In our previous report Commodities, costs and the consequences of geopolitical impacts, Mark Chesher, Executive Leader Business Development, and Rob Chesher, Technical Manager, Business Development of AMC Consultants (AMC), posited how modern mining must adapt to the fallout of the invasion of Ukraine. Soaring prices of several metals including copper and nickel, have seen commodity markets in a tailspin, while the world contends with a short-term deficit in copper and nickel supplies.
Meanwhile, a continuing shortfall in exploration for new deposits in other regions of the world does nothing to alleviate the impact of such geopolitical upheaval and is, worryingly, “widening the supply and demand gap, not narrowing it,” according to Rob Chesher. Copper mine production is not keeping pace with current increases in demand, and with “new” demand created by the EV revolution increasing, the market appears set for a substantial deficit, exceeding what has been observed over the last five years or so.
What then is the impact on the demand for battery materials, primarily for use in electric vehicles (EVs), which are seeing production scaling up massively in order to meet ambitious horizons established by automakers and various national governments?
The short-term prognosis is not positive, says Rob Chesher. “The copper stockpile situation looks set to worsen and reversing this trend will require a significant increase in spending on exploration, project studies, and new mine development. Other commodities are in a similar situation,” he says. “Improved recycling rates for copper are likely to assist in the longer-term, but the immediate need is unlikely to be met by scrap recovery due to the long lifecycle of most copper-intensive products.”
“The vehicle battery market is just getting started. There was initially a lot of pressure on the major car manufacturers to phase out internal combustion engines (ICEs) by a certain date. But regardless of the desired outcome, changes require significant new investment in capacity, and it appears that several companies just don’t believe it’s possible to achieve those targets. They’re concerned that they’re going to commit themselves to an objective that just can’t be met,” says Mark Chesher, who also highlights the role technical advancements in batteries will have on meeting this demand. “As this push for ICE phase-out gains momentum, we will see lighter, more efficient and chemically stable batteries developed relatively quickly. It is likely that these newer batteries may need different metals. So I think we’ll see substitution into the future as this situation develops.”
A great example of that, says Rob Chesher, is cobalt. While technically viable to use, it comes with some baggage as a material “significantly tainted”, in its association with non-ethical harvesting in African mines. But cobalt, he says, is “eminently substitutable”. Manufacturers, he says, are already finding ways to replace the alloys that require cobalt, rather than having to prove that raw materials (such as cobalt) required for a technically preferred battery configuration have been ethically sourced. “People have decided to look at other systems and are constantly looking for alternative possibilities. But some parts of the system are difficult to substitute. Regardless of the materials used in manufacturing, the batteries need to be hooked up to the system – and for now that means copper and nickel.”
The usage of copper in EVs can be up to four times more than in conventional ICE cars, says Rob Chesher. “It’s everywhere: it’s in the charging station; it’s in the car’s power system wiring and in the electronic control systems. In battery construction, regardless of the material of construction of the electrodes, there is a substrate that supports and connects the electrode. And the substrate is almost always nickel. Even if the electrode is a nickel alloy, or if it has cobalt or manganese in it, the substrate that it sits on is usually a piece of nickel. So, nickel is a big winner (with copper) when it comes to adding up how much metal it takes to build an EV.”
Australia leads the high-grade lithium market
The lithium-based battery system has got substantial traction in the marketplace, currently. While it might be possible to build a battery that doesn’t require lithium, according to Rob Chesher, “I don’t think that’s happening anytime soon. But the good news for lithium is it responds well to conventional mining and processing techniques, and there’s plenty of it around for recovery.”
Crucially, in mining terms, lithium is also not difficult to locate. Rather, it’s more a matter of “who’s got the best lithium?” says Rob Chesher. “And, at the moment, Australia is one of the leaders and has two advantages: it commenced mining approvals quickly – so the Australian mines are already in place; and it has substantial deposits of spodumene, one of the highest-grade minerals containing the lithium ion. So, the Australians are winning the race for now, but they’re not in it on their own. There’s a lot of lithium available in primary, hard rock deposits and in secondary salars – underground lakes containing various dissolved salts including lithium, to be found in the world and the market will become increasingly competitive as more players enter the race.”
Conversely, Australia does not currently boast battery manufacturing on any reasonable scale. While plans for construction of an AUD$3 billion (£1.6bn) 18 GWh lithium-ion battery plant have seen feasibility studies approved in the coastal city of Townsville, there are no live giga factories in Australia, which is still focused on building the first two stages of lithium production (spodumene concentrators and lithium carbonate plants).
