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Investigating the Expensive Lithium Mines in Western Sichuan: Sleeping in High Mountains and Deep Valleys, Large-Scale Mining Still Requires Significant Investment

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2023-09-18 09:12

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The transaction prices of 6.4 billion for the Snowway lithium mine and 4.2 billion for the Gada lithium mine, two auctions since last year, have created two sky-high prices... They have written footnotes in the history of lithium mine transactions in China.

 

In mid-August this year, as lithium carbonate prices stopped rising, the auction of two lithium mining rights in Aba Prefecture, Sichuan, became one of the most closely watched events in the domestic new energy industry, and a battleground for many well-known enterprises and capital. Well-known capital such as CATL and Shengxin Lithium Energy fought fiercely in this lithium mine competition. First, a related enterprise of Sichuan Energy Power acquired the exploration rights for the Lijiagou North lithium mine for 1 billion, followed by a surprise entry from Zhongjin Mining in the auction of the larger Gada lithium mine, which won with a high bid of 4.2 billion.

 

However, the winner may not take all. Zhongjin Mining acquired the Gada lithium mine at a high premium, which is also seen by outsiders as a burden of assets. However, the 4.2 billion bid may just be an entry ticket for Zhongjin Mining into the lithium mine map of western Sichuan, as reality is often more challenging than imagined; having a mine does not necessarily mean it is easy to extract.

 

In late August, reporters from the Daily Economic News visited the Gada lithium mine, Lijiagou North in Jinchuan County, as well as the Lijiagou project and the Dangba lithium mine. From the projects that have been developed, although various capitals have entered the market for many years, mass production mines are still rare. The main reasons are poor geological conditions, complex climatic environments, and high safety, environmental protection, and governance requirements. The reporters found that some project locations had muddy mountain roads that were difficult to navigate, making simple passing quite challenging, and it was hard to support large-scale truck transportation. Some mineral veins have complex terrain, which raises higher requirements for tailings construction and environmental protection.

 

The recently auctioned Gada lithium mine in Markang and the Lijiagou North project in Jinchuan still have a long way to go from exploration to actual mining.Meanwhile, from the perspective of local governments and enterprises, accelerating lithium resource development more efficiently, environmentally, and safely has become a common demand, which may constitute the main driving force for the accelerated mining of lithium mines in Aba Prefecture in the future.

 

The road down the mountain from the cliff's edge.

 

From a geographical perspective, on the other side of the Gada lithium mine is the Dangba lithium mine, along with Lijiagou and Yelonggou, together forming a large lithium mine belt, referred to by outsiders as "the largest lithium mine belt in Asia."

 

Observing the progress of the Dangba lithium mine under Jinxin Mining, which has been developed for many years, can also help predict the future mining difficulties of the newly auctioned lithium mines.

 

On the rural road in Gaoda Village, Markang City, driving from Songzan Bridge towards the Genza Bridge, an inconspicuous fork in the road leads to the foot of the Dangba lithium mine, where there is a simple warehouse of Jinxin Mining. The finely ground lithium ore is piled in a corner, representing the most rudimentary processing. Liu Qiang (a pseudonym), the head of the mining area of Jinxin Mining, has to drive up this small road every day. This is a mountain road that has not been asphalted, with a width only 1.5 times that of a regular SUV's axle. In the high mountain canyon, he drives along the winding mountain road. In narrower sections, the car turns almost at a right angle, with the wheels needing to press against the roadside to turn.

 

The rugged road to the Dangba lithium mine. Photo source: Daily Economic News reporter Xu Shuai.

 

The small road by the cliff, with a drop of hundreds of meters, the turbulent Dajinchuan River is stirring up mud.

 

Liu Qiang is from Gansu. Before this year, he had been working at Guocheng Mining's site in Inner Mongolia. Although both are mining sites, he had become accustomed to the vast grasslands and Gobi of Inner Mongolia. In the high mountain canyon of Dangba, he experienced a real sense of "acrophobia" for the first time. On the evening of August 16, it rained in Markang, making the already muddy road even softer, and he could clearly feel the front wheels slipping while turning. When passing, Liu Qiang had to be more careful than usual.

