(Chart via Benchmark Mineral Intelligence. Click to enlarge.)
A lithium supply gap? There is demand growth, but it is stifled by limited investments in mines and converters.
A key theme for mining investors in 2021 revolves around the acceleration in demand for electric vehicles (EVs) and battery
storage related to international regulations to combat climate change. This demand push is set against a backdrop of limited investments in mines and converters creating the conditions for an imminent supply gap. Asia’s dominance in the production of battery-quality lithium will lessen as the supply chains of battery and car makers become increasingly regional.
Benchmark Minerals noted that there were three battery cell “megafactories” in Q1 2015 with a total capacity of 57 gigawatt hours (GWh). As of January 2021, there are 186 megafactories in the pipeline with a capacity in excess of 3,100 GWh.
One company is working to become an integrated producer of sustainable lithium to empower the EV Revolution and it will also be one of the first lithium hydroxide (“LiOHrx”) producers outside of China,
Rock Tech Lithium Inc. (TSX-V: RCK, OTCPK: RCKTF, Forum).
The Company has planned two lithium projects in Ontario: a mining and concentration operation (the Georgia Lake lithium project) and a lithium sulphate production facility in Thunder Bay. With respect to the planned downstream operations, the Company signed a
Letter of Intent with
Avalon Advanced Materials Inc. (TSX: AVL) to assess the technical and economic feasibility of a jointly operated lithium sulphate processing facility. Rock Tech plans to refine the lithium sulphate product into battery grade lithium hydroxide in Europe, the current epicenter of the EV Revolution.
Rock Tech recently closed a trio of non-brokered private placements for gross proceeds of
$16.5 million. The proceeds from these private placements will allow the Company to accelerate the technical studies on both its Georgia Lake lithium project and its lithium hydroxide converter towards feasibility level.
History has shown that the closer a lithium project is to production, the higher its share price and Rock Tech is targeting LiOH production in 2023.
With no debt, Rock Tech is in a unique position to succeed. Stockhouse Editorial met up with the Company’s Chief Executive Officer, Simon Bodensteiner, to learn more about how Rock Tech will be a first mover for its LiOH supply for Europe.
SH: Thank you for joining us. To begin, let’s look at the global state of lithium demand. EVs are at a tipping point in Europe and with the Biden Administration’s plans for the US, the same could be said for North America. What are your thoughts and plans on meeting this supply?
While I have been the CEO of Rock Tech for almost one year, my involvement in the sector goes back much further. I find it is sometimes easy to forget that with all the developments and attention the space is now getting, we are still only at the beginning of this industrial revolution. The growth rate of EV adoption has been impressive but remains a relatively small portion of the overall auto market, growing from approximately 2.5% in 2019 to just over 4% in 2020. The EV market in China was the first to experience drastic growth back in 2015 and 2016; however, Europe is now the driving force behind EV growth, passing China in 2020 in terms of EV sales.
With the exception of Tesla, of course, the United States EV market has been a non-factor up until now.
The new administration has already re-affirmed its commitment to combating climate change by rejoining the Paris Agreement and has rolled out plans to drastically increase the rate of EV adoption in the country. The US is the second largest auto market in the world so it goes without saying that a meaningful increase in EV adoption there will have ripple effects throughout the entire global supply chain.
The lithium production market remains small, with only a handful of producers, suggesting it will be a challenge to bring supply online in the time required by the battery manufacturers. In the past, hard rock lithium companies would produce a concentrate product containing approximately 6% lithium oxide and ship it to China for purification into battery-quality products. As we see now with the EU pursuing a goal of “Strategic Autonomy” and discussions in the US and elsewhere regarding the criticality of lithium and other battery metals, those days are over. It is important not only to have security of supply over the raw materials but also to possess the know-how and expertise with respect to the production of value-added lithium products, such as lithium hydroxide.
The lithium hydroxide converter we have planned for Europe will benefit from Rock Tech’s secure raw material supply in Canada for a majority of its feedstock. We are also continuing to discuss strategic partnerships with emerging and current lithium producers whereby we can secure additional feedstock for our operations.
SH: Your technology is also a crucial part of your operations, what sets Rock Tech Lithium apart in this sense and what it about your technology that gives your Company an edge?
Technology and processing know-how will be a critical source of competitive advantage as the lithium market grows. A common misconception when it comes to lithium is that there is an abundant supply. If one were to look up the estimated lithium resources worldwide and not give any consideration to the processing challenges, it is understandable how someone could arrive at that conclusion. That being said, it is crucial to remember that not all resources will become reserves, not all reserves will become production and not all production will be battery-quality. In fact, a relatively small proportion will be suitable for use in batteries.
