The lithium mining industry’s ups and downs since the
start of the decade has been nothing short of spectacular. Measured from
2020 lows to November 2022 highs the price of lithium carbonate in China soared
1,400%, spodumene concentrate from Australia racked up 2,100% gains and
European and US hydroxide climbed 804%.
Unlike nickel where swings have been equally wild,
the action was not a paper-based futures short squeeze or other trading
aberration but real-world transactions. The frenzy during the second half
of last year meant anyone that could find a way to bring lithium to market did
so – from direct shipping ore from Africa to lepidolite ramp ups in China to
tailings reprocessing and, such as there were, recycled material.
That meant the corrections were just as steep as the
ascent with prices halving or falling as much as 70% from the records set last
year. And of course the inevitable rebound over the last few months as
interest in the sector reached fever pitch and China’s reopening gathered
steam.
According to Fastmarkets, London-based research
consultants and pricing agency, there were 45 lithium mines operating in the
world in 2022, with 11 expected to open this year and seven next year.
With so much public and private money rushing into the sector the buildout
is likely to dampen prices according to the Australia’s resources ministry.
But bringing new lithium production to market has always
been a tricky prospect with building delays, budget blowouts and technical
challenges a marked feature of the industry. And government intervention
like the recent nationalization of the industry by the Chilean government,
Mexico’s new mining laws, a Chinese environmental crackdown and global
opposition to new projects – notably in Serbia where development of Rio Tinto’s
massive Jadar mine is stalling – further add to the uncertainty.
Risky business
Gene Morgan, CEO of brinefield services company Zelandez,
tells MINING.COM that unlike oil and gas exploration and extraction, there is
nothing cookie cutter about lithium mining.
“Oil and gas feedstock is relatively similar and
processing is more or less the same wherever you are in the world. But with
brines, for example, in South America, every brine is chemically different. It
requires a bespoke process and I think that’s the challenge for the industry.”
Morgan, who founded the company in 2018 after a
career in oil and gas, says the amount and quality of lithium in a brine
deposit is difficult to estimate accurately. Zelandez, which works across 30
projects in South America and is now entering the US, uses borehole
magnetic resonance – something akin to an MRI scanner but for rock – to analyse
the deposit.
The technical challenges do not end once the brine is
above ground and processing into lithium chemicals requires several steps,
including pumping, evaporation, precipitation, and filtration, which are not
the same from one brine to the next, says Morgan.
Further downstream there are complexities too with
battery manufacturers requiring different-specification products and stringent
certification processes. Morgan says “carmakers realise they have to move
upstream to secure supply but the risk profile of mining is just so much
greater than what they are used to with manufacturing.”
“It scares them a lot but they have no option in
order to avoid putting all their EV plans at risk. But the influx of
money because of the provisions of the IRA (US Inflation Reduction Act) over
the last six months have been incredible. The IRA has really
changed the game.”
The new fracking
While most lithium projects in North America are
hard-rock, Zelandez believes the IRA will see many brine projects come out of
the woodwork. Clayton Valley, the only lithium mine in production, is of course
a brine operation and there are a number of other brine assets in the US
including in the California, Nevada region.
Morgan says lithium production in the US carries the
legacy of the shale oil and gas boom which made the country the largest
producer in the world surpassing Saudi Arabia yearsback.
Lithium in the US will eventually “punch above its
weight” in terms of producing assets and Morgan expects new technologies like
DLE (direct lithium extraction) and reinjection will open up the space just
like fracking and horizontal drilling achieved in shale oil.
Oil and gas workers can also help alleviate the acute
skills shortage that exists in lithium which is starting from such a low base
as both industries require a similar understanding of geology and exploration
techniques for fluid resources.
“There’s probably 50 companies around the world with
DLE technology. It’s extremely competitive and there are only so many projects.
The technology is still fairly immature and we’re only just seeing some
entering the commercial stage. There will be few DLE winners.”
Morgan says despite the fact that DLE is still in the
early stage, the technology is needed to meet demand because you just cannot do
it with evaporation ponds alone – “there are just too many challenges around –
either you lack evaporation rates or you may have high impurity levels which
make conventional processing just too difficult.”
DLE can be applied to very low grade oil field brines
or high grade salars, but says Morgan, one technique won’t work on all brine
deposits; it has to be tailored to the specific chemistry: “It’s very bespoke.”
Saluting salars
Zelandez believes the talk of Chile “nationalising”
its lithium industry is overblown:
“It was a path set long ago and now that the rules
are clearer and the uncertainty has gone away it gives companies confidence to
invest.”
Indeed, after an initial pullback on the news of
Chile’s public-private model, shares of SQM and Albermarle, the sole lithium
producers in Chile, have rebounded. Lithium production in the South American
nation, the world’s number two producer behind Australia, is set to increase
over the medium term and in another show of confidence on Friday SQM signed a
massive new long-term supply deal with Korean battery maker LG Energy.
At the same time investment in Argentina’s lithium
resources is booming as deals with the EU, India and China transform the country’s mining and refining
industry.
Morgan, who is based in Bolivia, says the
country’s lack of progress has been frustrating, but recent announcements
including a deal between state-run YLB and CATL, the Chinese battery giant, is setting the scene for
quicker development.
There is also a growing acknowledgement inside the
country that lithium is a key pillar for the future of the Bolivian economy
“and with elections coming up, lithium is going to be front and centre”.
It’s not just upstream that is being transformed,
chemical processing and conversion is being restructured just as fast says
Morgan with not just the US but countries like Japan – where Morgan recently
visited – also see the need for a rapid decoupling from China where 70%-plus of
global chemical processing is taking place at the moment.
“From a supply chain perspective it just makes sense
to do conversion in the same place you have gigafactories.”
Price floor
Morgan does not see the lithium-ion EV juggernaut
slowing down any time soon despite ever changing government subsidy and
investment criteria and new technologies like the commercialisation of
sodium-ion batteries, fuel cell powered vehicles or the uptake alternatives to
lithium for use in energy storage systems like vanadium redox flow
technology.
“You have ten years of significant development
of lithium-ion batteries in terms of performance and chemistries, but
crucially it’s the investment in the global supply chain over the past
decade.”
“Investment in battery factories is roughly three to
four times the pace of the upstream so lithium mines can’t be built quick
enough.”
“There’s going to be a massive need to keep building
mines into the 2030s, but then add the fact that we’re only just starting to
see the beginnings and understand the true size of the energy storage market
and that could be as big if not bigger than the demand from EVs.”
As for pricing Morgan does not see lithium going for
less than $20,000 a tonne in the foreseeable future adding that spot prices in
the $70–80,000 a tonne range seen last year wasn’t helpful either:
“At $20,000 to 30,000 a tonne downstream is still
making margin and upstream still has incentive to invest.” As for spodumene,
Morgan sees $2,000 a tonne as the likely floor for the feedstock.
Mining.com