JAKARTA – State-owned tin company PT Timah has been tasked with leading the hunt for the one key mineral Indonesia doesn’t seem to have to manufacture lithium-ion batteries: lithium itself. Most experienced geologists feel Timah may be on a fool’s errand.

Mining officials say the search has been focusing on possible deposits in Tikus, on southern Sumatra’s tin-rich island of Belitung, in Hatapang in central North Sumatra and in Aceh’s Tigapuluh mountain range. But that may be more for public consumption than anything.

Geologists rule out Tikus, which is best known for its ironstone, and they doubt the other locations are any more promising when lithium, a soft, silver-white metal, is found in “brines” or “hard rock” in mostly arid regions tropical Indonesia doesn’t have.

Conveniently, Australia does. Boasting at least 4.7 million tonnes of reserves, it is the closest “hard rock” source of a lithium-bearing mineral known as spodumene, which is used to produce lithium hydroxide, a compound now preferred by battery producers.

South American countries like Bolivia, Chile and Argentina are best known for brines, where lithium salts are pumped to the surface and evaporated, with chemical processors turning it into lithium carbonate, a similar inorganic compound.

Indonesia has everything else needed for lithium batteries: world-leading reserves of nickel — and associated cobalt– in Sulawesi and Maluku, manganese in East Nusa Tenggara, graphite deposits in Southeast Sulawesi, some vanadium in western Java and rare earths in the tin-mining waste of Bangka and Belitung.

Cashing in on the demand for batteries and copper for the ever-growing electric car industry, Indonesia aims to re-establish itself in the global supply chain on the back of a value-added mineral policy that was greeted with widespread skepticism when it was introduced in 2012.

Photo: iStock
Rolls of copper in a representational image. Photo: iStock

That was because all the initial attention centered on demands for Freeport McMoRan Copper & Gold (FCX) to build a second copper smelter to refine the rest of the concentrate from its Grasberg mine, a marginally profitable process that adds only 5% to its value.

Nickel smelting, on the other hand, contributes as much as 40% to the final product and was always seen as the more promising mineral to drive the policy of making more out of Indonesia’s natural resources. Electric cars have proven that, with China faster off the mark than anyone.

Orias Moedak, chief executive of MIND ID, the newly created, state-owned mining holding company, says apart from Australia, Indonesia is also targeting Peru, Canada, Jordan, Laos, Morocco, Senegal and Malawi as potential lithium suppliers.

Some don’t yet appear on the lithium map, but with the US Geological Survey (USGS) identifying 80 million tonnes of reserves worldwide, many countries are in the early stages of exploration and have still to commercialize their resources.

Currently, the USGS lists Bolivia (21 million tonnes), Argentine (17 million), Chile (9 million), the United States (6.8 million), Australia and China (4.5 million) as having the largest overall reserves, regardless of their stage of development.

A spokesperson for West Australia’s Department for Jobs, Tourism, Science and Innovation said the state government has not yet been approached by either the Indonesian government or Tsingshan to supply lithium, but that might not apply to contracts with private companies.

Australia was by far the largest lithium producer in 2019-2020 with 208,000 tonnes, far ahead of Chile’s 140,000 tonnes. Much of it was extracted from spodumene, which is rarely found anywhere except in the outback areas of West Australia.

Last year, world demand for lithium was 305,000 tonnes, but the West Australian Government’s Office of the Economist estimates it will rise by nearly 40% to 426,000 tonnes this year and rapidly climb to more than one million tonnes by 2026.

The state now has six operating mines, with another coming into operation this year. The largest is Talison Lithium, 240 kilometers south of Perth, a joint venture between Albermarle Corp, a US chemical company, and China’s Tianqi Lithium, which effectively controls 46% of the global production of lithium.

