The Western Australian government will offer royalty rebates to three of the state’s active lithium producers, in an effort to help the industry ride through a difficult period of low prices.
The McGowan government said that the producers of the raw lithium product, called spodumene, would receive a temporary rebate worth 50 per cent of royalties payment over a period of 12 months.
The state government said that it wanted to help the three producers, across Galaxy Resources’ Mt Cattlin operations, Pilbara Minerals’ Pilgangoora operations and Altura Mining’s Pilgangoora operations, to maintain employee numbers at the sites.
The measure is expected to help protect over 600 jobs for WA workers currently engaged in the lithium sector.
The royalty rebates will only be payable as long as the lithium producers agree to not significantly reduce their employee numbers, and will cease if the global price for spodumene recovers to $550 per tonne or more in a quarter.
Global prices for spodumene concentrate have fallen considerably over the last couple of years, as producers rush to boost the supply of lithium in anticipation of a surge in demand.
Spodumene concentrate generally contains around 5-6 per cent lithium and is a raw ingredient that is processed to produce lithium that can be used for batteries for energy storage or electric vehicle batteries.
But supplies of spodumene concentrate have managed to outpace demand, leading to a glut in supply. However, analysts expect the glut to be short-lived, as global production of lithium-ion batteries continues to surge.
One key factor will be the approach taken by battery giants like Tesla, which has predicted massive increases in the demand for lithium-ion batteries while also looking to manage its supplies of raw materials more directly. Tesla CEO Elon Musk spooked investors in Australian lithium producers when he suggested the company could look to take advantage of US-based lithium reserves, rather than continuing to source lithium from Australia.
The Western Australian government will require the lithium producers to repay the value of any rebates provided once global prices recover, ensuring the measure has a neutral impact on the government budget over the long term.
The Western Australian government has sought to support local lithium producers to ride through the short-term challenges.
“Over the past two years the fall in the price of spodumene concentrate has put these companies’ operations at risk and their finances under pressure, this is why the McGowan Government is offering assistance,” Western Australian mining and energy minister Bill Johnston said. “The McGowan Government’s support is consistent with our Future Battery Industry Strategy and our goal to increase battery minerals production and reduce project costs across WA.”
“Supporting these producers could prevent the loss of more than 600 jobs and save more than $20 million in annual royalty revenue over the coming years.”
“Experts predict prices for spodumene concentrate will rise due to the growing demand for lithium used to manufacture electric vehicles and energy storage systems.”