 

After driving for more than an hour, reaching an altitude of 3600 meters, this is the core vein of the Dangba lithium mine, also known as "the largest lithium mine in Asia." The amount of ore retained within the mining rights of the Dangba lithium mine is 50.914 million tons, containing about 678,000 tons of Li2O (lithium oxide). According to a ratio of 1 to 2.5, there are nearly 1.7 million tons of lithium carbonate reserves here. Jinxin Mining's main assets are the mining rights, exploration rights of this mine, and related buildings and equipment for a 50,000-ton mining and selection project.

 

So many "crazy stones" now quietly lie between the peaks. They are deeply hidden in the mountain, and Liu Qiang's important job is to dig a tunnel leading to the core mining area. The process of extracting spodumene must be done carefully, without over-excavating the surrounding spodumene. It's similar to avoiding hitting load-bearing walls when renovating a house; if the columns are too thin, it could lead to a collapse.

 

About two kilometers from the mine, the beneficiation plant further grinds the coarse spodumene ore for easier transportation down the mountain.The steep mountains lack large flat industrial land, so the beneficiation plant and office areas can only be arranged according to the terrain, forming a line along the mountain.

 

Dangba, the lithium spodumene mining area with the most resource endowment in the country, but the scene of large-scale mining still remains in imagination. When the high cliffs of the mountain canyon meet the unpredictable weather conditions, Liu Qiang sees this as one of the factors that make large-scale mining difficult.

 

This is a very realistic problem; if two small cars have such difficulty passing on the mountain road, how can thousands of tons of lithium ore be transported down from an altitude of 3600 meters on a large scale? In Liu Qiang's thoughts on large-scale mining paths, pipeline transportation of lithium concentrate may be more feasible. In this way, the ore on the mountain can slide down to the warehouse at the foot of the mountain like going down a slide after being crushed.

 

The Dangba mine overlooks the Lijiagou mine of Sichuan Energy Power across the Dajinchuan River. Dangba is slightly higher in elevation, allowing a full view of the mountain road leading to the Lijiagou mining area and the beneficiation plant being constructed below. Sometimes on the way down, Liu Qiang observes the layout of the facilities at the Lijiagou mine across the river and discusses the details with his colleagues. The Lijiagou mining area uses pipeline transportation for concentrate, which is one of the few available transportation methods in such harsh and rugged geographical conditions.

 

Looking towards the Lijiagou flotation plant from the mountain leading to the Dangba lithium mine. Photo source: Daily Economic News reporter Xu Shuai.

 

Sky-high lithium mines sleep in high mountains and deep valleys.

 

 

In the face of great enthusiasm for lithium, any difficulties can be expected to be eliminated. After last year's acquisition of Snowway by CATL for 6.4 billion, the battle for expensive lithium mines reignited in August this year.

 

Ultimately, a related enterprise of Chuaneng Power acquired the exploration rights for the North Li family lithium mine for 1 billion yuan, while Inner Mongolia's Dazhong Mining obtained the exploration rights for the Jiada lithium mine for 4.2 billion.

 

Liu Qiang is very concerned about this news. First, besides Chuaneng Power (000155.SZ, stock price 12.65 yuan, market value 18.67 billion), Shengxin Lithium Energy (002240.SZ, stock price 22.96 yuan, market value 21.164 billion), and Guocheng Mining, a new force in lithium resources in Aba Prefecture has emerged with Dazhong Mining; second, this bid was unexpected and beyond Liu Qiang and his peers' expectations.

 

The Jiada lithium mine is a "neighbor" of the Dangba lithium mine, although they are separated by several kilometers of rugged mountains.

 

The news of the auction results for the Jiada lithium mine did not quickly reach the city of Maerkang. Until August 17, a government worker in Maerkang even thought that the final winner was CATL (300750.SZ, stock price 230.5 yuan, market value 1,013.346 billion).

 

However, in this city, the name of the Jiada lithium mine is not unfamiliar. A local taxi driver said, "There are many lithium mines in this mountain, and they are very valuable."

 

Valuable is one thing, turning it into cash is another. A company secretary familiar with lithium resources in Aba Prefecture said that the Jiada lithium mine is only an exploration rights auction, "There is nothing on the mountain." The natural conditions of the Jiada lithium mine are no different from those of the Dangba lithium mine and the North Li family lithium mine, and the challenge of mining in rugged mountains is a common issue that needs to be resolved.

