Lithium Australia (ASX: LIT) (OTCPK: LMMFF) shares are up 66%. LIT shares rose on the announcement of a deal with Mineral Resources, oft known as MinRes. The basic idea is that Lithium Australia has some gadgetry which will increase the yield from standard hard rock lithium mining activities. In more detail, there’s always lithium left over in what is rejected, in the gangue or tailings. So, devise a process to extract those last parts, why not? You’ve already paid all the costs of mining and crushing the rock, why not squeeze the last parts of what’s valuable out of having already spent all that money?
There’s absolutely no doubt at all that this is possible. We can process absolutely anything out of absolutely anything - what matters is the cost we have to carry while doing so. The higher the market price of whatever it is we are extracting then the more we can extract from our original ore. Think of it this way - we happily mine rock that’s 1 gramme per tonne, that’s one part per million, for the gold content. If lithium were the same price as gold then we’d be happy doing the same. On the other hand there are mountains that are 30% iron (that’s 300,000 ppm) and we just don’t bother because iron’s of such little value that we’d lose money doing that.
Lithium Australia share price from Google Finance
The announcement is here: “Lithium Australia signs joint development agreement with leading ASX-listed mining company Mineral Resources (ASX:MIN) (“MinRes”) related to disruptive lithium extraction technology LieNA®.” MinRes funds the pilot plant, then owns 50% of the JV. The JV, on success, then markets the technology to other spodumene producers. The nett effect - assuming success of course - is that the bulk of the lithium that is currently thrown away (in fines, or in tailings) as being too difficult to extract now becomes possible to extract. That then raises the productivity and efficiency of every spodumene mine that utilises the tech. And then the JV will get an 8% royalty on all the lithium produced from the tech.
Here’s the important thing here. There is absolutely no doubt at all that this is possible. Possible in the technical sense that is, we can indeed extract anything from anything. It’s whether this is cost effective that matters. And that, in turn, will depend upon what the lithium price is. Our own estimation is that if lithium returns to long term pricing - ie, much lower than today - then this tech may or may not remain economic. But whether that estimation is true or not - well, we’re all going to have to wait until we see the numbers from that pilot plant. To give a very rough guide, if it costs $2,000 per tonne Li recovered from fines then this is something that only works at current lithium prices. If it’s $200 then it’s a long term goer. We’ll just have to wait and see.