Lithium- Kashmir's White Gold

The GSI, for the first time, had established lithium reserves of 5.9 mt in the Salal-Haimana area of Reasi district in Jammu and Kashmir. The finding was based on exploration carried out by the agency in the shadow of the pandemic in 2020-21 and 2021-22. In one stroke, this put India among the top 10 countries with lithium reserves.

The impact was immediate. At least half a dozen companies said they were interested in developing the precious resource. Suitors included high-profile names such as Sajjan Jindal’s JSW Group. Jindal told the Financial Times in April 2023 itself that he would “100 percent bid for the lithium blocks” a claim he would reiterate in March 2024. Hindalco Industries, Ola Electric, Vedanta Group and Shree Cement were some of the other interested parties.

Buoyed by such interest, the government moved quickly. Critical minerals, including lithium, were off limits for private miners in the country back then. In August 2023, the rules were amended to let private miners bid for these resources. By November, the stage was cleared for auction of the resource. The reserves put up for bidding in Kashmir were among 20 blocks comprising minerals worth an estimated ?45,000 crore.

The lack of bidders at the auction, which ended in the second half of January, was a sobering reality check. The reserves in Kashmir received only two bids, forcing the government to cancel the auction—less than three bidders makes the process invalid.

LITHIUM- A critical component in the global war against Climate Change

Lithium is a critical component in the global war against climate change and forms the bedrock of the batteries that power industries such as energy, consumer electronics and transport. The metal’s demand has zoomed in the last decade, earning it the moniker ‘white gold’, and is set to multiply manifold over the coming years. For an import dependent economy like India, the discovery of the reserves is a big deal, justifying the hype around its discovery. Why then is the industry reluctant to walk the talk?

UNPROVEN

The biggest factor deterring most companies from the bidding process is that the reserves are unproven and highly speculative. There are four stages of exploration for any mineral deposit—G4, G3, G2 and G1—as classified by the United Nations International Framework Classification for Reserves/ Resources (UNFC-1997). The reserves in Kashmir are classified under G3, the second stage of preliminary exploration, after reconnaissance.

G3 findings are inferences about mineral resources, where quantity, grade and mineral content have been estimated with a low level of confidence. Following this, geologists undertake more intense exploration to reach the G2 stage of general exploration, and then the final G1 stage of detailed exploration. It can take years to decades to get from one stage to the next.

International experience shows it takes, on average, 16.5 years from the discovery of critical minerals to production. In addition, J&K’s resources are currently at an inferred G3 stage, so further exploration will be needed to determine the extent of the reserves that are economically recoverable.

Bidding for resources with preliminary exploration is considered very risky as there is no certainty either on the quantity or quality. Companies find it difficult to put a fair value of the resource based solely on GSI’s assumptions.

LACK OF KNOW HOW

The other big reason for the tepid interest is lack of technical knowhow within the industry when it comes to mining lithium. Most of the lithium being mined globally today is found either in the form of brine—accumulation of saline groundwater enriched in lithium—in South America, or in the form of hard rock, in Australia. The lithium in Kashmir is neither brine nor hard rock but clay deposits mixed with other minerals, including bauxite. Commercial-scale extraction and production of such deposits is yet to be tested globally.

India’s domestic mining industry is largely made up of local companies, including public sector undertakings. Multinational firms such as Rio Tinto and BHP have tried to enter the market but with little success. Their absence has resulted in a lack of technical expertise, especially in the area of exploration and prospecting.

Global mining companies haven’t had a good experience in India. We auction our mines here unlike the ‘first come, first served’ system followed by most other mineral-rich countries like Australia and Canada. Global firms are not very comfortable with this given the uncertainties and risks involved in mining.

SENSITIVE LOCATION

A third stumbling block is the location itself. Situated 50 kilometers from the line of control in the country’s most politically volatile state, Kashmir is one of the least mined regions in the country. Added to that, the Himalayas are an ecologically fragile mountain range as the land subsidence in nearby Ramban earlier this year and Joshimath in Uttarakhand last year show.

Lithium mining can take a heavy toll on the environment— it takes about 2.2 million litres of water to extract one tonne of the metal. Any mining efforts run the risk of resistance from not just the green lobby but also the local population.

LITHIUM IS THE FUTURE

Due to its ability to pack energy, lithium is the key component in batteries that power modern appliances, ranging from smartphones, laptops and smartwatches to wearables and tablets. Beyond appliances, the metal has applications in other industries, such as the power sector, where it supports stationary grid storage for solar and wind energy and transport for electric vehicles.

With no production in the country, this is a massive deficit area for India. Lithium-ion imports shot up from just $94 million in 2014-15 to nearly $3 billion in 2023-24. This is only the start and as demand for electronics, renewable energy and electric vehicles (EVs) rises, so will the clamor for lithium. The big driver could be EVs. From under 25% today, EVs could account for nearly 75% of the demand.

The estimated demand of critical minerals like lithium, nickel and cobalt is half of the reserves that are already known and economically recoverable today. Therefore, the abundance of these raw minerals does not limit a smooth transition to EVs.

Where does all the lithium come from right now?

While the South American lithium triangle of Bolivia, Chile and Argentina accounts for more than half of the global reserves, production is concentrated in Australia, Chile and China. But having the resource and mining isn’t enough. Lithium also needs to be refined and that is where China has a stranglehold, accounting for two-thirds of world’s refining capacity.

Not surprisingly, around 75% of imported lithium ion in India comes from China. Alongside mining the reserves in Kashmir, India would also need to set up sufficient refining capacity to be truly self-reliant.

India will need to secure access to capital and technology to extract lithium as well as build processing and refining infrastructure.

The uncertainty surrounding the scale of the reserves, coupled with the long-time lag before production commences, means that India cannot be complacent in sourcing lithium externally to meet its clean energy manufacturing ambitions.”

Even if everything eventually falls into place, it will be years before lithium production takes off in India. But it will be a start.