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Lithium Universe moves to close “lithium conversion gap”

Lithium Universe’s Apollo field area. Credit: File

Lithium Universe (ASX: LU7) is positioning itself to fill what it believes will be a 700,000-tonne per year lithium carbonate gap in the mammoth North American electric vehicle (EV) market by establishing its own refinery in Canada.

With experts and analysts all around the world predicting a vibrant third wave for the lithium market, the company’s plan is to sit at the centre of the cyclone.

Management is planning to replicate the Jiangsu lithium carbonate plant refinery in China with its proposed 16,000 tonnes per annum facility at Bécancour in Quebec – where it believes it can take advantage of an expected increase in lithium battery plant activity on North America’s east coast.

In North America, the United States’ Inflation Reduction Act (IRA) has been designed to stimulate a lithium supply chain free of Chinese input. It requires EV companies to demonstrate that car batteries do not contain material that has come into contact with Foreign Entities of Concern (FEOC).

It means companies deemed to have procured products from an FEOC will be disqualified from being eligible for financial incentives and tax credits under US laws. The US Department of Energy’s proposed guidance on FEOC mainly covers four countries – the People’s Republic of China (PRC), the Russian Federation, the Democratic People’s Republic of North Korea and the Islamic Republic of Iran.

The fact that China pumps out about 95 per cent of the globe’s lithium conversion – taking mined lithium oxide and converting it to battery-grade lithium carbonate or lithium hydroxide chemicals – makes for a significant market opportunity for companies operating in US free trade agreement countries such as Australia.

But while China’s offerings are going out of favour, the giant US EV market remains hungry for lithium chemical product.

Major battery manufacturers are planning to deploy an estimated 1000 giga watts (GW) of battery capacity into the North American market by 2028. That will require about 800,000 tonnes per year of lithium chemicals.

North America is only believed to be capable of producing about 100,000 tonnes of lithium carbonate per year and there are currently no lithium converters on the continent.

So, the 700,000-tonne per year “lithium conversion gap” is where Lithium Universe is focussing its efforts. The company’s proposed facility – to be known as the Québec Lithium Processing Hub (QLPH) – is being designed to have the capacity for three trains totalling 48,000 tonnes per year.

Essentially, it is planning a toll service for Canadian spodumene miners, taking their feedstock and converting it to lithium carbonate before selling it back to them. And those miners have plenty of choice when it comes to battery manufacturers willing to buy the lithium chemicals, with 25 new manufacturing facilities proposed to be in operation by the end of 2028 on North America’s eastern seaboard.

Lithium Universe’s proposed site at Bécancour is just 2.5km from the port, which will serve as a convenient import location for spodumene material from external locations near the Atlantic Ocean such as Brazil, Africa, or possibly further abroad to Australia.

The company has contracted engineering firm Hatch to undertake a comprehensive study for the refinery’s design.

Quebec’s James Bay region shot to fame last year when several companies got onto some serious spodumene during drilling, resulting in eyebrow-raising mineral resource estimates totalling about 500 million tonnes at more than 1 per cent lithium oxide.

Big players in the area include Patriot Battery Metals and its Corvette deposit boasting 109 million tonnes at 1.42 per cent lithium oxide, Allkem with its James Bay deposit featuring 110 million tonnes grading 1.3 per cent and Sayona Mining, which has 70 million tonnes at 1.15 per cent at its Moblan operation. Further south, Sayona has its Abitibi Lithium Hub that contains 119 million tonnes of spodumene grading 1.1 per cent lithium oxide.

A handful of more modest resources also exist in the area.

Winsome Resources (ASX: WR1) has 59 million tonnes at 1.12 per cent lithium oxide at its Adina deposit, Critical Elements has its Rose deposit that has 34 million tonnes at 0.9 per cent, Cygnus Metals has the Pontax deposit featuring 10 million tonnes at 1.04 per cent and Namaska Lithium has its Whabouchi play boasting 55 million tonnes at 1.4 per cent.

Lithium Universe has its own ground in James Bay at its 240-square-kilometre Apollo project, which it says encompasses a fault shear corridor feature that extends to Winsome’s Adina deposit to the east. The company is now planning to drill at Apollo after it wrapped up a field program late last year and results of soil sampling and mapping are pending.

The price of battery-grade lithium carbonate in China has risen 13 per cent this year to hit AU$23,519 per tonne in a not-so-subtle upturn in the price chart. That chart represents a rollercoaster ride from the lows of late 2020 at about $8700 per tonne to the dizzying highs seen early last year at more than $125,000 a tonne.

Since those highs, the price of the metal and its derivatives have taken a beating, leading to several big lithium players – including Arcaduim Lithium, Albermarle and SQM – shelving expansion projects and waiting for the charts to again reveal a price hike.

The recent 13 per cent up-turn in lithium carbonate price is certainly eye-catching on the chart. Could it be the beginning of a longer-term price improvement?

Benchmark Source says it expects lithium demand to increase by 32 per cent this year compared to 2023 and forecasts the market to be balanced until 2029.

Towards the end of the past lithium boom, companies realised that finding lithium was great. But the serious money was in the downstream processing of lithium concentrate into battery-grade lithium chemicals.

So, it is little wonder Lithium Universe has recognised the business opportunity in North America and positioned its refinery to service the biggest EV manufacturing hub in the western world.

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