Australia has a “once in a life-time” narrow window of opportunity to carve out a decent slice of the new-era battery pie and evolve from a mere “dig and grow” country to a globally competitive downstream battery manufacturer, according to Western Australia’s Chief Scientist Professor Peter Klinken.
Regional Development Australia (RDA) released a report in May establishing a case for a WA-based “Lithium Valley”, which would involve processing the state’s energy metals and increasing Australia’s exposure to the A$213 billion battery chain.
At the moment, Australia is primarily a “dig and grow” economy – focused on shipping its ore overseas for further processing, Prof Klinken told Small Caps .
The “dig and grow” resources industry has certainly bolstered Australia’s economy throughout the years, but the RDA and other industry stakeholders have begun a push to secure a substantial portion of the downstream value chain which is projected to soar to around A$2 trillion by 2025.
Australia currently captures only 0.5% of the lithium value chain. RDA estimates that WA currently recovers a little more than A$1 billion of that A$213 billion battery chain from mining the metals. However, the economic value of goods increases “sharply” the further up the value chain they go.
By boosting secondary processing capacity alone, WA could capture up to 27% of the chain’s trillion-dollar value, or A$57 billion, the RDA estimates. This number would be even larger if entire batteries were manufactured onshore.
A Lithium Valley would have numerous positive flow-on effects for Australia’s economy including jobs, prosperity and strategic advantages as a trading partner.
However, unless the Federal Government comes to the party, Australia’s portion will remain a meagre 0.5%, despite the fact it possesses all the raw materials, capability and experience to carve a bigger slice of the pie.
RDA has likened Australia’s current opportunity in the surging battery chain to the rise of Silicon Valley in the US, which now has an estimated value of US$2.8 trillion.
The lithium value chain is set to grow tenfold within the coming decade. Commenting on the narrow window of opportunity to partake in this new technology era, Prof Klinken said it would be “bordering on tragic” not to take advantage.
“We’re missing out on something like 99.5% of the value of batteries. We have all the elements and we only get 0.5% of the value out of all of this.”
“That doesn’t seem to make a lot of economic sense to me,” he said.
He cautioned that there were many more countries in the world that want to play in this rapidly surging space.
“We’ve got a window, and we have to make sure we act and grasp the opportunities before the window closes,” he explained.
“Otherwise, in my view, future generations will look back on this and go: ‘how did you guys let such an opportunity slip when you had so many of the cards necessary to go down this pathway?’”
Powerless in an emerging battery world
Despite calls from the Association of Mining and Exploration Companies (AMEC), RDA, major universities and other prominent stakeholders including WA Governor and former Deputy Prime Minister of Australia Kim Beazley, the Australian Federal Government has had little to say on the opportunity.
“I haven’t heard a lot from Federal Government. Australia, and WA, in particular, is the world’s largest producer of lithium, and I haven’t seen a strong statement from the Commonwealth in this area,” Prof Klinken noted.
“We can’t take these remarkable resources for granted. We need some sort of a strategic plan on how we are going to manage these incredibly valuable resources,” Prof Klinken added.
Australia has all the raw materials necessary to create lithium-ion batteries. “A lot of other countries and jurisdictions in general, like the EU and the US have a list of critical elements – the elements that are absolutely essential for their future.”
“And, I don’t think Australia has such a list,” he said.
According to Lithium Australia’s (ASX: LIT) managing director Adrian Griffin, the Federal Government has gone beyond mere inaction to “jeopardising” the opportunity, with the research and development (R&D) rebate ceiling that was announced in its latest budget.
Mr Griffin told Small Caps that the R&D cap would “destroy any hope” of establishing a locally based Lithium Valley, with more incentives available to battery technology developers in other regions including Europe.
“Australia’s lithium industry risks being consigned to international backwaters if such an opportunity to become a global front-runner in the emerging battery technology race is allowed to slip,” Mr Griffin added.
R&D rebate cap
Until this year, the Federal Government’s R&D rebate did not have a ceiling. However, the 2018 Federal budget has now stunted the R&D rebate at A$4 million for companies that generate less than A$20 million a year in revenue.
Mr Griffin argued the capped rebate made Australia uncompetitive compared to other jurisdictions that offer far more R&D incentives.
“Clearly, if we are to pursue the Lithium Valley concept with passion, as we all wish to, the Federal Government needs to recognise the innovative status of the industry, as it does with biotech, and retain an R&D environment competitive with other jurisdictions and this developing industry,” Mr Griffin said.
Lithium valley
Signs of a fledgling Lithium Valley are emerging with lithium processing plants under construction at two Kwinana sites.
Tianqi Lithium is constructing a two-stage lithium hydroxide processing plant in Kwinana, which is expected to cost the company A$700 million all up.
Additionally, Kidman Resources (ASX: KDR) and joint venture partner Chilean-based SQM have proposed a lithium carbonate or lithium hydroxide refinery in Kwinana.
However, RDA points out these plants were based on business decisions made months-to-years ago.
Should Lithium Valley eventuate, the anode, cathode, chemical and battery manufacturing hub would enable Australia to transition to a “new energy” economy, drawing on all the available raw materials and experience the country has to hand.
However capital investment in these downstream refining and battery manufacturing facilities of A$34.1 billion is essential.
It’s not all about lithium
The burgeoning new energy era isn’t just about lithium.
Other critical metals in this emerging energy boom include nickel, manganese, graphite, cobalt, vanadium, tin, tantalum, manganese, and rare earths.
Other metals used in battery technology often overlooked. Additionally, with numerous innovative battery formulas under development, novel demand may emerge for other plentiful WA minerals including titanium dioxide, which disruptive technology developer UltraCharge (ASX: UTR) has harnessed to generate a cost-effective alternate material for the lithium-ion battery anode.
LIVE Vanadium Price,