“The mentality of mining companies in Australia was to make money quickly,” says Rob Chesher. “It was a case of direct ship ore (DSO) [Direct Shipping Ore – mined and transported without upgrading] for a long time, which gives virtually the whole value chain away. Then it became a case of making a 6% Li2O concentrate in Australia prior to shipment overseas. Unfortunately, Australia is a late comer to downstream processing, but we’re trying to encourage our government to change this approach. Lithium upgrading and eventual battery manufacture are tailor-made for Western Australia; for instance in the Kwinana and Bunbury areas,” he says.
“An exciting recent development is the construction by Albemarle of a lithium hydroxide plant at Kemerton just north of Bunbury in WA. The plant is designed to produce 50,000 tpa (tonnes per annum) LiOH however management is already talking about x2 and x4 expansions. Albemarle expects first production in June 2022. Everything needed for EV battery manufacture is close by these plants, including Australia’s first nickel sulphate plant at BHP’s Nickel West refinery in Kwinana.” This is in stark contrast to the UK, where several new players are making bids to get manufacturing plants off the ground.
Experienced help for newcomers
While worldwide copper mine exploration and production has stagnated, and demand has increased in the meantime, AMC’s insight and expertise in this area can certainly help, says Mark Chesher. “We find prospects and help turn them into successful projects. That whole mine production chain is our bread and butter. That’s what we do for a living. The market has been in deficit five or six years in a row, but there is no doubt that the market is now attracting new players. Our corporate teams assist with valuations and review of existing projects and documentation. There has always been a reticence around people coming into an industry that they’re not used to, and unfortunately, some have been burned in the past when they have come in and don’t understand how to invest in mining. That is where we can help astute investors.”
AMC not only conduct feasibility studies for new projects but remains involved through the whole life of projects. “Once construction starts, we often play an owner’s representative role for companies across all facets of a project, monitoring the performance of project construction contractors and ensuring adherence to scope and budget. We’ve got multiple specialists throughout the organisation that can help investors understand what’s going on when they come into the industry and help them to review studies that have been done to assess the quality of the work,” says Mark Chesher.
That insight helps investors to identify areas where AMC can improve the outcomes for a company, whether they be financial, or even environmental outcomes. “We can identify a company’s objectives, and make sure that projects are meeting those objectives. It’s all the way through this value chain, right from someone coming to us with a database of drill hole data, through to turning the switch and the plant starting to produce,” says Mark Chesher.
“We don’t get into design of plants, or the engineering side. We stick to our core competency of resource development: that’s geology, geotech, mine planning, metallurgy and process flow sheet development. We are happy to recommend and partner with experts in these areas. We help people to develop and coordinate ideas. There might be three or four different consulting companies contributing to a project from different angles, so an investor gets multiple sets of ideas from quality professionals across the industry. Helping to merge these into the viable plan is the goal.”
For Rob Chesher, the most exciting recent development for AMC in this space is the ability “to incorporate Predictive GeometallurgyTM into our whole enterprise optimisation. We start from undisturbed ground and then design the drilling programme as the basis to develop geometallurgical modelling of the resource in the ground. Then, using that very specific data that goes block by block for the whole deposit, we can apply our optimisation routines. This way, we have the ability to model all the way from in-the-ground, through mining, through to processing, and to develop and test optimised mining and processing solutions.”
A holistic view of mining
This attention to detail can make a difference to investors of “hundreds of millions of dollars” through “avoiding fundamental mistakes about how you set the mine up in the first place. It’s just amazing how many times our industry doesn’t get that balancing act correct. Plants are built at the wrong size, so you can have a quarter of a plant idling because it’s too big or chronically undersized and unable to deliver the promised performance. Our ability to optimise the capital spend creates significant value for the project stakeholders,” says Rob Chesher.
Another benefit of optimisation planning is that operators can accurately measure and manage their carbon footprint. “We can incorporate various algorithms across the 3D model that estimates how much carbon is produced for a kilogram of metal produced, and this too can be optimised.” says Mark Chesher. This also applies to estimates of water usage, power consumption, or any other factor that can be defined by fields in the model.
“That enables operators to then choose the objectives that they would like to achieve as part of a project. Where water or power are a problem, you can run algorithms on water or power usage. You’re moving outside of just mining and processing to looking at a project in a holistic way to achieve the full spectrum of objectives set by the board at the start of the project.” With the world facing a plethora of challenges in sourcing battery materials and beset by geopolitical pressures and an increasingly fragile supply chain, having a holistic view of the whole mining value chain – and expertise in the core competencies of resource development – is proving invaluable for AMC’s customers.