Kidman, SQM confirm lithium hydroxide potential

Joint-venture partners Australia's Kidman Resources and Chile's Sociedad Quimica y Minera de Chile (SQM) are contemplating the production of 45,254 t/yr of battery-grade lithium hydroxide from a refinery they are planning to establish at Kwinana, south of Perth.

A pre-feasibility study and updated scoping study have indicated that an integrated mine, concentrator and refinery can be developed at a capital cost of $601mn to generate life of project revenue of around $33.5bn over a period of 47 years, Kidman said.

Cash costs are estimated at $4,487/t with lithium hydroxide prices estimated at $14,074/t for the first 10 years and $15,115/t for the life of the project.

The studies are based on 315,000 t/yr of lithium concentrate grading 6.2pc lithium oxide being transported to the refinery from the Earl Grey mine, which forms part of the integrated development.

Average project value is estimated at $713 mn/yr with a post-tax net present value of $2.3bn and a payback period of three years. Development costs will be shared by Kidman and SQM on a 50:50 basis.

Kidman and SQM have formed a new company, Covalent Lithium, to manage the mine and concentrator to be built at the Earl Grey mine and the proposed refinery. An investment decision on the integrated development is expected in the first half of 2019.

"This marks an important milestone in our project to deliver a long-life vertically integrated mine-to-refinery operation in Western Australia (WA). Covalent Lithium will be a producer of premium battery-grade lithium hydroxide, which will be a competitive advantage for Kidman's marketing activities both now and into the future," managing director Martin Donohue said.

Kidman has already entered into a three-year offtake agreement with electric vehicle producer Tesla for 25pc of its share of lithium hydroxide output and is continuing negotiations with other potential partners for the remaining 75pc of its share.

Kidman and SQM are seeking an exemption from the WA mines minister from their obligations to fulfil minimum tenement expenditure at the Earl Grey mining site. If this exemption is not granted, it could delay the timing of the project's development, Kidman said.

It is estimated that the WA government will receive mining royalties of around A$1.7bn ($1.2bn) over the life of the integrated mining and refinery project.