AVZ’s Manono project is one of many lithium projects within the development pipeline competing to fulfil the anticipated supply deficit in lithium markets. AVZ Minerals recently released a scoping study upgrading the processing capacity of Manono from 2Mtpy to 5Mtpy. At full capacity, this will have the ability to release approximately 130kt of LCE into the battery-grade supply chain annually. Operating costs for the Manono project appear highly competitive, however, due to the location and nature of the deposit in the DRC, transporting the project’s spodumene concentrate to a port will compromise a major cost component.
The scoping study outlined an estimated average minesite operating cost of US$100/t 5.8% Li2O concentrate and an estimated average transport cost to China of US$223/t concentrate. As a result, transport of the ore will out-cost processing by a factor of 2.8. The reason for this is the remoteness and insufficient infrastructure of the project and surrounding area. AVZ will have to transport the processed ore from Manono to Dar es Salaam, a total of 1,832km. Approximately 800km of this will be by roads which are largely un-tarmacked for long sections of the route, particularly in the DRC. There are plans for Chinese investment to improve the quality dramatically, however, this will not be carried out until 2020 at the earliest.
When comparing this to Pilbara Minerals’ recently commissioned Pilgangoora project in Western Australia, we see a marked difference in the minesite and transport cost split. In Pilbara’s Stage 3 scoping study for a 7.5Mtpy processing capacity, the company outlined estimated average minesite costs of US$250/t 6% Li2O concentrate (this excludes royalties and tantalite credits) with mine to port transport costs of just US$25/t.
This dynamic shows the importance that location plays on a lithium project’s viability. In particular, those producing spodumene which is a relatively low-grade concentrate containing less than 3% lithium. While AVZ has adjusted and improved its transport route over time, there is only so much improvement to be made without massive infrastructure investment. The proposed road investments by Chinese firms around the south of the DRC will be a determining factor in project success, not just for Manono but also for other future projects in the area.
Furthermore, it is not just the project’s proximity/accessibility to a port, but also the subsequent shipping distance to China (where the majority of lithium refining capacity is situated) that should be considered. While Manono’s competitive deposit grade and low strip ratio mean it might be able to support these hefty transport costs, there are other DCR lithium deposits that might not and, as such, we expect Australia to continue to be a dominant supplier of lithium.
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