When I talk about the lithium miners with industry experts and industry insiders, the most interesting and yet unknown area, involves that of the disruptive lithium extraction technologies.
In response to several Seeking Alpha commentators requests, I take a look at the latest lithium extraction techniques and try to draw some conclusions. My purpose is to summarize the main options, and then to let investors and other experts give their input to reach the best conclusions, recognizing my limitations of not being a chemical engineer or expert in this area.
History of lithium processing summarized
Lithium is processed from:
Brine - Using evaporation (18 months), then leaching. Costs are about USD 2,000/tonne of LCE. Slow process time, low (40-50%) lithium extraction rate, high start up costs.
Spodumene - Using crushing, roasting, leaching. Costs about USD 4,500/tonne of LCE, plus extra costs of around USD 3,000 to convert to higher battery grade lithium. Quick process time, lower start up costs.
Clay - Not yet proven to be cost viable, and not yet done commercially.
Put simply, extracting lithium from brine is cheap but slow, from spodumene is expensive but fast, and from clay is not yet commercially proven at scale.
It is the cost of "crushing and roasting" that renders the cost of lithium from spodumene uncompetitive compared to the production of lithium chemicals from brines. Despite spodumenes costing more to produce they still make up around 50% of the lithium market as lithium demand is currently so strong (and some low iron spodumene is used in ceramics and glass). Additionally, one also needs to consider that lithium concentrate is considerably higher in pegmatites (spodumene (LiAlSi2O6) is found in pegmatites) at around 8%, than in brines, helping pegmatite deposits to be economically viable and able to compete with brine deposits.
After the brine mines came online, and before the recent electric vehicle (EV) and lithium boom, virtually all of the spodumene producers went out of business as they had a higher cost of production (the exception was the Greenbushes mine that could sell low iron spodumene for the ceramics and glass market).
A key issue for the spodumene miners is how can they get their costs of production down, so that they are able to compete when the lithium price turns down again. For the brine miners, the question is how can they produce more volumes and quicker, with less environmental damage. The answer to this will be in developing new lithium extraction techniques to disrupt the industry.
The latest lithium extraction techniques
The four leading technologies involve leaching, solvent extraction, geothermal extraction, and electrolysis. In some cases there is a combination of the above.
I will look at each leading company and what technology they are pursuing.
Lithium Australia (NYSEARCA:LIT) - Price = 0.28
Lithium Australia is a dedicated developer of disruptive lithium extraction technologies including the versatile "Sileach" process, which is capable of recovering lithium from any silicate minerals. Lithium Australia has strategic alliances with a number of companies, potentially providing access to a diversified lithium mineral inventory globally. In some case Lithium Australia has gained free access to process the lithium micas (waste ore), which they believe can be profitable using their Sileach technology.Sileach is based primarily on using sulfuric acid as the key reagent along with Lithium Australia's proprietary Lixiviant preparation to leach (actually dissolve) the Lithium from the spodumene ore, or from brine. The key is that it does not use roasting, thereby reduces cost.
Sileach process steps
Sileach cost of production comparison
According to Lithium Australia, the Sileach process will cost around USD 2,000 per tonne, putting it on par with the cost of the brine producers. The advantage is that the process takes only 4 hours, to extract 90% of the lithium, and is effective on spodumene, and supposedly on clay. Unlike conventional processes, the Sileach process does not require a roasting step, and therefore has the potential to be much more energy efficient. Reduction of energy consumption, together with the potential to recover valuable by-product credits, may provide cost efficiencies which were not previously possible. The Sileach process cost is shown below by the red arrow, and the spodumene average costs is shown by the blue arrow.
Sileach in the cost curve
Lithium Australia are currently starting a pilot plant project partially funded by the Australian Government backed ANSTO, in News South Wales, to further test their technology. By late 2016 they plan to build a demonstration plant, and in 2017 they hope to start a commercial production plant.
