The Brownfield Lithium Brine Opportunities of North America

Alex Grant, Principal, Jade Cove Partners, San Francisco, USA

November 2019

The PDF of this article is available here and its associated LinkedIn post is available here.

The years 2018-2019 will be remembered in lithium industry history as a “lithium winter”. Prices of lithium equities from junior explorers to major producers have dipped by >50% from highs in many cases, caused by a temporary oversupply of spodumene concentrate that has negatively impacted the price of lithium chemical products on the China spot market.

The “oversupply” should be understood as narrowly as described, and seen as a temporary phenomenon. Few (possibly zero) lithium market analysts see major issues with the fundamental positive growth story of lithium demand for electrification of transportation in the coming decade. The present “lithium winter” is a major price dislocation that investors can take advantage of before the spotlight returns to lithium equities. But has anything changed during this lithium winter that might have you reconsider which equities are worth in investing in now? The answer: a lot.

Before 2018, South American brine projects were top of most investors’ radars. Chile and Argentina host some of the largest lithium brine deposits in the world, and the high grade (500mgLi/L) and low impurity profile (Mg/Li ratio < 7 for example) of these resources drew interest because these are some of the criteria that make brines amenable to extraction using evaporation pond systems.

Evaporation ponds work by pumping brine from underground, concentrating the lithium/removing impurity salts by evaporating water using wind and sun, and adding chemicals over the course of 18-24 months. When this 12th century technique is the only option for extracting lithium from brines, it restricts the kinds of brines that can produce lithium and that’s why most focus was on these South American resources before 2018. It certainly works well for high grade/purity resources, but to meet demand, we will need to produce lithium from many resources in the future that don’t fit that bill.

Now Argentina is suffering another currency crisis, has re-elected a government perceived to be hostile to business, and recently imposed a “surprise” export duty on lithium products that is scheduled to sunset, but no one expects that to happen. (1) Chile is experiencing a series of large, violent protests that have literally blocked the roads to the Salar de Atacama, one of the most important lithium producing resources in the world. These factors don’t mean South America is “cancelled” by any means, but it has given investors reasonable reservations about the region and elevated attention to other jurisdictions.

During the depths of the lithium winter which seems to have hit South American projects the hardest, some very different kinds of projects have been heating up in North America. E3 Metals Corp. with a 6.7Mt LCE lithium brine resource in Alberta, Canada announced in September an up to $US 5.5M investment by Livent, one of the world’s largest lithium producers and a technology leader in the industry. (2) Standard Lithium is currently starting up a demonstration plant in Arkansas, USA to extract lithium from an already flowing brine producing bromine, and they announced in October a $US 3.75 loan from Lanxess, their German chemical partner who operates the plant. (3)

These Alberta and Arkansas lithium brines are different from South American salar-type brines. They come from much deeper in the Earth (thousands of feet vs. hundreds of feet), have very different impurity profiles, and lower lithium concentrations. This means that lithium cannot be produced from these brines using the evaporation pond route which is perceived to be low risk in South America.

Instead, both companies have independently developed innovative direct lithium extraction (DLE) technologies which make it possible to remove the lithium from the brine quickly and with low cost. Instead of removing all the contaminants and the water away from the lithium, these DLE technologies remove the lithium from the brine and leave everything to be reinjected back underground.  A desorbent fluid like acid or water is used to create a new lithium concentrate which can be easily and reliably processed into battery quality lithium chemical products using processes that recycle most of the water, take up very little space, and are not dependent on the weather to work properly like evaporation ponds. A schematic for how these processes work is shown below.

Using DLE processes, the impurity profile and lithium concentration become almost irrelevant. For example, 100mgLi/L and 40,000mgCa/L is a perfectly suitable brine for DLE which could never be processed economically in an evaporation pond. Both E3 and Standard have identified that DLE can unlock brine resources in a safe jurisdiction like North America to produce battery quality lithium chemicals with low cost. Standard’s preliminary economic assessment (PEA) estimates their process will have an OPEX near $4,400/tLi2CO3, which is competitive with other major brine projects and much cheaper than making lithium from hard rock resources like spodumene. (4)

It’s interesting to consider that in the dead of the “lithium winter” when large investment and serious partnerships seem to have stalled for South American projects, both E3 and Standard have reported major financing achievements. Additionally, US Magnesium on the Great Salt Lake is quietly advertising a new 10,000 tLi2CO3/year product coming online in 2020. No one saw that coming 5 years ago.

 The attributes of E3 and Standard’s projects which make them unique from South American brines are mostly a shared list.

They both:

1. Are located in North America, considered a stable jurisdiction to invest in large capital projects with minimal political fluctuations and well-established environmental/financial regulations,

2. Have arranged partnerships with large chemical companies who have significant experience producing chemical products and access to low cost capital,

3. Developed DLE technologies that unlock their brines for economic lithium extraction that don’t require evaporation ponds and are expected to require minimal freshwater and space,

4. Are brownfield projects that take advantage of already flowing brine or already drilled wells to produce lithium from brines known to other industries but not previously considered to be a relevant source of the metal,

5. Located in regions well-endowed with industrial infrastructure and skilled workforce who are familiar with extractive and chemical industries.

Investors should take a look at both these companies, and consider looking at other projects in the Northern hemisphere that are applying similar strategies to other unconventional brines containing multi-million tonne lithium resources. Below is a map of some of these potential opportunities based on Jade Cove’s research.

References

(1) Orocobre, 2018. Temporary Argentina Tax Changes. URL.

(2) Livent, 2019. Livent and E3 Metals Announce Joint Development Agreement to Advance Lithium Extraction Process and Technology. URL.

(3) Standard Lithium, 2019. Standard Lithium Secures C$5.0 Million Convertible Loan Financing. URL.

(4) Standard Lithium, 2019. Standard Lithium Announces Positive Preliminary Economic Assessment and Upgrading of Mineral Resource at Its Southern Arkansas. URL.