The world's largest hard rock lithium mine will "more than double" its annual production of lithium from late 2018 in a move analysts say will threaten the existence of a wave of Australian junior players.
The owners of the Greenbushes lithium mine in Western Australia's south-west revealed on Tuesday they would move to more than double the amount of the chemical-grade lithium concentrate it produces.
The expansion is designed to provide supply to a $400 million lithium processing plant in Kwinana, south of Perth, to be built by China's Tianqi Lithium.
Tianqi is the world's largest producer of the lithium chemicals ultimately used in lithium batteries, including lithium hydroxide which the Kwinana plant is expected to produce 24,000 tonnes of each year from late 2018. Construction is set to start in October 2016.
Tianqi is the 51 per cent controlling shareholder of Talison, the owner of Greenbushes, with the remaining 49 per cent held by US-based Albemarle Corporation.
Greenbushes general manager Pat Scallan told The Australian Financial Review the mine would be expanded to meet the growth plans of both owners.
"We are completing our engineering studies to more than double our chemical grade capacity," he said.
"We hope to finish the studies in early 2017 and be in production at about the same time as the Kwinana plant."
The Greenbushes lithium mine currently produces 65,000 tonne of lithium carbonate equivalent a year, which represented more than a third of global demand for lithium in 2015.
The mine has enough lithium ore to expand easily but its chemical grade plant, which produces the concentrate, is understood to be operating at capacity.
Patersons Securities analyst Rob Brierley said the expansion would likely see the mine produce 130,000 tonnes of lithium carbonate equivalent a year once the expansion was complete.
The plant will only use about half that amount and Greenbushes' Mr Scallan said the additional product would "be able to either cater for some further expansions or for to our other owner [Albemarle] to build a plant or for toll treatment".
In August, Albemarle said it would acquire lithium hydroxide facilities in China, foreshadowing a need for extra supply.
"Undoubtedly this will increase supply of the spodumene concentrate and reduce the need for customers to buy marginal production. If this production does come on, it is two years down the track so some of the juniors may struggle to get the necessary funding and agreements for their projects," Patersons' Mr Brierley said.
However Ken Brinsden, chief executive of lithium developer Pilbara Minerals, said it was "good news".
"It reinforces how important hard rock sources of supply are and how much the Chinese favour that technological path," he says.
"And it is interesting they are choosing to do it ex-China because it shows how keen the market is to establish external sources of supply to the Chinese logistics chain. Really, people are underestimating how much conversion capacity is being developed in China and given that, we think there is room for everyone, in particular those that can generate a low cost of production."
Western Australia's State Development Minister Bill Marmion said the plant development introduced "value-adding secondary processing into the local supply chain" which was "very positive news for growing the state's economy".
It came amid a flurry of news in the West Australian lithium sector with Kidman Resources announcing a lithium discovery at its Earl Grey project, Pilbara completing a final metallurgical testwork program for its Pilgangoora project and Galaxy Resources revealing first exports from its Mount Cattlin project had been delayed until December and the total capital cost had jumped to $22.4 million from $15 million, with a number of directors offering to temporarily foot part of the bill.
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