 

In the week of August 16, Dazhong Mining's exploration team went up the mountain, and the process of going up the mountain was very arduous. Geological experts in Sichuan Province described the journey to the Jiada lithium mine, driving to Jiada Village and then walking up the mountain, with a one-way walking time of up to 4 to 5 hours.

 

The coverage area of the Jiada lithium mine is huge, with a total area of 21.2247 square kilometers. In contrast, the exploration area of the lithium spodumene mining project in Dangba Township by Jinxin Mining is 9.6108 square kilometers, less than half of the former's area. The mining area of the Jiada lithium mine even extends into neighboring Jinchuan County.

 

Starting from Maerkang City, driving along the Dajinchuan River southward, winding up the mountainside, it takes about 2 hours to reach the western mountainside of Sha'er Township in Jinchuan County. At an altitude of nearly 3000 meters, there is a patch of primitive forest, rarely visited by people, where only nearby villagers from Kermar Village come to "pick mushrooms" (note: collect wild mushrooms). From the perspective of geographical coordinates, this place is close to the turning point coordinates of the Jiada lithium mine.

 

Image source: Reporter Xu Shuai from Every Day.

 

On that day, a reporter encountered a villager from Kermar Village, who had not heard of any lithium mine in the area. However, he had heard a little about the auction of the expensive lithium mine. After confirming the coordinates were close to the latitude and longitude of the Jiada lithium mine, his expression became somewhat excited. For this villager and others, the future mining could bring more economic benefits.

 

 

Unlike the coordinates on the map, what seems close is actually far away.

 

 

The North Li family lithium mine is about 30KM in a straight line from Jinchuan County, located between the Dajinchuan River and the Muzugou. Although it is just north and south of the Li family ditch, it still takes more than an hour to drive from the Genzha Bridge, where the Chuaneng Power's Li family ditch project is located, to the North Li family project. This journey of more than an hour involves driving along the Sun River, passing through canyon forests, and reaching an altitude of 4192.7 meters on the plateau meadow.

 

No signal, few people, complex terrain, narrow roads... are the natural conditions faced by both the North Li family project and the Jiada lithium mine. A reporter learned from informed sources that the North Li family is actually adjacent to the Li family ditch project, and in the future, they can be mined in coordination, significantly improving the mining efficiency and economic benefits.

 

Whether it is the personnel from the Mao Ri Township government where the North Li family is located or ordinary villagers from Kermar Village, they all realize the huge economic value behind mining. However, the realization of this wish takes time, especially for Dazhong Mining, a new capital in the lithium mines of western Sichuan. Winning the auction for 4.2 billion and starting mining are two different matters. To put it more realistically, in the context of limited lithium resources in the country, the 4.2 billion auction is merely a ticket to enter the lithium mining map of Aba Prefecture. The large-scale mining transportation channels, mining infrastructure, and various safety and environmental permits required for mining are the issues that Dazhong Mining must face.

 

The flotation plant equipment for the Li family ditch project has been installed.

 

“All electricity, communication, and transportation must be solved by ourselves.” Liu Qiang made an estimate for the subsequent construction of the Jiada lithium mine, stating that the investment in mining infrastructure projects will exceed 1 billion yuan.

 

The estimate of an investment exceeding 1 billion yuan is not without reference; the Li family ditch project under Chuaneng Power is a good reference sample. The total investment for the Li family ditch 1.05 million tons per year mining and selection project reached 1.65 billion yuan. Looking back at the history of Dexin Mining, it obtained a mining license as early as June 2013, and listed companies that have had interactions with it include Chuaneng Power, Yahua Group, and Zhonghe Co., Ltd. (which has been delisted).

 

Long construction time, difficult mining, and remote project location... In recent years, at every annual shareholder meeting, investor interaction platform, and various institutional research, Chuaneng Power has been "interrogated" about the progress of the Li family ditch project.

 

The flotation site of the Li family ditch project is located next to the Genzha Bridge, at the foot of the Dajinchuan River. Lithium ore flotation is a key link in the production of lithium concentrate from raw lithium ore, determining the marginal value of lithium ore. Raw ore is transported for rough processing, while the separated lithium concentrate can be considered fine processing. Concentrate is a valuable existence, and most of the concentrate needed for domestic lithium carbonate processing comes from imports. Just in the second quarter of this year, the import volume of lithium concentrate reached 900,000 tons, and based on a price of 3,000 yuan per ton, the import amount is close to 3 billion yuan.

