What is Lithium?

Lithium is becoming one of the most important and precious minerals throughout the world.  Recently dubbed, “the new gasoline” by Goldman Sachs, Lithium is taking off due to Electric Vehicles sales increasing rapidly as well as other technologies such as Consumer Electronics (as an example, The Iphone) and energy storage to name a few.  Supply of the precious minerals are racing to keep up to all the demand which is part of what makes this space so interesting and worthwhile from an investment perspective!

In order to delve into Lithium companies, and explore which ones are the most exciting from an investment and strategic perspective, we must start off with a foundation of WHAT is Lithium?!

Lithium is an alkali metal that is reactive in the presence of water and oxygen.  It is the lightest metal, and least reactive of the alkali metals.  It has many applications (which make it a very exciting mineral with many interesting companies and an industry built around it as we will detail in the very near future), the most intriguing of which is in batteries for use in electric vehicles and energy storage.

How is lithium mined?

There are two primary methods through which lithium can be mined: Brine-based evaporation, and Hard-rock (Spodumene) processing.  Of the estimated 176,000 tons of lithium supply in 2015, 51% was extracted from brines, with the balance coming from spodumene processing

Brine-based Evaporation

Brine process

Source: Li3 Energy

This is a longer process than the hard-rock processing outlined below.  However, it is cheaper (around half the cost, according to some estimates).   Under this method, lithium is extracted from Salar Brines.  Salars are large salt flats, which are prevalent in the Lithium Triangle of South America- Chile, Bolivia, and Argentina.  The brines are underground reservoirs that hold high concentrations of salts, such as lithium.  The process of extracting the lithium follows the following steps:

  • Pumping the brine to the surface
  • Evaporation of the brine over a period of months. For this process to work cost effectively, the environmental conditions play a major factor.  With Salars often occurring naturally in areas of high altitude, and low rainfall, evaporation is the ideal extraction method.
  • The first salt to precipitate during the evaporation process is potassium, which then gets harvested from the ponds.
  • As evaporation continues, lithium chloride concentrations continue to rise until they reach optimum levels
  • The remaining brine is pumped to an extraction plant where it undergoes filtration to remove byproducts such as boron and magnesium
  • Next, the solution is treated with Sodium Carbonate (soda ash), which precipitates lithium carbonate.
  • The lithium carbonate is filtered and dried, thus making it ready for delivery. The remaining brine is pumped back into the salar.

 

Hard-rock (Spodumene) Processing

Spodumene proessing.png

Source: Galaxy Resources

This is a quicker process than brine-based extraction, as the miner is in control of the full process, and not subject to weather or other environmental conditions that influence the brine-based evaporation method.  However, it is more expensive, due to large heating energy requirements.  Although Spodumene is found around the world, currently, this process is employed primarily in Western Australia, with newer operations sprouting in Canada and the US.

Under this method, the lithium is extracted from spodumene, a rock consisting of lithium aluminum inosilicate.  Once the rock is mined, lithium can be extracted via a wide array of metallurgical processes.  For example, one such process is outlined below:

  • First, the spodumene rock is crushed.
  • Next, roasting heats the resulting spodumene mixture, causing it to undergo a phase change. This allows the lithium present in the ore to be extracted via mixing with sodium.
  • After the phase change, the spodumene is cooled, milled into a fine powder, mixed with sulpheric acid and roasted again.
  • A filtering system then separates waste out of the mixture, and precipitation removes magnesium and calcium.
  • In the last step, soda ash is added, allowing lithium carbonate to precipitate (much like at the end of the brine-based process). The lithium carbonate is then heated, filtered, and dried, making it ready for delivery.

 

Company Specializations

Although the extraction method used depends on where the lithium is located and the type of resources found (salar vs spodumene), companies currently tend to utilize one method more over the other.  For example, although they own both types of resources, the majority of Albemarle’s lithium is extracted via the brine-based method.  Similarly SQM, FMC, and Orocobre primarily utilize the brine-based method of extraction, all having operations in the South American Lithium Triangle.  Conversely, the largest producer in the world, Talison, which is a joint venture between Albemarle and Tianqi, utilizes the Spodumene processing method, with operations in Western Australia via the Greenbushes Mine.