Pilbara Minerals (ASX:PLS) has agreed to share equally in the operating costs of the pilot plant program (estimated to be approximately $400,000). If the program is successful, the parties will commit to form a 50/50 joint venture and undertake a Pre-Feasibility Study on the establishment of a large-scale pilot plant facility in the Port Headland area, the capital cost of which would be met by Lithium Australia.
Lithium Australia are also applying their Sileach technology on the Alix Resources (OTCQB:ARXRF) (TSXV:AIX) clay lithium Electra project in Sonora Mexico, next door to Bacanora Minerals (OTC:BCRMF) [TSXV:BCN]. If this succeeds it will open up clay based lithium projects to the market, and help establish the Sileach technology. Additionally Lithium Australia have been able to take a 25% equity stake in Alix Resources.
POSCO (NYSE:PKX) - Price = USD 48.81
POSCO has developed their own secretive lithium extraction technique, since 2010, possibly using leaching. It is reported to have an 80-90% lithium recovery rate when using it on brine, and taking just 8 hours. POSCO have had several failed attempts at partnering up with a lithium project - initially in Bolivia, then Chile, then with Lithium Americas in Argentina. In February 2016, POSCO stated that it planned to build a large scale lithium processing plant in Argentina, which would utilize a lithium supply contract with Lithea Inc. of Argentina, the company owning the mining rights of Pozuelos Salt Lake in Argentina, securing the stable permissions to access the lake. They hope to produce 40ktpa of LCE by end 2017, and 135ktpa of LCE by 2020.
Note - Seeking Alpha commentator "philtskier" has stated (see comments section) after visiting POSCO's project, "my view is POSCO and Lithea will never bring Pozuelos into production using any of their so called new technologies. Having visited Salta in the last few days POSCO seems to be hiding and covering up everything because their so called processes are costing a rumored $14,000 per tonne at their 2,500 (tonne) pilot plant and using a version of a patent that was developed in the 60's. No-one I know in Boliva, Chile, Peru or Argentina (nor their suppliers in Salta) can pinpoint this so called new technology. If they have brines with all the 2 valency ions removed it should only take 15 minutes not 8 hours to produce lithium chloride and another 15 minutes with some sodium carbonate to produce lithium carbonate." I would be happy to hear from POSCO if this in not true, and if they can offer details on their technology and cost and rate of extraction.
Simbol announced in late 2012 that it had developed proprietary separation technology capable of extracting high-purity lithium carbonate from hydrothermal brines, a by-product of the geothermal power plants that operate on Southern California's Salton Sea. Reports suggested they would use "reverse osmosis", however their website discusses using hydrothermal brines, a by-product of geothermal power plants. They use a proprietary technology that seamlessly bolts onto existing geothermal power plants. The company states that their, "separation technology extracts lithium, manganese, and zinc in high quality at the first product cut. We transform these materials using by-products from the geothermal plant, such as CO2, wastewater, and condensate, into high performance battery materials using our proprietary materials synthesis technology."
Tenova Bateman (private)
Tenova is a worldwide supplier of advanced technologies, products, and services for the metals and mining industries providing innovative, integrated solutions for complete process areas.
Tenova has developed a lithium "solvent extraction" technology they call "LiSX".
LiSX technology achieved spectacular results at bench scale with 100% Lithium extraction at robust purity, lithium chloride solution (>99.9%), in just 1 day.
"Brine is pumped from underground and filtered to remove magnesium and calcium. It's then mixed with a proprietary solvent that selectively removes only the lithium. The lithium in the brine combines with the solvent, even at low concentrations (as low as 20ppm). The solvent is then moved into settling tanks where it is collected. The lithium is removed from the solvent, and processed into high purity battery materials such as lithium hydroxide. Now that the solvent has no remaining lithium in it, it's available to be recycled and used again. The process is continuous, takes less than a day, and the lithium free brine would be re-injected back into the ground, providing a uniquely sustainable low energy intensive, and truly green solution."