To help tackle this challenge, we partnered with the Technische Universität Bergakademie Freiberg, commonly known outside Germany as the Freiberg University of Mining and Technology, the oldest university of mining and metallurgy in the world. Together, we have developed a proprietary and innovative method of producing battery-quality lithium hydroxide from lithium sulphate, the Nitrate Process. In comparison to the industry status quo, we expect our process to require far less energy and convert waste-streams to by-products which are expected to generate higher value revenue streams. This will provide us with lower operating costs while reducing our CO
2 emissions.
SH: Let’s look specifically at the Company’s innovative nitrate process, can you give us a rundown on how it works?
We cannot disclose too much information on the technology since we are in the midst of a patent application process. What I can say is that the currently used process requires temperatures well below freezing during the crystallization of lithium hydroxide. Several iterations of crystallization, re-dissolving and re-crystallization are required in order to remove impurities and to obtain battery grade lithium hydroxide. This is not only a difficult process from an operational standpoint, but also requires substantial amounts of energy. Our process does not require such low temperatures and we also generate different by-products, such as gypsum and other nitrate compounds. Therefore, the expected benefit is two-fold: lower energy consumption which will reduce our unit costs, whilst the by-products will generate additional revenue streams which will likely overcompensate the slightly higher reagents cost. We are running a pilot plant campaign in the first half of the year to confirm the industrial scalability and the expected economic benefits.
SH: Can you elaborate on the economic assessment for Rock Tech Lithium, specifically where high returns are concerned?
What we set out to confirm in our recent Preliminary Economic Assessment was the positive business case with respect to pursuing a vertically-integrated lithium hydroxide operation with our Georgia Lake lithium project serving as the backbone. The PEA serves as a “base case” as it assumed a lithium hydroxide production capacity matching production from Georgia Lake and using the industry standard production process. In reality, we will be pursuing much larger production capacity which will reduce both the capital intensity and operating cost on a per tonne basis. If the piloting campaign for our Nitrate process proves successful as part of our ongoing Pre-Feasibility study and confirms our expectations on cost savings and by-product revenue streams, even higher returns can be expected.
(Rock Tech Lithium Inc. stock chart – August 2020 to January 2021. Click to enlarge.)
SH: RCK shares saw a significant spike in mid-January, rising nearly 30% over the first few weeks of the month. What do you attribute this rally toward?
The EV sector, including Tesla and other aspiring EV startups, battery makers and raw materials suppliers, started catching a tailwind towards the end of last year. Increasing EV sales in the latter half of 2020 and supportive policies in Europe and a new administration in the US combined to provide the impetus for the sector-wide increase in valuations.
With respect to Rock Tech, in particular, we have been fortunate to raise a significant sum while keeping dilution very low. Directors and touchstone shareholders own approximately 70% of the company resulting in a relatively low float. We are very grateful for the recent participation of investors from the Middle East looking to diversify away from fossil fuels in addition to UK and Silicon Valley based macro investors who share our vision and see the opportunities in the lithium market. We are now fully funded through feasibility studies and have a shareholder base that can reduce project financing constraints. In this regard, we have achieved some de-risking and our valuation reflects that.
SH: Rock Tech has internationally competitive cost structures of the lowest quintile when compared to its peers, can you explain a bit further what this means for investors?
It is a general rule-of-thumb that a vertically-integrated hard rock operation is the most cost effective source of lithium hydroxide. The additional processing steps required to convert lithium-bearing brines into lithium hydroxide erodes the cost advantage this lithium source has in the production of other lithium compounds.
Our feedstock from the Georgia Lake lithium project has low impurities, is rather homogenous and performs quite well with gravity separation and flotation, leading to good recoveries. Combining these factors inherent to the material at Georgia Lake with the expected benefits of our novel lithium hydroxide conversion process, with its lower energy consumption and valuable by-product production, we anticipate being among the lowest cost producers of lithium hydroxide generating attractive returns for investors.
SH: Can you give us an update on negotiations with your off-take partners and financing consortia?
It is our intention to finance the capital expenditures with an even split between equity, debt and subsidies. We are in discussions with a handful of localities in the European Union regarding subsidies as our lithium hydroxide converter is precisely the type of project the EU hopes to attract. We are also in discussions with a select group of banks regarding the debt component and we are confident that the equity portion can be achieved through our existing networks.
