Lithium’s clay play

By Simon Moores
Published: Tuesday, 23 March 2010

Western Lithium is vying to break into the industry’s elite through the world’s first production of lithium from hectorite clay, timing it to coincide with an expected demand boom from the electric car market

“This stuff is so soft you can scoop this out with your hands cash flow is all I see,” commented one potential investor while examining the green, sticky clay that could become key in the world’s battle to wean itself off oil.

Hectorite is an unknown quantity when it comes to commercial exploitation on a large scale.

The clay’s swelling characteristics enable its use as a paint thickener and in cosmetics, but it is its lithium content is attracting a lot of attention in the wake of a global supply race driven by a pending demand from the electric vehicle (EV) market.

At least, this is what Western Lithium Corp. is hoping and this is what drove potential investors, competitors and independents to attend a site visit on the back of IM’s Lithium Supply & Markets 2010 (LSM10) end of January in Las Vegas, USA.

Kings Valley hectorite has a lithium concentration
of 3,300-3,500ppm.

From its Kings Valley project in Nevada, Western Lithium Corp. is aiming to become the world’s first company to mine and process hectorite into lithium carbonate, a key component of lithium-ion auto batteries the chosen technology to power the world’s next generation of vehicles.

“With the downturn of the global automotive industry, it now seems clear that there is an imperative to come up with a new business model that will last the next 100 years based on the electrification of the car,” explained Western Lithium’s president, Jay Chmelauskas to IM.

More significantly, the company is looking to become North America’s biggest lithium producer with a projected 27,700 tpa of battery grade lithium carbonate production, a title presently held by Chemetall Foote’s small brine operation in the south of Nevada, USA.

Western Lithium has chosen the north of the state to set up its camp on land previously drilled by Chevron Resources in the 1970s and subsequently picked up by Western Uranium in 2005.

Western Lithium’s Kings Valley deposit is a short
flight from Lithium Supply & Markets’ host city of Las Vegas.

Kings Valley

“Welcome to the future of lithium mining in the USA,” declared Western Lithium’s senior vice president of development, Dennis Bryan, as the delegation descended on the Kings Valley project area nestled in the McDermott Caldera.

The caldera a collapsed volcano that has subsequently filled with water gave rise to economic quantities of minerals in the area which in addition to lithium includes gallium, uranium, and gold.

Created 15m. years ago, the caldera was a result of significant volcanic activity 700km north-east at Yellowstone National Park in Wyoming.

Volcanic fluids from Yellowstone leached the lithium, along with other minerals, out of ash beds and washed into the crater. As the closed system filled, the lithium concentration became higher and the water was eventually absorbed into the clay.

Clear evidence of this was seen first hand at by the delegation Western Lithium’s core shack. Row after row of drilling core samples displayed the hectorite the company was targeting, a green/grey soft sediment containing an average of 3,300-3,500 ppm Li.

The 220ft (67 metre) core showed the layer of flaky white ash rock closer to the surface gradually becoming layered with hectorite. The highest concentration of lithium was 7,680 ppm with the lowest 1,870 ppm.

“Drilling for lithium is like playing battleships,” explained one of the company’s geologists, aptly describing the nature of the job.

Turning hectorite into lithium

Western Lithium’s hectorite to lithium carbonate process is the key to
success at Kings Valley.

Mine plans

There are plans to mine the hectorite from two open pits on the east and west areas of the deposit using the simple truck and shovel method commonly seen with coal mining and oil sands.

The 18 year mine life will see 32m. tonnes of raw material enter the processing plant via a overland conveyor spanning the site, and 78m. tonnes go to waste using a lithium content cut off 0.27%.

“We anticipate the two pits will eventually become one,” explained Peter Critikos, manager for the project.

Each pit will be mined in a series of eight to nine benches each 12 metres high this could see a pit over 100 metres deep.

Western Lithium

But the project is still some way off this stage yet, still testing samples at laboratory scale with a present recovery rate of 89%.

And there is still the issue of mineral rights which at the time was unresolved. The company explained that it was “being looked at by our legal department” but they expect it to become a leasable mineral product like oil.

As the delegation made its way back into the off-road vehicles (petrol powered at the moment), the size of the deposit compared with the close proximity to roads, water, and electricity links became abundantly clear.

“I was expecting the site to be much more remote than it is,” said Seth Fletcher, an editor at US magazine Popular Science, who is writing a book on the lithium-ion battery boom.

“The mining itself looked surprisingly easy. I heard someone describe it as ‘gardening.’ Whether the project makes commercial sense is for the market analysts to tell you. I did ask one analyst on the trip what he thought and he said it was certainly a ‘project of merit,’ but that he hadn’t run the numbers yet,” he added.

“You see some mines that look like you have had to move the whole world to get what they want,” said the same delegate earlier commenting on the softness of hectorite.

It is a fair point that extraction will not be one of Western Lithium’s worries, nor will access to power and amenities or road and rail access. And being based in a mining friendly state such as Nevada will no doubt come in use at some point in the future.