Eramet are a large French mining and metallurgical group. The company acts at each stage of the chain from exploration to mining to extraction to final metal product. 2015 sales revenue breakdown was 46% manganese, 32% alloys, 22% nickel. You can read more about ERAMET here.
ERAMET's lithium "solvent extraction" technique appears similar to Tenova.
The brine goes through columns filled with solid beads which retain lithium, whereas the majority of other elements such as magnesium, calcium, boron, and sulphates are not captured. These are then discharged with the brine. After the brine has gone through the unit, a solution is used to recover lithium from the beads to which it is attached. You can view the full flow chart here.
Currently ERAMET are working on their Centenario-Ratones Argentine lithium brine project, with their Salta Government partner REMSA. In 2016, the ERAMET Lithium Project will enter the last phase of its development. After two years of development and optimization studies at lab scale and through continuous piloting, the Direct Extraction Process will be piloted at an industrial scale this year to finalize engineering studies and qualify the product for future clients.
ERAMET plan is to produce 20ktpa of LCE, before 2020.
ERAMET Centenario-Ratones Argentine brine project
Neometals has developed the ELi Process. The ELi process converts spodumene concentrate into a high purity lithium chloride solution, then uses "electrolysis" to produce high purity lithium hydroxide and lithium carbonate.
Put simply the plant takes in lithium ore or brine, adds hydrochloric Acid ((HCl)), then using electrolysis splits the compound to separate out the lithium to form lithium hydroxide.
Electrolysis involves using electricity to split the lithium compound to form lithium hydroxide. The advantages are it is a fairly simple process, and plant capex can be reasonable. The main problem has been that electrolysis uses a lot of electricity, so it can be costly, especially if your electricity source is not cheap.
Neometals (70%)/Mineral Resources (30%) ELi process
Whilst electrolysis is expensive as it uses a lot of electricity, according to CEO Chris Reed the end result of producing lithium hydroxide is worth it, as it sells above USD 10,000 per tonne compared to spodumene around USD 600/tonne.
Plant cost is estimated at just USD 83m (in Malaysia), and can be completed within 2 years. Next steps is a pilot plant in 2017, then all going well, full production of the hydromet plant by 2019.
Neometals focus is on the commercialisation of its patented "ELi" downstream lithium processing technology held in Reed Advanced Materials Pty Ltd (RAM). RAM is beneficially owned 70:30 by Neometals and Mineral Resources. The Feasibility Study (FS) demonstrated an internal rate of return of 51% and a pre‐tax net present value of US$481M using a 12% discount rate.
Neometals own 13.1% of the Mt Marion mine in Western Australia, with partners Mineral Resources (NYSE:MIN) 43.15, and Chinese Ganfeng Lithium 43.1%. The company is moving focus somewhat away from being an explorer and miner to being a downstream processor of lithium at the new hydromet plant. You can view a video of the plant and extraction process here at the 11.30 minute mark.
Nemaska Lithium (OTCQX:NMKEF) [TSX:NMX]
Nemaska have stated they estimate their cost of lithium hydroxide production will be very competitive at USD 2,154/tonne using electrolysis.
Nemaska's Proprietary Lithium Extraction Method Flow Sheet
I have spoken to two world leading lithium experts and they are both "optimistic" on Nemaska's electrolysis lithium extraction technique.
By using electrolysis, Nemaska Lithium's main input cost is electricity, which in Quebec is highly predictable and cost effective. In Quebec, hydroelectricity costs just $0.05 kWh. CEO Guy Bourassa sees this as a game changer for lithium extraction. You can read more here. You can also read more about Nemaska Lithium here.
Implications of new lithium extraction technologies
If new disruptive lithium extraction technologies prove to be successful in the next few years, then we can expect to see many changes.
1) The old and slow (18 months) evaporation of brine technique in holding ponds would become obsolete.
2) Lithium mines could be set up quicker and cheaper, and lithium supply can be brought to market a lot faster, and potentially in higher volumes. Lithium recoveries would be increased, improving economics.