With respect to off-take, we are talking to the major electric vehicle and cathode manufacturers in Europe and will commence the product qualification process when we receive material from the pilot programs early in the second quarter.
SH: As we await more news in the coming weeks, is there anything you can share now to whet investor appetite in the meantime?
The lithium market is in the early innings yet and we see tremendous growth over the rest of this decade and beyond. We will continue to add professionals to our team with a strong track record of success in project execution. We expect positive developments on both our upstream and downstream projects in the coming months as we make further progress with environmental and operational permitting at Georgia Lake. Our pilot test programs and pre-feasibility work will also provide valuable insights into our innovative lithium hydroxide conversion process and, as mentioned previously, allow us to intensify the product qualification process with potential customers. We are also excited to further our discussions with potential strategic partners and existing producers with regards to securing additional feedstock for our converter.
Additionally, we will shortly choose a site location in Europe for our lithium hydroxide converter. On this front, we have entered into a Framework Cooperation Agreement with GP Günter Papenburg AG (“Papenburg”), a highly reputable German construction company with over 3,800 employees and €1 billion in revenues. Papenburg has granted us exclusive negotiating rights with respect to two potential sites for our plant both strategically located near chemical parks from which most of the reagents for the conversion process can be sourced. Conveniently, Tesla’s new Gigafactory in Grünheide is located 160 km away and BASF’s new cathode factory is just 130km away in Schwarzheide. Rock Tech and Papenburg will also cooperate on logistics and recycling, working towards a binding agreement whereby Papenburg will guarantee the off-take of the produced by-products in the conversion process.
SH: Can you tell us a bit about your background and what brought you to Rock Tech Lithium?
I started my career as a Mining Engineer with Rio Tinto in Australia where I worked in several open pit and underground mines in a variety of operational and technical roles. Over the years I gradually brought more and more strategic and business development experience under my belt as a consultant at The Boston Consulting Group and as Head of Metals & Mining of Deutsche Rohstoff, a German resource company. It was at that time where I met Dirk Harbecke, Chairman of Rock Tech, and started to learn more about the lithium market. When I looked at the fact that Rock Tech has a strong European shareholder base, excellent ties to political and economic decision-makers in Europe and a lithium resource in Canada it became obvious to me that an integrated business model with a mine in Canada and a converter in Europe provides a competitive advantage over most other companies in the sector. Our team is already located on both continents and I am excited to be part of it. I am very much looking forward to growing it together with our projects over the next years.
SH: What are some other management highlights you would like to share? You recently appointed Klaus J. Schmitz and Prof. Wolfgang Voigt to your Board of Directors, what do they bring to the table?
Project execution is critical for every business and particularly so in the lithium industry. Perhaps equally as important in the lithium industry is processing, as I alluded to earlier. Adding both Mr. Schmitz and Prof. Voigt to the team helps bring needed expertise in both of these areas. We expect several additions to the team in the coming weeks.
Mr. Schmitz has global operational expertise and comprehensive experience in the field of Engineering, Procurement and Construction (“EPC”) for conventional and renewable power generation and other industrial plants. He has served as the Chief Operating Officer and Deputy Chairman of the Management Board for Hitachi Power Europe and was the Executive President and Head of the Power Division for Bilfinger SE.
Prof. Voigt is a Professor Emeritus in Inorganic Chemistry who has been focused for the past twenty years on researching salt chemistry, particularly lithium chemicals. He has worldwide lithium experience including both brine and hard rock projects and combines technical knowledge of proven processes with innovative technological concepts for more efficient spodumene conversion. Prof. Voigt was instrumental in the development of our patent-pending innovative lithium hydroxide conversion process.
SH: Thank you again for taking the time to tell us about Rock Tech Lithium, anything further to add?
So much in life comes down to being in the right place at the right time. Canada has a long history of responsible mineral development and is a world leader for secure raw materials supply. Our Georgia Lake project is adjacent to a provincial highway and is less than two hours trucking time to the Port of Thunder Bay. As a result, we will avoid timely and expensive infrastructure buildouts putting us on track for near-term production. In Europe, where we plan to build our lithium hydroxide converter, the EV Revolution is front-page news every day. From the MEPs in Brussels down to local mayors in Eastern Europe, establishing Strategic Autonomy over the lithium battery supply chain is a top priority. Canada and Europe are certainly the right places to be.
The timing couldn’t be better and we are still only at the beginning of this industrial revolution. Electric cars powered by lithium batteries are the way of the future and market share and adoption rates are on a strong upward trajectory and will continue for the foreseeable future.
For more information about the Company, visit
rocktechlithium.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.