Latin Lithium Part 1
Buckle up, this is going to be long. In Part 1 I'll cover an overview of lithium mining. In Part 2 I'll talk about some of the countries and companies in Latin America in the Lithium mining space.
What is Lithium?
The Irreplaceable Battery Element
Lithium is an element with the symbol Li. Its in the first column (group one) of the periodic chart, which means it has one electron in its outer shell (valence electron). That electron out there all by itself makes it easy to set free to go wandering, which is a great property for batteries. Li is also in the second row of the periodic table, which means it is light. With an atomic weight of 6.94 it is the third lightest element behind Hydrogen (H) and Helium (He).
Helium makes terrible batteries being way over in column 18 where it doesn't like to give up electrons. Hydrogen is also in column one and forms the basis of most of the energy sources through human history until very recently. Hydrogen is in coal, natural gas, oil, hydrogen fuel cells, and all kinds of fuels. All other elements are heavier than Lithium, which is why Lithium is the irreplaceable element in batteries where weight matters.
It's theoretically possible to have cheaper batteries for stationary applications like grid storage made out of cheaper but heavier elements like Sodium (Na), Zinc (Zn), or Lead (Pb). Though at present it's a Lithium battery (LiFe) that is winning the cheapest battery title.
Lithium has other uses from medicines to lubricants, but today we are just going to talk about batteries. Because right now lithium batteries are posed to become such a large user of lithium that everything else is rounding error. Battery growth is being driven largely by two markets: electric cars, and electric grid storage for solar and wind power. As technology advances lithium batteries are getting cheaper and that opens up both of those markets even more.
Finding Lithium isn't hard. With Gold if you find very much of it you can likely extract it profitably. Gold sells per gram/ounce, Lithium sells per ton. Lithium is all over, the challenge with Lithium is knowing if you can get it cheaply and process it cheaply enough to get to high purity.
What's the Lithium In Lithium Batteries?
There are a lot of different elements used in Lithium batteries, and it keeps changing as we get better.
Lithium Carbonate (Li2CO3 ) was the first real volume Lithium product sold for batteries. It is still used in a lot of battery chemistries including Lithium Iron Phosphate (LiFe) batteries. LiFe batteries are much cheaper to make since both Lithium (Li) and Iron (Fe) are relatively cheap and abundant. LiFe have less energy density than other chemstries so they tend to be used for stationary applications or where range isn't as important as cost.
Lithium Hydroxide (LiOH) is used in many more expensive higher engergy density battery chemistries. If you see a lot of Nickel or Cobalt in a battery it probably has Lithium Hydroxide as the form of Lithium.
There is also pure lithium metal which will be more relevant when solid state lithium batteries come out of the lab and into production. But it's not clear if solid state battery manufacturers will actually put pure lithium in the anode during manufacturing or if they will just put Lithium Carbonate or Lithium Hydroxide in the cathode and the lithium in the anode during operation will come from the cathode material.
How Is Lithium Mined?
There are two major source of Lithium today: Hard Rock mining and Brine Evaporation. There are two up and coming sources of Lithium: Lithium Clay and Direct Lithium Extraction. Let's dive into each.
Brine
Brine producers find underground aquifers that are full of salt. NaCl is table salt and LiCl is Lithium Salt, also known as Lithium Chloride. Brine producers pump the water out of the ground into large ponds lined with black plastic. Over time the water heats up and evaporates. As the water evaporates various chemicals dissolved in the water start to fall out of the water. There may also be various chemicals mixed in at various stages. After a lot of time, on the order of a year, you have lithium Chloride (LiCl) that falls out of the brine, which is easy to turn into Lithium Carbonate. Also worth noting is that Lithium Chloride is also easy to turn into pure Lithium metal should the battery manufacturers need.
Lithium Carbonate can be turned into Lithium Hydroxide but the processing is pretty expensive. It is because of brine producers that many think the price of Lithium Hydroxide should be higher than Lithium Carbonate by the cost to process Carbonate into Hydroxide. Also because Hydroxide tends to be used in the more expensive battery chemistries with higher engergy density, and many see the top end of the battery market as growing faster. I don't personally share that view. The Carbonate and Hydroxide markets are intertwined, but there is no inherint reason one should be higher than the other.
Brine producers tend to be in deserts both because that's where salt aquifers tend to be and also because water evaporates faster in the desert and it doesn't rain to reverse all the evaporation progress.