3) This may lead to periods of oversupply in the lithium market. However, with rapid EV and energy storage adoption accelerating as prices fall (especially after 2020) it may well be that demand rises just as fast as supply, and we see the lithium market grow at a rate much faster than previously.
4) Lithium brine deposits may lose some of their cost advantage, as spodumene and maybe clay can be processed cheaper. The brine miners would have lower initial capital costs, and could bring their product to market quicker than previously (which was the advantage of spodumene). Those with access to cheap electricity such as Nemaska Lithium may prove to use electrolysis successfully to lower costs.
Overall, it looks to me as though all segments of the lithium miners (brine, spodumene and clay) can be winners for different reasons. This will also help bring much needed supply to market, especially after 2020, when I see demand rising rapidly.
Given the large implications I believe all lithium miners could be affected by changes in this area. In particular the major lithium producers SQM (NYSE:SQM), Albermarle (NYSE:ALB), FMC Corp (NYSE:FMC),Ganfeng Lithium (SHE:002466), Sichuan Tianqi Lithium Industries (SHE:002466), Orocobre, Mineral Resources, Galaxy Resources (ASX:GXY) (OTCPK:GALXF), and Neometals. The near-term producers including Altura Mining (OTC:ALTAF) [ASX:AJM], Pilbara Minerals, Nemaska Lithium, Critical Elements (OTCQX:CRECF) (TSXV:CRE), Lithium Americas, Lithium X (OTC:ROCEF) (TSXV:LIX), European Metals Holdings Ltd (ASX:EMH) (LSE:EMH) and Bacanora Minerals (OTC:BCRMF) [TSXV:BCN]. And the prominent juniors Pure Energy, International Lithium (OTC:ILHMF)(TSXV:ILC), and Dajin Resources (OTCPK:DJIFF) (DJI). Also this applies to the Lithium ETF .
Whilst I am no chemical engineer, I do have a Bachelor of Science degree. I have come to the following conclusions.
1) Disruptive lithium extraction technology is coming and we will see a lot more of this in the next 2 years. It can be a game changer.
2) There are different options developing such as leaching, solvent extraction, geothermal extraction, and electrolysis. I am not knowledgeable enough to know which one will win, but it maybe more than one, depending on the mine type and location.
3) For now, I would favor for brines the Tenova Bateman or ERAMET solvent extraction technologies, as they can extract 100% of the lithium, and the brine can be returned to the salar, maintaining a more healthy environment. However, they would lose some of the other mineral credits such as potash. For spodumene, where miners have access to very cheap electricity, it appears (from Nemaska Lithium's cost estimates) that "electrolysis" can also be an effective solution, and if no cheap electricity the leaching technologies (Lithium Australia, maybe POSCO) look reasonable. Simbol's geothermal extraction is really a lithium mining and extraction technique all in one, and obviously also has great potential.
In writing this article, I would hope to get some feedback from industry experts and insiders, so that investors can better understand which lithium extraction technique will be likely to succeed, and then factor that in on their selection of lithium miners. I am happy to modify my view and conclusions, if experts present compelling views and information forward, as I state I am not an expert in this field.
I am not an employed analyst, and investors should do their own due diligence and modeling.
As usual, all comments are welcome.
Disclosure: I am/we are long GALAXY RESOURCES (ASX:GXY), ALBERMARLE (ALB), OROCOBRE (ASX:ORE), LITHIUM AMERICAS (LAC), PILBARA METALS (ASX:PLS), NEMASKA LITHIUM (TSXV:NMX), ALTURA MINING (ASX:AJM), LITHIUM X (TSXV:LIX), CRITICAL ELEMENTS (TSXV:CRE)., CRYSTAL PEAK MINERALS (TVXV:CPM) , INTERNATIONAL LITHIUM CORP (TSXV:ILC), DAJIN RESOURCES (TSXV:DJI), ASBURTON VENTURES (TSXV:ABR), ALIX RESOURCES (TSXV:AIX). I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information in this article is general in nature and should not be relied upon as personal financial advice.
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