Alliance Mineral signs MoU to access downstream lithium hydroxide industry

Alliance Mineral and Jiangxi Special Electric Motor have signed a non-binding MoU to jointly produce and sell battery-grade lithium hydroxide.

Australian lithium spodumene concentrate producer Alliance Mineral and lithium and electric vehicle producer Jiangxi Special Electric Motor signed a non-binding memorandum of understanding on Friday April 26 for a 50:50 joint venture to produce and sell battery-grade lithium hydroxide.

Jiangxi’s hydroxide converter will process 20% of Alliance Mineral’s spodumene concentrate production from Bald Hill in 2019 and 2020. Once the Australian mine is fully commissioned, it will process 100,000 tonnes per year of lithium spodumene, equivalent to 15,000 tpy of lithium hydroxide.

Although the period over which the hydroxide plant will ramp up was not specified, Jiangxi’s hydroxide circuit commissioning was set to start in September 2019.

Alliance expects combined production from the Bald Hill mine in Western Australia of 180,000 tpy of min 6% lithium spodumene concentrate from stages 1 and 2 in 2019, rising to 240,000 tpy in 2020.

In recent years, various new-energy vehicle and battery makers have sought to secure lithium supplies through similar joint ventures or offtake agreements with lithium producers, in order to secure this critical raw material or to gain access to a supply of lithium.

Most recently, carmaker Volkswagen and lithium producer Ganfeng signed an MoU for lithium supply.

The Alliance-Jiangxi joint venture will work to develop long-term downstream partnerships with third parties for battery-grade lithium hydroxide or carbonate, Alliance said in an announcement made on April 29.

Under this joint venture, Alliance will supply the spodumene concentrate from its Bald Hill mine, and both companies will share equally the margin from sales of lithium hydroxide, after recovering Alliance’s spodumene production costs and Jiangxi’s conversion costs.

Alliance expects significant improvement in the profit margin per tonne of spodumene concentrate, when it is processed under this joint venture and sold as lithium hydroxide, instead of being sold as spodumene concentrate - a raw material.

"The hydroxide joint venture provides for a rapid, low-risk, low-cost entry into downstream production and sales of battery-grade lithium products," Mark Calderwood, managing director of Alliance Mineral, said.

"We see market demand for lithium hydroxide increasing. Aside from traditional industrial uses, a number of rechargeable battery manufacturers are now using lithium hydroxide in their products, and this joint venture will enable Alliance to participate in this market," he added.

"Over the next two months, Alliance and Jiangxi will work toward completion of the joint venture documentation, and simultaneously continue talks with potential long-term downstream customers which may provide additional longer-term certainty around demand and pricing," he said.

Both companies expect to execute a formal joint venture agreement by June 30 this year.

The existing offtake arrangement that Alliance has with Jiangxi Bao Lithium will remain in place, and the Australian producer will continue negotiations with third parties for unallocated spodumene concentrate of as much as 80,000 tpy in 2019 and 90,000 tpy in 2020.

Martim Facada

martim.facada@fastmarkets.com

Published

Martim Facada

May 01, 2019

10:25 GMT

London