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Could Lithium Become A More Lucrative Alternative To Fossil Fuels?

While the world is still relying heavily on fossil fuels, and the revenues they bring in, as green energy becomes more widespread, we can expect a new range of high-cost energy projects that could earn countries billions. The global demand for metals and minerals has been on the rise for years and is continuing to climb rapidly -too fast, in fact, for mining activities to keep up. As the need for these resources becomes greater as the world undergoes a green transition, the price of minerals, such as lithium, and metals, such as copper and zinc, are expected to soar. And this could be just the incentive that is needed to turn efforts away from fossil fuels to greener alternatives. 

Australia, which still relies heavily on coal mining for its economic prosperity and energy security, is beginning to turn its attention to lithium. With extensive mining experience and huge lithium reserves, Australia could play a major role in the green transition and make good money while doing it. Chile and Australia are home to the largest lithium reserves in the world, with 9.2 million metric tonnes and 5.7 million metric tonnes of lithium respectively. And while Chile has the bigger reserves, Australia is already exploiting its mining potential successfully, with a lithium output of around 68,450 metric tonnes in 2022 compared to Chile's 26,000 tonnes output. 

Despite the potential for a shift to lithium mining, Australia continues to mine huge amounts of coal, the dirtiest fossil fuel, every year. Australia's coal production increased by around 3.5 percent in 2021 and remained flat in 2022, at 565.1 million metric tonnes. While there is significant pressure to achieve the government's net-zero carbon emissions by 2050 target, by December 2021 there were 37 coal projects at the feasibility stage. With 74,147 million tonnes of black coal and 74,039 Mt of brown coal, it's no wonder that Australia wants to continue producing the fossil fuel, particularly as demand for Australian coal exports in Asia remains high. However, there may now be a cleaner and more lucrative alternative for the mining industry - lithium. 

Australian lithium exports could be earning as much as sales from thermal coal within the next five years as demand for the white gold increases with the uptake of electric vehicles (EVs) and other battery technology rises. Meanwhile, the value of fossil fuels is expected to decrease as demand trails off in favour of green alternatives. Recent data from the Australian government suggests that the country's lithium production could double by 2027-28, with revenues expected to triple. And the value of Australia's coal exports is expected to fall by over 70 over the same period. 

The price of lithium is expected to reach around $19 billion this year before dropping off as new mines open around the world, balancing out supply and demand. The value of lithium is expected to rise again after this slump as demand continues to climb well into the next decades. With EV sales projected to see tenfold growth between now and 2030, as well as the demand for batteries for electrical devices and renewable energy projects expected to rise sharply, there will be a much greater need for lithium. In addition to lithium, Australia has around 22 percent of the world's nickel reserves and 21 percent of its cobalt, meaning that a move away from coal does not spell the end for the country's mining industry or role in the international energy industry.

Australia aims to be producing 116,240 tonnes of lithium a year by 2026, which could make it the world's biggest producer. Although it will see strong competition from the South American Lithium Triangle development between Chile, Bolivia and Argentina. The three countries together account for approximately 56percent of the world's lithium supply. Much of the investment in the region comes from China, which has acquired several Argentinian, Chilean, and Bolivia lithium mining operations. China invested around $16 million in mining projects in the Lithium Tringle between 2018 and 2020 and is expected to continue investing in the region. 

China controlled around 65 percent of the world's lithium processing and refining capacity in 2021, a figure that is continuing to grow in line with its investments in new lithium projects. Although it only had access to around 25 percent of the world's reserves. Joe Lowry, president of consultancy Global Lithium, explained "China is vulnerable as it lacks [lithium] resources at home, and has to rely on supply from other countries." This means that countries such as Australia and those in the Lithium Triangle have significant potential to shape their mining operations and position themselves in the global metals and minerals market as the world shifts away from fossil fuels to green alternatives. 

By Felicity Bradstock for Oilprice.com 

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Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More