Greenbushes lithium mine (biggest lithium reserve) located in Western Australia has been in the news with regard to doubling concentrate production by 2018. The expansion move is expected to make supply provisions for a $400 million lithium processing plant in Kwinana, south of Perth, which is to be built by China’s Tianqi Lithium. Let us understand some consequences that may erupt owing to this move:
 
Concerns of Oversupply: The lithium industry could be affected by the oversupply with the addition of these new volumes, which would pose pressure on incumbent producers to protect their market share. On the other hand, there is a strong increase in long term demand for the lithium compounds for the production of high performance, rechargeable lithium batteries used in the electronics market. Given the growing demand for lithium from new generation electric vehicles as well as home energy storage systems like the Tesla Powerwall, the sector is attracting new investments. In Western Australia, Galaxy Resources has restarted mining at its Mount Cattlin spodumene mine while Mineral Resources and Neometals are commissioning their new Mount ­Marion mine.
 
Small players in a fix: The mining activities are down in Australia recently, which had pressurized small players due to the lower realization and production cut. However, the expansion of the capacity to double production would lead to new investments driving the plagued WA state government and the small players who could benefit from the new processing plant. Moreover, the development would also lead to a realization of the state’s long-held aim for more downstream processing which is mining and value addition for the resource-rich states which comes within its borders. The planning documents submitted by Tianqi, which owns a 49% stake in Greenbushes, indicate their plans to build a facility that would convert about 160,900 tonnes a year of spodumene concentrate from Greenbushes into over 24,000 tonnes of lithium hydroxide for use in the rapidly growing global market for lithium ion batteries. Tianqi could run the new Kwinana plant with its share of the existing output out of Greenbushes, but would leave Tianqi’s lithium hydroxide processing facilities in China short of inventories. As a result, Tianqi intends to grow its total output. Additionally, WA has historically had a poor track record of downstream processing, as evidenced by the disaster of BHP Billiton’s hot briquetted iron plant near Port Hedland and Rio Tinto’s HIsmelt venture. At the same time, many Australian players are considering their own downstream lithium processing facilities. For instance, Neometals is studying the merits of a plant.
 
Demand by Albe­marle Corporation: Greenbushes mine’s 51% owner is North America’s Albe­marle Corporation, who was looking to increase the material and was planning to acquire lithium hydroxide facilities in China. Greenbushes have ample extra mining capacity but the mine currently is only running for nine out of every 14 days. Any expansion of the mine would require a second processing plant on site even though the current plant is operating at full capacity. Meanwhile, the processing at Kwinana would add significant value to spodumene out of Greenbushes, which would drive revenues for the state. In addition, each tonne of lithium hydroxide would be worth $US14,000- $US15,000, against $US450 for each tonne of spodumene concentrate. Therefore, about eight tonnes of concentrate are needed to produce a tonne of lithium hydroxide.
 
Recent comments from Macquarie Bank that the lithium boom may be "over before it started" at the back of a supply surplus from 2017, has raised a lot of concerns. At the same time, many including UBS disagree with the statement.

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