Creat Group to invest in Australian lithium carbonate project

With this, the Chinese investment firm became Galaxy Resources’ largest shareholder, holding a 19.9 percent stake.

Upon construction, the lithium carbonate facility will transport spodumene ores from a western Australian mine, the world’s second largest spodumene mine, to Zhangjiagang, a port city in eastern China’s Jiangsu Province. Upon arrival, it will be processed into battery grade lithium carbonate.

Lithium is a strategic resource required for the development of clean energy and a low carbon economy. Lithium demand is expected to enjoy at least a 15 percent annual growth in the coming ten years. Upon the project’s completion, Creat Group will become the largest lithium carbonate producer in China, and the world’s fourth largest, according to the company’s president Zheng Yuewen.

Lithium carbonate is used in lithium-ion batteries, which are seen as the most practical option for electric vehicles because they have the higher energy density required to feed electric motors.

Creat Group is a comprehensive investment firm whose business covers manufacturing, mining, finance, and real estate. Prior to its Galaxy Resources deal, it took control of Australia’s Zeehan Zinc Limited via investment. 

The new lithium carbonate facility will transport the element from Western Australia mines and process it in Zhangjiagang, a port near Shanghai, to meet booming demand for lithium-ion batteries in China and overseas.

The deal is part of a recent move by Galaxy and Beijing-based private investment firm Creat Group, which last month agreed to inject A$26 million in equity financing and commit A$130 million in debt financing for a 19.9 percent stake of Galaxy and get the company’s lithium out of the ground.

RZB Austria will take the lead in financing A$130 million, said Sun Yimin, vice-president of Creat Mining Investment Ltd, a subsidiary of Creat Group.

He added that the venture would also include a lithium concentrate facility near the world’s second largest lithium mine in Western Australia, in which Galaxy will invest about A$68 million.

Exploitation of the mine will begin later this year.

The lithium carbonate facility in China will sell 40 percent of its output to the Chinese market, and the rest will go overseas, mostly to Japan and South Korea, Sun said.

"We’ve already got orders at 220,000 tons of lithium carbonate, of which Japan’s Mitsubishi Corporation ordered 5,000 tons," he said. "The supply can’t meet the demand."

Sun said the global annual demand for lithium carbonate could triple to 300,000 tons by 2020, from the current annual demand of 110,000 tons, with a 15 percent growth every year. Electric cars will account for one third of total lithium capacity. China has a huge demand for lithium carbonate, standing at 25,000 tons a year.

Galaxy Resources (ASX: GXY) is an emerging mining and chemical company focusing on lithium and tantalum production.

Galaxy is at an advanced stage of developing its Mt Cattlin Lithium Project (hard rock spodumene) in Ravensthorpe, Western Australia.

The Project encompasses a mine and minerals plant which will produce 137,000 tpa of 6% Li2O spodumene concentrate. Galaxy intends to add value to the Mt Cattlin Project by establishing its own downstream lithium processing facilities in China. The Company is finalising plans to establish a lithium carbonate chemical facility in Jiangsu Province, producing 17,000 tpa of lithium carbonate.

By establishing a plant in China, Galaxy will benefit from easy access to established technology in the region, lower associated capital and operating costs, as well as being close to the strategic growing battery markets in Asia.

Oil scarcity leads us to electric cars which leads us to Neodymium scarcity

Peak Neodymium? A recent Reuters article quotes Jack Lifton, an independent commodities consultant and strategic metals expert, as raising an alarm about the use of rare earth materials (like Neodymium) in hybrid and electric cars like the Prius. The article raises the specter of running out of these rare earth materials dooming the possibility of adoption of electric vehicles and other technologies such as high powered wind turbines. It may not be as dire as Mr. Lifton suggests, however.

Among the many reasons for adopting electric vehicles is the looming shortage of oil. The shortage is predicted by the peak oil theory which is based on observations over decades oil field operation. The peak oil theory says that when an oil field is approximately half full it becomes harder to extract the oil and the production on that field begins to decline. Averaging the observations over all the oil fields on this planet indicates the peak of oil production either has already occurred, or will occur within a few years.

Any nonrenewable resource existing in a fixed quantity will, with continuing use of that resource, obviously face exhaustion of the resource over time. Further it should become harder to extract the resource as the supply runs low. There will be a peak of coal production, a peak of uranium production, and so on. There are lots of resources we use to run our society which exist in a fixed quantity.

Neodymium and other rare earth materials are used in a wide range of electronics gizmos. Neodymium, terbium and dysprosium are key components of an alloy used to make the high-power, lightweight magnets for lightweight powerful electric motors. Lanthanum is a major ingredient for some batteries. Production of both electric vehicles and wind turbines is expected to rise due to the move to green technology.

It’s possible to substitute other materials if there is indeed a shortage of these rare earth materials. Prabhakar Patil, CEO of battery-maker Compact Power suggests the car makers could switch to induction motors and other electronics choices that are not dependent on the rare earth materials. Worldwide demand for at least 15 rare earth materials is expected to exceed supply by 40,000 tons per year, according to a recent Reuters report.

There is a China angle to this story in that China largely controls the rare earth material industry. There are several deposits of rare earth materials around the world. However a few years ago most shut down due to China undercutting the prices. China mines more than 95 per cent of the world’s rare earth minerals, which mostly come from Inner Mongolia and are a crucial component of numerous technologies. Recently some of the mines outside China began to go back into production. There is an obvious geopolitical danger for any one country (whether or not that country is China) to have tight control over a vital resource.

The Chinese government appears to be planning to tighten export of rare earth materials. Some have seen a draft report titled "Rare Earths Industry Development Plan in 2009-2015" which would limit exports and completely ban export of dysprosium, terbium, thulium, lutetium and yttrium. Recently the United States and the European Union jointly filed a suit with the WTO over China’s restrictions on exports of precious metals, claiming their interests are hurt by the restrictive measures taken by China. On their part China says every country has the right to control the exploitation of its resources, and that’s all they are doing.