 

Image source: Li family ditch flotation plant next to Genzha Bridge, reporter Xu Shuai from Every Day.

 

Last year, the Li family ditch project directly sold raw lithium ore (infrastructure mining). In the first half of 2022, it achieved sales revenue of 27.8761 million yuan from the by-product ore.

 

To maximize the benefits of the Lijiagou project, the most important thing is to complete the separation of lithium concentrate. In the flotation workshop, two disc-shaped concentrate thickeners are clearly visible, and the construction of the concentrate warehouse is largely completed, indicating that the general appearance of the flotation site of the Lijiagou project is gradually becoming clear.

 

On site, a staff member and an informed person familiar with the project stated that the construction of the Lijiagou project is being pushed forward vigorously, with the shaft system equipment already installed, and the construction of the mining and selection plant and tailings pond proceeding as planned. According to on-site workers, the tailings pond is located on Lijiagou Mountain. However, getting up the mountain is no easy task, as there is a checkpoint at the entrance, requiring a forest fire prevention certificate, a pass, and other documents.

 

Checkpoint leading to the Lijiagou tailings pond. Photo source: Reporter Xu Shuai.

 

As for the construction progress of the tailings pond, different sources have conflicting statements, and the reporter was unable to verify the situation on the mountain. However, according to the content released on May 4 by China Minmetals Corporation's subsidiary, China Metallurgical Group Corporation, the external drainage tunnel of the Jinchuan tailings pond project has been completed, marking a milestone step towards the production of the overall tailings pond project. It was mentioned that the geological conditions of the strata traversed by the tunnel are extremely complex, located at an altitude of about 3400m, with a height difference of about 300m for the external tunnel. Due to the harsh construction environment, the height difference makes it extremely difficult to discharge slag and exhaust smoke inside the tunnel, and the transportation routes are complex and variable, requiring a lot of time and manpower to transport construction machinery and materials to the site. In early spring, rain and snow weather is frequent, and the mountain is steep.

 

The interviewed workers also mentioned that the construction conditions on the mountain are complex and harsh, especially regarding the weather, "In winter, the mountain is covered in snow." According to the content on the website of China Metallurgical Group Corporation, the project team stated that they will complete all the tailings pond projects on time with quality and quantity guaranteed.

 

Outside of the Lijiagou project, the Dangba lithium mine is also facing issues with tailings pond construction. Liu Qiang said that the tailings pond at Dangba still needs to cross a mountain, and currently, they are only planning to leave a piece of open land there. Without a tailings pond to accommodate the slag, large-scale production of concentrate is undoubtedly a pipe dream.

 

Poor geological conditions, complex climatic environments, and high safety and environmental protection requirements are objective constraints faced by lithium mining and selection projects in high-altitude mountainous areas.

 

To some extent, due to the relatively fast construction progress and the backing of the listed company Chuaneng Power, the Lijiagou project has become a hope for large-scale lithium production in Aba Prefecture.

 

However, the first to enter production was Shengxin Lithium Energy's Aoyinuo Mining, which holds the mining rights to the Yelonggou spodumene mine. The open-pit mining, selection, and tailings engineering project of the Yelonggou spodumene mine has passed the "three simultaneous" acceptance and was put into production in November 2019, with an original ore production scale of 405,000 tons/year, equivalent to about 75,000 tons/year of lithium concentrate. Aoyinuo Mining has also become one of the few mining companies in Aba Prefecture capable of achieving mass production.

 

New opportunities for lithium mining in western Sichuan.

 

The current mining progress of western Sichuan lithium mines is difficult to match with their reserves.

 

The largest supply and most development-potential lithium mines in China are mainly concentrated in Ganzi Prefecture and Aba Prefecture in Sichuan Province. The proven lithium resource reserves in Sichuan Province are about 1.89 million tons (equivalent to about 4.68 million tons of lithium carbonate), and currently, only 31% of the resources have reached the exploration level. However, at present, only the Methylka 134 vein under Rongjie Co., Ltd. in Ganzi Prefecture has achieved true mass production, with a mining capacity of 1.05 million tons/year and a processing capacity of 450,000 tons/year.