There are problems with traditional brine. One problem is that it is really hard to make a high purity product, leaving battery manufacturers to do additional processing to remove more impurities or to leave the impurities in and make a worse battery. The other problems have to do with the environment. The ponds necessary to hold a year's worth of water are massive covering huge amounts of land. Most salt aquifers in the desert don't refill quickly at all, so pumping water from them lowers the aquifer level. Imagine the scene from the movie There Will Be Blood where "I drink your milkshake" only instead of oil it is water. Dropping salt aquifer water levels can also impact the water levels of fresh water aquifers and surface water tables in the region.
Hard Rock
There are crystals in the ground that contain a lot of lithium. You mine them in pretty traditional hard rock methods that you would think of as mining. You might see things like bulldozers and dump trucks. The mineral they are mining for is called Spodumene LiAl(SiO3)2 and without getting into the chemistry it is easier for hard rock miners to process Spodumene into Lithium Hydroxide than it is to process it into Lithium Carbonate.
Clay
There is a lot of lithium in the world in sedimenatary layers at high concentration near surface that is contiguous across large areas of land. If you know anything about mining you know high concentrations near surface across large areas of land means inexpensive open pit mining. The problem to present has been how do you get the Lithium out of the clay?
Many companies have been experimenting with varouis processes to remove Lithium from various types of clay. There have been demonstration plants built that show it works on a small scale. Now, we are at a point in time where a lot of new money has been invested in Lithium Clay projects. Several are under construction with backing by major Lithium companies.
The problem of course is what if the pilot scale plants don't scale to full sized production, or worse if they do scale but the costs at production scale are higher than predicted. There is a lot of uncertainty that each company will be able to figure out how to cheaply extract the Lithium from their particular clay. Or maybe they can cheaply extract Lithium from some clay, and then move 200 meters to the west and find that something in the clay changed and they can't cheaply extract the Lithium from that clay.
Direct Lithium Extraction
The concept of Direct Lithium Extraction (DLE) is pretty simple. You pump brine out of the underground aquifer, you take the Lithium out of it, then you pump the now lithium free brine back into the underground aquifer.
DLE has several advantages compared to traditional brine evaporation ponds. You can extract the lithium in hours instead of a year. You need a reasonable sized building instead of black plastic ponds that stretch to the horizon. The aquifer levels stay stable because you are putting the water you take out back in. You can do it in places where it rains or where it is cold. The lithium you get out is very high purity. Also brines with lower concentrations of lithium can be economic that wouldn't be economic in evaporative ponds.
Standard Lithium has a DLE project in Arkansas, USA. I've been to Arkanas and had it rain for a week straight. Even if the state and the national environmental regulatory agencies would let you build ponds stretching on as far as the eye can see it just wouldn't work because it's too wet. E3 metals has a DLE project in Canada. Besides the problem that it rains Canada also has proper winters where all ponds would freeze solid.
Lake Resources partnered with Lilac on a DLE project in Argentina. The Lithium concentrations in their Kachi project are lower than concentrations in production aquifers in neighboring Chili. Standard Lithium's concentrations in their Smakover Aquifer project would also be considered low compared to those in traditional evaporation pond brine projects. But because of the processing speed the lower Lithium concentrations have less of a negative impact on the economics.
The trick of course is that like Lithium Clay there have only been pilot scale demonstrations of DLE technology. So like Lithium Clay it is unproven at production scale both in cost and in effectiveness.
Speculation
As an investor where do I put my money? I'm looking for projects that are high purity, low cost, and environmentally sustainable. There are projects in all four technologies that tick the low cost box and in all four technologies that don't.
Brine evaporation ponds are quite often the lowest cost, especially for Lithium Carbonate, but they struggle to produce a high purity product. They also set of red flags for me on environmental sutainablity more than any other technology.
Hard Rock I know and understand, and for Lithium Hydroxide are often the low cost producer. But not always.
Lithium Clay I'm still waiting for the technology to be proven out because it is complicated and site specific enough for me to not fully understand it. But I think several clay projects are going to be winners.
I am a big believer in DLE. All the DLE projects tick the high purity and environmentally sustainable boxes. The real question is if they can also tick the low cost box. I belive they can, at least for Carbonate. Currently I'm long Standard Lithium, and am taking a hard look at E3 and Lake Resources.