It Looks Like A Monumental Lithium Jackpot

Mike Leslie
July 8, 2024

Lithium, hailed as the "white gold" of modern times, is critical to battery technology and renewable energy initiatives.

Inputs that matter: The soaring demand necessitates ramped-up production, urging advancements in mining, refining, and sustainable extraction and processing technologies.

  • Although lithium is not rare, it is highly reactive and never found in its pure form in nature.
  • With the price of lithium batteries constituting 40% of an electric vehicle’s production costs, major EV manufacturers like Tesla, Ford, and BYD are actively seeking cost-effective alternatives.
  • Car manufacturers favor lithium-ion batteries because they can store significant energy in compact spaces and quickly recharge.
  • Lithium iron phosphate batteries are esteemed for their safety and durability, making them ideal for stationary storage and secure EV applications.

The opportunity: China currently leads the lithium battery production market, but the United States and latecomer South Korea aim to challenge its dominance.

  • In the US, commercial-scale lithium production mainly comes from a brine operation in Nevada.
  • Direct lithium extraction from geothermal brines (e.g., Salton Sea, CA) and produced water from shale gas fracking (Texas).

Zoom in: The lithium cycle begins with magma that contains lithium rising to the Earth’s crust during volcanic activity.

  • This magma cools and crystallizes into rocks such as granites or pegmatites.
  • Over thousands of years, weathering breaks down these rocks, releasing lithium salts that flow into rivers.
  • Most of this dissolved lithium ends up in the oceans.
  • However, rivers terminate in closed basins in some high mountainous regions like the South American Andes.
  • Here, water evaporation leaves behind lithium-enriched brine in salt flats, known as salars.
  • Besides these natural deposits, lithium can also be sourced from oilfield brines, geothermal brines, and clays.

Between the lines: According to the International Energy Agency (IEA), most of the EV battery supply chain is expected to remain concentrated in China for the foreseeable future.

  • Countries like Australia, Chile, and Argentina hold substantial lithium reserves and are significant players in the global supply chain.
  • Political stability in these countries is crucial as unrest or policy changes can disrupt supply and affect global prices.
  • International trade policies, including tariffs and trade agreements, further influence the flow of lithium across borders.

Follow the money: Albemarle, based in North Carolina, is the largest lithium company by market cap and the world’s leading lithium producer, boasting over 7,000 global employees.

  • Primarily operating in Chile, SQM extracts brine from the Salar de Atacama and processes lithium chloride into lithium carbonate and hydroxide at its Salar del Carmen lithium plants near Antofagasta.
  • Tianqi Lithium, the world’s largest hard-rock lithium producer, is a subsidiary of Chengdu Tianqi Industry Group based in China.
  • The company holds a notable stake in SQM, acquiring a 2.1% share in 2016, later increasing it to 23.77%.

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