Lithium is one of the world’s most heavily in-demand commodities, mainly thanks to the growth in electric vehicles. But as with most other minerals, not all lithium is created equal.
There are two main types of lithium deposits: Hard rock (pegmatite and sedimentary) and brines. Hard rock is mined using conventional drill and blast techniques whereas in brine operations, lithium is pumped to the surface in artificial ponds and extracted or harvested as evaporation takes place.
AVZ Minerals‘ (ASX:AVZ) Manono Project in the Democratic Republic of Congo is the largest undeveloped hard rock lithium resource in the world with a grade above 0.5 percent lithium oxide.
Hard rock lithium deposits typically costs more to mine than brines because of the greater reliance on trucks and excavators, but that is not to say they are inferior.
Hard rock lithium deposits tend to be higher grade than brines, often between 1 percent and 2 percent lithium oxide.
Manono is a case in point. With a resource of 400.4 million tonnes grading 1.66 percent lithium oxide (spodumene), the project carries the second highest grade ever known. Only Talison Lithium’s Greenbushes deposit in south-west Western Australia surpasses it on this measure.
The Manono resource is also very low in impurities. For example, iron oxide, a potentially deleterious element, has been estimated at 0.99 percent. With additional processing in test work, this was reduced to 0.4 percent iron oxide, one of the lowest levels reported for a hard rock lithium deposit globally.
Because of the low impurities, AVZ expects to produce a spodumene concentrate of more than 5.8 percent lithium oxide and potentially higher than 6 percent lithium oxide.
To date, the company has succeeded in producing a 6.3 percent concentrate using dense media separation as one of the processing methods and it should be noted that the Belgians that mined Manono in the 1950s produced a 6.58 percent concentrate.
This means that AVZ should attract a material premium above the standard 5 percent to 6 percent lithium concentrate price for product from Manono.
In the base case scoping study completed in October this year, for every 0.1 percent increase in concentrate grade above 5 percent, the company factored an additional US$15 a tonne on to the estimated received price.
The exercise gave a price of US$920 a tonne for a 5.8 percent concentrate, with AVZ noting that it saw “significant upside” for lithium concentrate pricing in the mid-term.
The other important consequence of concentrate quality – which is reflected in the price premiums – is demand from end users.
Lower quality concentrate converts at approximately 9-10 tonnes for every tonne of lithium carbonate, whereas higher quality concentrate such as that from Greenbushes converts at 5.8-6 tonnes for every tonne of lithium carbonate.
For a concentrate processor, there is incentive to use higher grade product as it will deliver more saleable product (lithium carbonate) for the same level of utilisation.
Manono’s unique attributes have already ensured a substantial level of interest from potential offtake partners around the world and there will no doubt be plenty more as the project moves closer to development.
This content is produced by Star Investing in commercial partnership with AVZ Minerals. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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