This article is a sponsored feature from Mining.com.au partner Pan Asia Metals. It is not financial advice. Talk to a registered financial expert before making investment decisions.
The pieces are coming together for Pan Asia Metals (ASX:PAM) as the critical minerals explorer looks to advance a lithium project capable of withstanding the cyclical highs and lows.
The phrase “grade is king” is often bandied around the industry, but that is not always the key factor that will provide a solid foundation for a project, and projects based on grade alone will not always cut it.
For Pan Asia, the top priority is working to establish a low-cost operation located near processing hubs capable of supporting it.
Managing Director Paul Lock tells Mining.com.au the company’s focus is on projects that will be positioned in the bottom third of the cost curve.
“Cost environment is the primary driver, being primarily energy and labour, and being situated near industrial and or chemical manufacturing clusters means there will be a skill base,” he says.
“Grade is a consideration, naturally the higher the better, but it is not the sole consideration, metallurgy is just as important as is the cost environment.”
Despite the still growing demand for lithium batteries to power electric vehicles, the lithium carbonate price has been on a rollercoaster ride since November 2022 following a bull run that saw the price hit a peak of over $122,000 a tonne.
LCE is now selling for around $17,622 a tonne, nearly 86% lower than its peak.
“Lithium carbonate is currently sitting at three-year lows,” Lock says. “The current price instils the importance of a project’s position on the cost curve, and what we are seeing is a split between hard rock projects, which tend to be higher cost, and brine projects, which are lower cost.”
Pan Asia is advancing both types of projects. The RK Project in southern Thailand is a hard rock deposit with lithium hosted in lepidolite/muscovite rich pegmatites, while the Tama Atacama Project is a brine deposit in Chile.
“Many pundits thought a ‘low-grade’ lepidolite project in Asia could not compete with higher grade spodumene projects, yet the most efficient lepidolite processors are producing lithium carbonate for less than most of the non-integrated spodumene projects,” Lock says.
The global focus was initially on spodumene for the production of lithium hydroxide, which is used in nickel-manganese-cobalt (NMC) batteries.
While NMC batteries have a higher energy density, stability issues and difficulty sourcing nickel and cobalt saw a shift back to the original lithium ion phosphate batteries (LFP), which use lithium carbonate.
Lock says because they have a lower energy density they were regarded as a second tier battery, a label largely driven by range anxiety – although LFP batteries are much more stable.
“The NMC-LFP and hence hydroxide-carbonate debate took a turn when Tesla started exporting Tesla 3s with LFP batteries, and consumers could not tell the difference.
“Other car companies followed suit and this along with advances in LFP energy density soon saw LFP batteries taking market share – essentially killing the spodumene-hydroxide-NMC mantra.”
Nous + cash = downstream value-add
Given the evolving landscape, and in the past couple of months having boosted its coffers by over $11 million via a placement and funding facility, Pan Asia has mapped out a two-pronged approach to advancing its lithium projects.
With respect to the RK Lithium Project, the company signed a memorandum of understanding with IRPC Public Company in July 2023 to assess the viability of developing an integrated lithium operation.
The project would encompass a mining operation to produce a lithium oxide concentrate, which would then be fed into a proposed lithium conversion facility located in IRPC’s Industrial Zone, in the Rayong Province of Thailand, to produce lithium carbonate.
Pan Asia and IRPC are also assessing the potential development of a cathode active material facility.
The junior explorer is now in talks with several Chinese lepidolite processors in the hopes of securing a third partner for the project, and this week hosted Yongxing Special Materials Technology – “one of leading and lowest cost producers of lithium carbonate from lepidolite in China” – at the RK Project.
The lowest cost integrated lepidolite style lithium chemical processors are producing lithium carbonate at well below current market prices, supporting very strong gross margins.
Pan Asia says its RK Project has similar grades to those leading lithium chemical producers and is also situated in close proximity to all of its input requirements such as labour, energy and reagents, as well as end markets.
“We have a preference for partnerships with knowledge partners and balance sheets,” Lock tells this news service.
“We could sit around waving the 100% flag and selling a concentrate, but for lithium I regard this as the consolation prize. With the right partnerships we can position the company for downstream value adding, which in-turn positions the company for new opportunities.”
The RK Project comprises the RK, BT and KT East Prospects as well as the KT West Prospect under application.
The KT Prospect has the potential to be larger than the RK and BT prospects combined, with good grades and a similar style of mineralisation to both prospects.
Pan Asia is waiting to progress the project towards feasibility until it has the right partner, which Lock says has the potential to accelerate the project at a lower cost and with higher confidence in the results.
Brine producers ‘making a killing’
Brine projects, meanwhile, can produce lithium carbonate at a much lower cost, which means they can generate strong returns at current prices.
“In the current price environment of say US$13,000/t ($19,507), the brine leaders are making a killing, with gross margins well above 65% for the leading producers,” Lock says.
“The leading processors of lepidolite are also making very strong gross margins. Therefore, our view on price is a little different than most.”
Lock says in the current price environment the leaders will do well, and if the price moves into the US$20,000s then “all good and well”.
However, he notes that it’s not necessarily a smart strategy to be banking on lithium being in the high US$20,000s/low US$30,000s for long periods of time.
“Although I’m happy to take it if it is,” Lock says.
Pan Asia was recently granted an additional 300km2 exploration concessions covering its Tama Atacama Project, which the company describes as “one of South America’s largest and most strategically positioned lithium brine projects”.
Lock says the project sits at 1,000m altitude, which is a low-cost, comfortable working environment from a labour and processing perspective.
“We have available to us road, rail and port infrastructure, massive energy infrastructure, we have the largest salt mine and export terminal 75km by road, which gives us a pathway for dealing with waste salt,” he says.
Tama Atacama is also located near roads and rail leading to Antofagasta, South America’s only lithium carbonate processing hub with several expansion initiatives to produce lithium carbonate and cathode, primarily LFP.
“The project sits 1,300m below Salar de Atacama and is in a well established mining district, with historical and current nitrate mining abutting the entirety of Tama Atacama’s western flank and several other mining and evaporation projects in and around Pan Asia’s holdings,” Lock says.
“In Pan Asia’s opinion, it won’t take much to launch this project to the top of the brine peer group, subject to exploration success of course.”
Long-term fundamentals override trend
The other factor of importance to Pan Asia is the long term fundamentals of a commodity. Lock says a commodity needs to “make sense” before it will be included in the company’s portfolio.
“We need to see scale or potential scale in demand for the underlying commodity which will support new product entering the supply chain and or will allow our project to push a higher cost project off the right hand side of the cost curve,” he explains.
While commodities such as gold and copper, providing the project is low cost, will always be able to “push-in to the cost curve” and edge out a higher cost producer, for new energy commodities like lithium a project needs to be low cost and have strategic advantages.
“In short PAM always steps back to look at the big picture, you need to break out of the short term news cycle, the underlying dynamics of the commodity need to stack up, and the project needs to be situated in a low-cost environment proximal to a relevant industrial or manufacturing cluster,” Lock says.
Write to Angela East at Mining.com.au
Images: Pan Asia Metals
