Savannah Resources Plc (LON:SAV) Chief Executive Officer David Archer and FinnCap Research Director Martin Potts caught up with DirectorsTalk for an exclusive interview to discuss the influences on lithium demand, response from the mining industry, key features in a lithium miner and how technological developments are influencing the battery sector
Q1: There seems a lot of activity in the lithium space at the moment, I’d like to talk to you both about what constitutes a good lithium project. If I can start with you David, how do you see the influences on demand for lithium?
A1: Well, I think actually it’s a very seminal time in the sector because I think there are a series of influences, political, social and business really driving things forward.
I suppose politically, we’re seeing governments, the French and the UK governments, that are mandating higher usage of electric vehicles and restricting the use of vehicles with internal combustion engines. People just don’t want noxious vehicles on the road so there’s that very social need influencing and finally, there’s really a business impetus as well because both operating and acquisition costs of electric vehicles are actually reducing and they’ll be a cutover where ultimately, they’ll be less expensive than internal combustion engine vehicles.
So, I think they’re the very major influences and of course, this is all moving towards completing overall climate targets and I suppose the other major influence is that the motor vehicle companies, with their emphasise on diesel engines, have now found themselves rather flatfooted and they’re all racing to build out electric vehicles in their fleets. For example, in the United Sates, Ford announced the other day a major reworking of their vehicle fleets towards electric vehicles so lots of very very big influences that are going to drive lithium battery demand.
Q2: Martin, how is the mining industry responding to this?
A2: The mining industry is really in a state of catch-up, the growth in demand for lithium has really caught people slightly on the back foot, lithium has become a very niche chemical mined in 3 or 4 mines in the world and used away from the public eye really in lubricants, chemicals, things like that, some medical applications. Now, all of a sudden, we’ve got a mass market use for this stuff and people have started looking around and saying ‘ok, where do we find it?’.
Most of the world’s lithium, so far, has come out of brines which are below the Atacama Desert in South America which are very low-grade but they take advantage of the weather in the Atacama, it’s a very very dry desert indeed and over a period of a couple of years, they can concentrate up the lithium grade and then process it. That’s all well and good, these things take a long time though to commission so there’s a sort of lag between discovering a new brine deposit and actually starting to contribute lithium to the market.
So, there’s a big gap there and that’s really where the emphasis is at the moment, there’s various hard rock minerals that contain lithium, what’s not well understood by the market though is what constitutes a good lithium project or what constitutes a less attractive one. The way to really work this one out is to have a look at where the Chinese money is being spent and it’s nearly all going into one mineral, that mineral is called spodumene, unsurprisingly it is the one that has the greatest lithium content out of all the lithium minerals.
So, this one, there’s several mines being built in Australia, there’s projects being looked for elsewhere including Savannah Resources’ one, this is where the clever money is, the other less-clever money is looking at all the other lithium minerals which are frankly are lower quality and would be more expensive to produce.
Q3: What are the key features then that you would look for in a lithium miner?
A3: Even the cleanest spodumene contains less than 4% lithium so access to infrastructure of the shipping, access to power, all these things are extremely important, rather more so than if it was an iron deposit, you’ve got 60-70% iron in the ore minerals, if it’s copper you’ve got 30 something percent.
As I say, less than 4% lithium in the highest quality, in the best mineral, means that you’re going to be shipping an awful lot of rock so infrastructure is key, power, all the other infrastructure things.
Access to a decent shipping port because this stuff is most likely going to be processed in China and a friendly investment environment, you don’t want somebody’s African resource nationalisation issues. Also, frankly, something easy to mine because nobody has really mined these things before, what you can find is that some lithium projects are in good locations, you don’t have to go to remote areas to mine these things. I suppose the last thing is that you actually need quantity, it’s not really worth going for 1 million tonnes or 2 million tonnes of ore, you want at least 10, 20, 30 million tonnes for a decent size project, the demand is certainly there.
Q4: David, how are technological developments influencing the battery sector?
A4: I think there’s continuing innovation in the sector and it’s really driving battery technologies to the point where getting increased efficiencies.
For example, just the other day Toshiba Corporation, which really is very much an industry leader in the lithium battery space, announced an innovation in anode in lithium batteries which provides increased energy density and allows a much more rapid charging of batteries. With this sort of technology, for example, you can get something like 320 kilometres of range for a 6-minute charge so those sorts of innovations are really going to improve the utility of lithium-ion batteries and, of course, cost will continue to be driven down and there will be a virtuous cycle that’s introduced into this.
So, it provides a very positive overall framework for companies like Savannah Resources, really looking forward to being able to deliver lithium into international markets.