 2017

Lithium Race Ludicrous Mode: Chile’s SQM To Acquire 50% Stake In Mt Holland Lithium Project In Western Australia.

The heat wave of Lithium M&A this summer has officially arrived. Lithium race now enters the ludicrous mode and SQM moves into the JV in Western Australia in the hard rock mining! SQM is the world's top lithium brine producer, but recent changes in Chile have brought some new challenges for the company. This move is diversifying SQM geographically and will allow finally increase the share of revenues in its fertilisers and chemicals stream towards lithium products. SQM is already engaged in JV with Lithium Americas and Ganfeng Lithium in the lithium brine project in Argentina.

SQM is itself a target of constant dating from Chinese companies including Ganfeng Lithium and Tianqi. We have just recently discussed the advance from GSR, another Chinese company. Now we can better understand the announcement by Ganfeng Lithium in June when SQM stopped to ship concentrated brine from Chile to China. Please note the announcement that SQM and Kidman have agreed to develop a proposed downstream lithium refinery operation to produce lithium carbonate and hydroxide in WA. All lithium majors are entering into the direct competition now and building their own vertically integrated lithium businesses when the security of lithium supply is everything. This process will drive M&A and consolidation in our industry in this Lithium 2.0 stage.

Bloomberg: The Electric Car Revolution Is Accelerating - Production Of Lithium Will Increase More Than 100-fold.

And now Bloomberg is joining our discussion about critical secure lithium supply to feed this Energy rEVolution and the coming tide of electric cars. The total disconnect between the exponential growth of sales of electric cars and available secure lithium supply is making its way into the mainstream investment media.

For us here, it will not be a secret that BNEF is totally right to point out the main driving force of this coming Electric rEVolution - cheap lithium batteries change everything. The surprise is coming with the news from Audi - they are claiming to be able to purchase lithium batteries for the upcoming electric cars at $114 per KWh from China already! And I will not be surprised by it at all. With all that build up in lithium batteries capacity, the new coming players will bid for business now betting on mass volume production to bring the cost of lithium batteries fast down. We are entering the Solar Panels stage of total industry cost structure disruption for Lithium Batteries with China investing billions to corner this market as well.

Security of lithium supply is at the very base of this state-level investment game by China. In the end, you cannot participate in billions of dollars in available government funding if you cannot secure the supply of lithium raw materials to feed all this pyramid. Disruption of $12 Trillion dollars industries ($4 Trillion Transportation and $8 Trillion Energy and Utilities) is based on the $2 Billion dollars market by sales of lithium raw materials. And the price of that critical commodity is just under 2% of total cost of a lithium battery. We will have the very fast increase in lithium prices and the wave of M&A in our very small sector will be one of the most impressive ones, when billions will be chasing all available secure lithium supply trying to buy the time they have lost already. Read more.

Chile’s SQM to acquire 50% stake in Mt Holland lithium project in WA

Sociedad Química y Minera de Chile has signed a $110m joint venture (JV) agreement to acquire a 50% interest in Kidman Resources’ Mt Holland lithium project in Western Australia (WA). 
Following completion of the deal, Mt Holland project will be shared by the companies, having previously been wholly owned by Kidman Resources. 
Under the agreement, SQM will make an initial cash payment of $30m to Kidman and contribute $80m to fund the development costs of the project in exchange for the 50% stake.
Furthermore, the companies have agreed to develop a proposed downstream lithium refinery operation to produce lithium carbonate / hydroxide in WA.
"It contains a mineral resource of 128 million tonnes at 1.44% Li2O for 1.84 million tonnes of lithium oxide."

The refinery is expected to be underpinned by the Earl Grey lithium deposit at Mt Holland. It contains a mineral resource of 128 million tonnes at 1.44% Li2O for 1.84 million tonnes of lithium oxide.
Funding from SQM will be used for the completion of feasibility studies relating to Mt Holland lithium project, alongside the mine development phase and processing plant on-site. 
Funds will also be directed towards the mine's construction phase, processing plant and associated infrastructure, as well as funding the refinery plant's design and study phase.  
The agreement will give exclusive rights to the JV to explore and mine for lithium in the project area, while Kidman will retain the exclusive right to exploit gold. 

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