Pan Asia Li projects Thailand

Pan Asia Metals: In the right place to be a longer term lithium play

This article is a sponsored feature from Mining.com.au partner Pan Asia Metals Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.

As the world enters into an era of decarbonisation, the uses and importance of critical minerals such as lithium are becoming well-known and documented.

Those familiar with the soft, silvery-white alkali metal would be aware that the major lithium-producing regions in the world include Australia, China, and South America.

As emerging lithium play Pan Asia Metals (ASX:PAM) can attest, Southeast Asia may not emerge as a major lithium region yet having the company’s assets in Thailand are crucially important for a myriad of reasons.

Managing Director Paul Lock explains: “Going forward the major lithium regions will continue to be Australia and South America, they will soon be joined by North America – the US for brines and clays, and Canada for hard rock primarily – as well as some countries in Africa and Europe. 

In this context I do not see Southeast Asia becoming a major primary lithium producing region, so the region will not compete on volume but, for Southeast Asian lithium miners and processors, they will always be able to compete on cost and proximity to market. 

At the end of the day, we are talking about commodity products and in the crudest sense, with all else being equal, it comes down to the cost of producing and shipping a molecule – and with ESG and our carbon footprint in mind, the closer you are to your market the better. 

Further, Southeast Asia is the fastest growing region on earth, ASEAN has a population of over 600 million people and is flanked by India and China – there is a lot going on here. 

Layer on this the fact that Thailand is an advanced industrial economy – it’s the largest vehicle manufacturer in the region and just about all of the dual cabs on Australian roads were manufactured in Thailand. The country has a very progressive policy package geared toward 10 S-Curve industries, including NEVs and LIBs, and the Policy on Mining and Downstream Industry was recently introduced to encourage exploration and development of battery and critical metals. 

It’s not difficult to see that we are in the right place so I don’t see regional mine output as an overly important factor.”

Pan Asia Thailand Li assets

Longer term lithium play

Lock notes that for Pan Asia Metals, location is just one element of the attractiveness of its strategy – albeit an important one.

The company’s value proposition lies in it being a ‘longer term play’ to build a chemicals company not a concentrate seller. The MD says the further downstream you can go the more options and opportunities there are for revenue and profit expansion. Whereas as a concentrate seller, companies are essentially limited to mining more tonnes and by price movements in the underlying commodity market.

“Certain circumstances provide the option to move past the mine gate and value add, but the option is not available to all project developers. The primary requirements are commodity type, geography, and cost environment, and your position or potential position on the cost curve. 

Commodity is important, very few companies can value add a bulk or base metal, there is too much capacity in the system, for example iron ore, the situation speaks for itself, and if I were producing say a copper concentrate, it’s unlikely that I could put together an economic argument to support refining due to surplus capacity, but for lithium and other specialty metals such as tungsten it can be different. 

This gets us to geography – geography captures access to ports, proximity to manufacturing hubs and therefore your required inputs, and proximity to end markets. Having these put the developer in a good position, not many have all three but PAM does. 

Then we have the cost environment, regardless of the commodity and geography, if you are situated in a high-cost environment then it becomes more difficult to get the economics of downstream activities to stack up. This is why companies like Lynas and Redflow and many others have their production in Malaysia and Thailand, it’s because the cost environment works, it’s very competitive.”

The MD adds that Thailand is a low-cost environment, noting as an example that much of the structural steel for the Roy Hill Iron Ore project was fabricated there. This is a material advantage for the company, for instance labour in the region has a degree of mobility, a shortfall in one country can be filled with labour from another.

In Western Australia we have seen cost blowouts in the Kwinana lithium hydroxide plants, there’s a lot of water to flow under this bridge yet but there is a looming question as to whether these plants can be competitive as the capital costs are now baked in. 

“In short PAM has the right commodity, geography, and cost environment”

In short PAM has the right commodity, geography, and cost environment. Our projects are located in Thailand, an advanced industrialised economy which ranks about 30th in terms of economic complexity, by way of example Australia’s ranking is above 70.

In addition, the cost curve is important, PAM has lepidolite style mineralisation, which, based on Wood Mackenzie’s LCE cost curve, sits well below the bulk of spodumene production.”

Refining its view on EVs

According to the MD, Pan Asia aims to refine the battery and critical metals mined into precursor chemicals – highly refined metals which are needed by the battery manufacturers in the EV and lithium-ion battery markets.

The company believes it is reasonable to take the position that achieving a battery grade LCE is not too difficult to achieve.

Sure, it won’t be easy, nothing really is, but we have the right mineralogy and this is already being done on scale and commercially in China, and there are several mica-based feasibility studies out there with supporting metallurgy to this effect. 

Given the state of the market, along with our geography and cost environment, and the fact that Thailand is the 4th largest vehicle manufacturer in Asia, we are very well positioned. 

“I think our potential LCE production will facilitate our ability to negotiate a joint venture to produce cathode active materials”

Therefore, I think our potential LCE production will facilitate our ability to negotiate a joint venture to produce cathode active materials. 

We have in fact had early stage discussions to this effect, and the response has been very encouraging. There is some way to go but I personally can’t see why not, so long as we have the right knowledge partners.”

With Thailand being one of the largest auto producers in Asia, Lock notes that it is incredibly important for Pan Asia to be positioned within close proximity in order to achieve the aforementioned objectives.

The reason we can realistically contemplate our downstream ambitions is due to our geography. Only a few project developers have this advantage, projects need to be close to industrial centres where inputs required for advanced chemical processing are readily accessible and the pricing is competitive. Otherwise, you will need to ship these processing inputs to the project area and export your primary product and potential by products from the project area, which will impact the economics – in most cases critically. 