A lithium rock mining site in Australia. Image: Talison Lithium

The two partners are spending US$1.2 billion on three lithium hydroxide plants due to come on stream in 2021-22. Covalent Lithium – an Australian-Chilean undertaking – is building a fourth at Mt Holland, site of an open-pit lithium mine 350 kilometers east of Perth.

Mount Marion, another deposit east of Perth, is the main source of lithium for China’s Ganfeng Lithium, which occupies a unique place in a broad swathe of the lithium battery supply chain, including refining and processing, battery-making and recycling.

Ganfeng also recently strengthened its stake in London-listed lithium developer Bacanora, owner ofsignificant deposits in Sonora, Arizona, and Mexico, and also with aninterest in a Lithium Americas project in Nevada’s high desert.

China’s dominant role in the industry worries Washington, which recently announced a $30 million research project to ensure that American business has access to a sustained domestic supply of lithium, cobalt, nickel and rare earth minerals.

“This is a race to the future that America is going to win,” said US Energy Secretary Jennifer Granholm, later telling the New York Times: “China just put out its next five-year plan. They want to be the go-to place for the guts of the batteries, yet we have these minerals in the United States. We have not taken advantage of them, to mine them.”

Although China’s Tsingshan Steel owns two major nickel-smelting complexes in Central Sulawesi and across the sea in North Maluku, which will soon begin making lithium batteries, it will likely not be looking to its home country as a source of the metal.

China produces about 170,000 tonnes of lithium and currently controls about 80% of the lithium-ion battery supply chain. But because of its high consumption rate, it also imported large amounts of the material to supplement domestic production.

Much of that is from Australia, even though last year Beijing stopped buying Australian coal, copper ore and concentrate, sugar, timber, wine and lobster in protest over Canberra’s efforts to push an international inquiry into the origins of the Covid-19 pandemic.

The price of lithium fell in 2020 because of slower growth in China’s electric car industry, but that is expected to change in 2021-2022 with the average price of spodumene concentrate forecast to rise from US$430 to $580 a tonne and lithium hydroxide from $7,640 to $10,000.

Employees in the workshop of a lithium battery manufacturing company in Huaibei, eastern China’s Anhui province, November 14, 2020. Photo: AFP/China OUT/Stringer

Meanwhile, in Indonesia, officials now say the talks between Tsingshan and FCX over the proposed construction of Freeport’s copper smelter at the Chinese company’s Weda Bay industrial site may not be dead in the water after all.

Coordinating Minister for Maritime Affairs and Investment Luhut Panjaitan indicated in a phone interview that Tsingshan may relent on its demand for a 5% discount on Freeport copper concentrate, one of the key obstacles to the joint project.

While there are other issues to be resolved, Panjaitan has always pushed the idea of moving the smelter from Gresik, East Java, to Halmahera because of the synergy involved and because Weda Bay, lying on the east coast of Halmahera, North Maluku’s largest island, already has infrastructure in place.

Tsingshan is now the world’s largest stainless steel producer, reporting $260 billion in sales and operating a supply chain that incorporates mining and nickel pig iron smelting through to stainless steel smelting and related product manufacturing.

A copper processor would give the Chinese giant a ready supply of sulphuric acid, a by-product of the smelting operation that is needed in the manufacture and also recycling of lithium batteries.

Three times more copper is also used in an electric vehicle than in an internal combustion engine, which would create opportunities for growing the sort of ancillary industry now missing from around Indonesia’s only existing copper smelter near Gresik.

Tsingshan had agreed to pay 85% of the cost of the new $2.5 billion, 2.4 million ton smelter, which would otherwise have to be borne by FCX and the Indonesian government, the 51% majority owner of subsidiary PT Freeport Indonesia. 

Economic Coordinating Minister Airlangga Hartarto, chairman of the second-ranked Golkar Party, is believed to still favor Gresik’s Java Integrated Industrial Park Estate (JIIPE) for the project, a position that may be grounded in politics given East Java’s 31 million voting population compared to North Maluku’s 665,000.