 

Spodumene. Photo source: Reporter Xu Shuai.

 

To some extent, Ganzi Prefecture has completed the "1.0" breakthrough for large-scale production of spodumene and is currently considering how to expand production on a larger scale. In contrast, Aba Prefecture is still in the "1.0" stage, and is now considering how to complete the first step of large-scale mining.

 

The fierce competition for the 6.4 billion yuan Snowway lithium mine and the 4.2 billion yuan Jada lithium mine, although both reflect the determination of the participants to value lithium resources, the constraints faced by the two are still different.

 

The Methylka area veins are mostly open-pit mines and are distributed on highland meadows, with good mining and transportation conditions. Taking the Methylka 134 vein as an example, the route it passes through from Xinduqiao to Kangding is on National Highway 318, which is already a very mature transportation route. Whether it is the site selection for mining and selection or the transportation of concentrate, there are not many difficulties.

 

However, the Jada lithium mine, Lijiagou project, and Dangba project are limited by the natural geographical environment. The lack of convenient transportation networks also brings certain difficulties to the mining and transportation of mineral resources, increasing the cost and risk of mining. Coupled with the special environment and ecological protection needs of Aba Prefecture, all parties involved in the mining project will also become very cautious.

 

However, the outstanding lithium resource endowment in Aba Prefecture still attracts various capital.

 

These capitals also constitute the historical narrative of the capital market competing for lithium mines. The first phase was represented by Zhonghe Co., while the second phase participants include Chuaneng Power, Shengxin Lithium Energy, Guocheng Mining, CATL, and Chuanfa Longmang, among others. However, the first phase was more about conceptual speculation and stock price manipulation. In 2015, during the first round of the lithium bull market, Zhonghe Co. completed a market value leap to 10 billion yuan through lithium mine speculation. But after the mask was removed, the company had already delisted. The second phase can be seen as a shift from capital and conceptual speculation to real industry.

 

The aforementioned personnel from the Maerkang municipal government admitted that the complex equity disputes of Jinxin Mining in the past are another important factor hindering lithium mining.

 

For the development of lithium mineral resources, Sichuan Province has proposed to firmly support key enterprises in deepening cooperation with resource areas and orderly, efficient, and clean development of lithium mineral resources.

 

This is precisely an important condition for promoting the leap from the first phase to the second phase. After all, in 2017, the road to Lijiagou was also muddy and difficult to walk, but now, with the support of hardened roads, the transportation environment has greatly improved.

 

The staff of the Maerkang municipal government stated that against the backdrop of poverty alleviation and rural revitalization, the government has spent a lot of effort repairing mountain canyon rural roads.

 

The reporter noticed that on the road to the north of Lijiagou, although there are many uninhabited areas, the roads have basically been hardened. If this area becomes a necessary place for mining in the future, it will save enterprises' infrastructure costs.

 

The staff of the Maerkang municipal government also stated that while focusing on ecology and production safety, the local area is now emphasizing the importance of improving the economy.

 

According to a draft plan regarding lithium mining in Markang obtained by reporters, it mentions adhering to the principles of "increasing reserves and production, and efficient utilization," orderly promoting the development of lithium resources, steadily advancing the mining of lithium mines in Dangba, Alabo, Longgu, and Jiada, and strengthening lithium resource exploration. Based on the development advantages of the lithium resource industry, it aims to create a "resource + capital" cooperation platform for the lithium industry, and establish a "resource mining area" centered around the "Keer Yin mining cluster." It also mentions achieving low investment, high output, low pollution, and high efficiency, while severely cracking down on illegal cross-border and private mining activities.

 

The "Overall Planning for Mineral Resources of Aba Tibetan and Qiang Autonomous Prefecture (2021-2025)" sets a goal to achieve new breakthroughs in lithium resource exploration by the end of 2025. It focuses on strengthening the exploration efforts of existing mining rights, improving the comprehensive exploration level of important mineral resources, increasing lithium resource reserves to meet the needs of establishing a lithium resource base, and discovering and evaluating one medium to large lithium mining site in the Keer Yin area.

 

 

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Note: This articleSource: Daily Economic News

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