We will also produce by-products, without potential customers nearby these would be regarded as waste, so geography becomes more important particularly if your by-products are low value bulk products such as quartz and feldspar, and even basic aggregates. 

In Southeast Asia all of our inputs are close at hand and we also have markets for bulk mine waste, that is, aggregate for cement manufacturing and road construction, and low value products such as quartz and feldspar which will be by products of our concentrate processing, along with other metals such as tin, tantalum, and possibly caesium and rubidium. 

Overall, we have a very good set of circumstances.”

Ties to Thailand

In Thailand, Pan Asia has 2 wholly owned projects – Reung Kiet Lithium Project and the Kata Thong Geothermal Li and Hard Rock Li/Sn Project.

Reung Kiet is its most advanced project and contains 2 prospects, the Reung Kiet Lithium Prospect and the Bang I Tum Prospect. At the Reung Kiet Prospect Pan Asia recently reported an Inferred Resource of 10.4 million tonnes grading 0.44% Li2O, which is (2012) JORC compliant and was completed by CSA Global.

We are currently conducting infill and extensional drilling which will see a large part of the Resource move into the Indicated category and some into the Measured category. CSA Global will also do this work.  We will also see the Resource tonnes increase.

We will report an updated Mineral Resource later this year and that will feed into our Scoping Study. We are targeting initial production of 10,000 tonnes per annum of lithium carbonate for 10 years, which I believe will be easily achieved. 

“The Reung Kiet Prospect still remains open along strike and at depth”

The Reung Kiet Prospect still remains open along strike and at depth. At the Bang I Tum Prospect we have generated a drill supported Exploration Target of 8-14 million tonnes grading 0.5-0.8% Li2O.  As soon as we have completed drilling at Reung Kiet we will move the rigs to Bang I Tum.”

The Kata Thong Geothermal Lithium and Hard Rock Lithium-Tin project is a compilation of 5 exploration applications, 4 containing extensive historical tin mining and 2 containing geothermal fields. One of the geothermal fields abuts the lithium rich Kata Khwam granite batholith, a 145km-square granite intrusion with rock-chip assays up to 2,700ppm Li2O.

Four of the application areas are highly prospective for lepidolite style lithium and tin, with stream sediment assays returning strong Li2O values from target catchments and each of the application areas contain historic tin mines.

Lock adds that Pan Asia is actively pursuing additional application areas in Southeast Asia with several target areas under negotiation.

With this in mind I see our worst-case outcome being 10,000t LCE for 10 years.”

Pan Asia is basing everything it does around Li salts and cathode active materials (CAMs) whereby the company is not interested in concentrates at all. The MD estimates that about 95% of exploration and development companies are stuck at the mine gate selling concentrate.

For Pan Asia, again, this is all about geography, and the location of its projects close to heavily industrialised zones which are producing a range of complex products.

The Eastern Economic Corridor in Thailand is just this, the Thai Auto Industry is the No.1 vehicle producer in Southeast Asia, there are over 20 Auto Assemblers and 12 Motorbike Assemblers, supported by 525 Tier 1 Auto Parts Companies and 1,687 Tier 2 and 3 suppliers – the ecosystem is huge. 

The Thai electric vehicle policy is geared to retain Thailand’s No. 1 position with 14 EV projects and 18 Battery projects already underway. Great Wall, Geely and BYD are already producing EVs in Thailand and there are more due to start this year. LIB manufacturing will follow. With this in mind you can see why we want to head downstream. 

Further, if we consider the 12-month average price for LCE, at about $40,000/t, and the same for SC6, at about $2,000/t, we have an LCE/SC6 ratio of approximately 20x. 

Assuming the LCE/SC6 ratio holds over time – and why wouldn’t it – this means that a 10,000tpa LCE plant will generate revenues equivalent to a 200,000tpa SC6 concentrate plant.  This is why we are not too interested in mine gate concentrate sales. And, as we head downstream, we get exposure to new opportunities – this is where our potential growth path lies.”

Pathway to value

Pan Asia Thailand assets

In Thailand, Pan Asia is also within close proximity to hydro power and the potential to use solar, all of which will help it to produce a lower carbon or even a zero-carbon product.

Lock explains that a low to zero-carbon product has an intrinsic value to the consumer – it means they have to work less to reduce the carbon footprint of their product. Therefore, a low to zero carbon product should attract a premium as the company is supplying something with built in value.

I am perplexed when I see companies which have the potential to produce a low to zero-carbon product entering into MOUs with OEMs to sell their product at market prices – they have just transferred that built in value to the OEM for free. 

We believe that our situation will allow us to produce a low carbon product and being close to our market means we are moving our molecules less distance, and therefore we have a lower carbon footprint. 

This has value.”

For Lock, PAM is unlikely to rush into entering into any MOUs anytime soon. He says firstly, most MOUs are non-binding and offer little more than a flag waving exercise. Secondly, the current rush indicates that on the part of the OEMs we can see an element of ‘FOMO’, at least in lithium, and this presents an opportunity.

But what about the mid-tier OEMs, a segment which is more than EV related LIB producers – this represents an opportunity, can a better deal be done with a smaller yet still credible party.”

Thirdly, MOUs are market price related, SC6 is essentially a commodity, as is LCE, and therefore if there is a hole to fill then any in-spec product will fill it, MOU or not.

Finally, signing away on an MOU, binding, or non-binding, deters other discussions which may offer a lot more opportunity, that is, why sign away my concentrate or LCE when it may get me further down the supply chain. 

As previously discussed, you need the right geography and cost environment to take this position. That said, if the right partner and opportunity presents, we will enter into an MOU, but not for concentrate.”

Write to Adam Orlando at Mining.com.au

Images: Pan Asia Metals Ltd & iStock
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.