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 years back.
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 with Korean battery maker LG Energy.
At the same time investment in Argentina’s lithium resources is booming as 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 , 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.
