Battery Watch — Lithium in focus

By Glaiza Gagno and Pau Gan | 19 January 2018

The following analysis includes an abstract of S&P Global Market Intelligence 2017 Corporate Exploration Strategies (CES) annual publication which evaluates global mining exploration budget trends and examines how mining companies allocated their budgets by commodity, country and stage of development.

In recent years the green energy market has driven innovations in storage battery technology, which has created a lithium buzz within the mining industry.

Lithium prices have reflected the increasing demand by more than doubling over the past two years, with the lithium carbonate global average price index closing at US$16,000 per tonne on Dec. 31, 2017, compared with US$6,900/t two years previously.

Lithium exploration budget doubles

The global lithium exploration budget has seen significant growth in the past years as demand rises. In 2017, the mining industry's budget for lithium exploration totaled US$156.5 million, more than double the US$72.9 million allocated in 2016 and quadruple the US$36.2 million in 2015.

On a regional basis, Latin America, home to most of the largest lithium brine deposits, had the largest lithium budget with US$42.7 million, which was 41% higher than in 2016. By country, Australia, the U.S., Argentina and Canada were the top destinations for lithium exploration spending in 2017, accounting for 26%, 13%, 12% and 11%, respectively, of the global lithium budget.

The rising demand for lithium leads to the question of where to obtain supplies. Of the primary lithium properties covered by S&P Global Market Intelligence, 70% are still in the early stages of exploration and development, while only 6% are in production. Geographically, 78% of lithium properties are located in the U.S. (24%), Canada (23%), Australia (20%) and Argentina (11%), with the remainder scattered across the globe.

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Miners advancing more brine deposits

A number of companies are venturing into the lithium market in response to the demand; the table below lists the largest according to their aggregate, attributable lithium reserves and resources as of January 10, 2018.

Quimica y Minera de Chile takes top spot with over 20 million tonnes of lithium oxide in reserves and resources, aggregated from its Mt Holland - Lithium, Cauchari-Olaroz and Salar de Atacama properties, located in Australia, Argentina and Chile, respectively, which are some of the world's largest lithium deposits.

Lithium can be sourced from hard rock or brine deposits. In this analysis, out of the 89 properties with lithium reserves and resources, hard rock deposits contain the lion's share at 65%, and the remaining 35% is in brine deposits. Since brine deposits are easier to mine than hard rock deposits, brine deposits are more advanced in terms of development: 48% are in the mining stage, preproduction and production, compared with 21% of hard rock deposits.

The largest hard rock lithium deposit is Bacanora Minerals' Sonora property in Mexico, which has 3.6 Mt of lithium oxide in reserves and resources. Among brine deposits, government-owned Comibol's Uyuni Salt Flat project in Bolivia is the largest with 39 Mt of contained lithium oxide.

Lithium-focused activity continues to ramp up

There has been an increasing tempo of drilling and M&A activity surrounding lithium over the past three years. In 2017, there were 166 lithium-focused deals valued at US$565 million, compared with 44 deals valued at US$120 million in 2015. Lithium streaming deals and exploration earn-in agreements are some of the largest deals in the lithium space.

The top two primary lithium deals by deal value in 2016 and 2017 were company acquisitions. The largest, valued at US$201.1 million, was the acquisition of Canada-based Lithium X Energy by NextView New Energy Lion HongKong in December 2017. The second largest was the merger of Australian miners Galaxy Resources and General Mining in May 2016, with a deal value of US$152.3 million.

The third-largest deal, and also the largest primary lithium asset acquisition, was GUO AO Lithium paying US$60 million to acquire a 60% interest in the reserves development-stage Moblan lithium project in Quebec, Canada, from Shenzhen Zhongjin Lingnan Nonfemet

Lithium drilling activity more than doubled over the past two years. Lithium explorers reported 2,625 drillholes containing 1,196 significant intervals in 2017, compared with 1,306 drillholes containing 576 significant intervals in 2016.

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Battery Watch — Lithium in focus

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