“I buy into the theme that most of the green technologies in the world will take off and more importantly the need back up systems to store power,” explained a US based potential investor, “I think this is one of the most promising markets for lithium that not many are talking about.”

While the majority of the delegation were converted to the idea of a promising lithium future, the one thing which could trip up the glut of new lithium explorers aiming to be the next big producer, is actual demand.

New lithium entrants continue staunchly fight the electric car corner (as they would be expected to), but it has to be made clear that significant demand is not here today, and while the signs looks promising, it is far from guaranteed in the future.

Acknowledgments: IM would like to extend its gratitude to Jay Chmelauskas and Dennis Bryan of Western Lithium for hosting the LSM10 industry tour and providing access to and commentary on its Kings Valley project, and James Hayter, the company’s marketing director, for organising and coordinating the visit.

Comment: Western Lithium

Hurdles to overcome, persuading to do, but nevertheless promising

Nissan’s lithium-ion powered LEAF Courtesy Nissan

 Western Lithium has a unique lithium source in hectorite and one that, on paper, can almost compete with the cheapest brine sources in South America.

On a cost base, the company believes it can produce lithium carbonate for $1,967/tonne after potash and clay by-product credits. Compared to the industry’s leading brines, Salar de Atacama, Chile, and Salar de Hombre Muerto, Argentina this is favourable.

Production from the Atacama averages $1,450-1,800/tonne while its Argentine counterpart, Hombre Muerto, is higher at $2,100-1,400/tonne. Lithium carbonate from mineral sources, namely spodumene, is much higher and pushing the $5,000-6,000/tonne barrier (see graph).

Western Lithium’s proposed cost includes an assumed income from sulphate of potash sales, but is lower than Argentine brine production this may come as a surprise to some.

Most of the attention is on the potential of present production of all brine sources, particularly in South America, China, Canada, and the spare plots of land around Chemetall Foote in Nevada. There is an assumption in the industry that: brine is the biggest, brine is the cheapest, and therefore brine is the best. Not necessarily so.

If a brine source has a high magnesium to lithium ratio, producers will see significantly higher costs. If the location of the source is in the middle of nowhere, logistics will hit them hard. It is estimated that over a third of the cost of lithium carbonate from Atacama is for logistics, maintenance and labour.

It is the efficiency of the operators, the favourable brine chemistry, and good evaporative conditions that keep costs in the Atacama low.

Western Lithium’s location will play a big part in its success. It was described by one of the delegates that the company had logistics “on tap”, and in comparison to the South American salars it does. Most salar projects are far from major towns and cities, have to everything from the ground up, and face fresh water issues.

The major challenges for the company lie in its process to extract lithium carbonate. It has to dispel any doubts over this brand new source.

Western Lithium is looking to take advantage of a significant increase in demand from the EV battery sector. It believes that with lithium carbonate being the lowest cost component of the lithium-ion battery, that cost difference is not the issue, but source security from a number of different projects is.

This may be difficult for many industry participants in the west to digest but this way of thinking is starting to creep into Asia’s biggest corporations.

South Korea’s biggest steel producer, POSCO, told IM that its recent entry into the lithium industry is about “security first, efficiency second.” While this may be scoffed at by many, it is an inherently Asian and typically Chinese way of thinking (IM March 2010, p.16 : POSCO & Eramet up lithium activity).

The French group Eramet the raw material and processing side of a joint-venture with Bollore  which to produce EVs was also of a similar mindset.

Both companies were in the site visit delegation.

Investors of today and customers of tomorrow will be more inclined to go with lithium from tried and tested brine and hard rock sources. Much of Western Lithium’s work will be to prove that its battery grade lithium carbonate has the quality, and, more importantly, the consistency that is critical to long term contracts and ultimate success.

Together with the increasingly active and impressive Galaxy Resources Ltd and Rincon Lithium Ltd, Western Lithium is in the industry’s leading pack of developers. Should the company surmount quality, consistency and processing challenges, other key factors will play into its hands.

Production costs for a tonne of lithium carbonate ($)

Note: these are estimated costs with no profit margin

Profile: Western Lithium Corp.

Company: Western Lithium Corp.

HQ: Vancouver, Canada

Major shareholders: Western Uranium (24%)

Primary business: Lithium carbonate (development)

Secondary business: Sulphate of potash (SOP), clay by product (both in development)

The Kings Valley project

Location: Humboldt county, Nevada, USA

Source: Hectorite

Planned production: 27,700 tpa Lithium carbonate, 115,000 tpa SOP

Start up date: 2013

Indicated resource: 48.1m. tonnes at 0.27% Li (688,000 tonnes LCE*)

Inferred resource: 42.5. tonnes at 0.27% Li (606,000 tonnes LCE)

Comment: Mineralisation is present in five pods with the primary focus, the PCD lens, close to infrastructure links

*LCE lithium carbonate equivalent