Lithium Australia NL (ASX: LIT) shares are on the move after the company released a positive update this morning. In early trade, the Lithium Australia share price is soaring 6.82% higher to 11.75 cents.
In today's update, the company shared that its subsidiary, VSPC Ltd, has received encouraging results and can potentially commercialise its lithium ferro phosphate (LFP) products.
Let's look closer at today's news out of Lithium Australia.
What's driving the Lithium Australia share price?
The Lithium Australia share price has bolted out of the gate this morning after the company advised a pre-feasibility study found VSPC's LFP cathode powders to be of superior quality and performance than most other products available.
The study also gave VSPC information on the costs and benefits to begin commercially manufacturing its LFP cathode power.
Lithium Australia said steps towards the production of LFP cathode powder will likely begin shortly. It has a goal of producing 10,000 tonnes per year by 2026.
The study also found the most economically sound location to produce the product is in India. Although, the company is still contemplating other up and downstream opportunities that may exist if it is produced in Australia, the United States, South Korea or Europe.
Producing LFP cathode powder in India could see the company with earnings before interest, tax, depreciation and amortisation (EBITDA) of US$66 million a year, as well as a free cash flow of US$56 million per year. The plant itself would cost US$113 million and take two years to build.
Next, Lithium Australia will conduct a feasibility study and a business case review for basing the plant in India. It will also conduct a life cycle assessment analysis of the project to determine its carbon footprint and sustainability.
Is LFP the future of lithium technology?
In today's release, Lithium Australia stated it believes LFP is set to become the dominant lithium-ion chemistry in China over the next few years. It expects this trend will become global, in which case VSPC is in a position to supply the market with little competition.
Lithium Australia said only 2% of LFP cathode products are produced outside of China. Due to China's own electric vehicle (EV) industry, EV manufacturers in other nations, Europe and the US in particular, may seek out locally produced LFP cathode powders.
Volkswagen has recently announced its entry-level EVs will be powered by LFP. Lithium Australia hopes other EV manufactures will follow suit.
The company also noted that potential demand for LFP may come from creators of battery energy storage systems.
Commentary from management
Lithium Australia managing director Adrian Griffin said the pre-feasibility study demonstrated VSPC is able to produce some of the most advanced LFP cathode powders available. He said:
These major milestones have been achieved in an environment in which the largest electric vehicle producers are moving to incorporate LFP lithium-ion batteries into entry-level vehicles, due to their superior safety, lower cost, longer life and reduced exposure to conflict metals. These LFP attributes are also expanding its utilisation in stationary energy-storage applications. Indeed, major battery producers worldwide are racing to expand their LFP production to meet demand as LFP becomes the fastest growing sector of the battery industry.
At present there is little LFP production outside of China, with original equipment manufacturers striving to secure alternative supply chains. Lithium Australia and VSPC aim to provide that supply chain security.
Lithium Australia share price snapshot
The Lithium Australia share price has been soaring on the ASX lately and today's news has provided a further boost.
As is the case for many ASX listed lithium producers, Lithium Australia shares have boomed in 2021. They are currently up by almost 96% year to date. The Lithium Australia share price is also up by 135% over the last 12 months.
The company has a market capitalisation of around $98 million, with approximately 897 million shares outstanding.
