Why The EV Industry Is Betting On This Lithium Mining Breakthrough

The world contains vast quantities of lithium, an integral element in electric vehicle batteries. And while lithium is commonly mined from hard rock, the majority of the world's lithium reserves are actually found in brine, extremely salty water beneath the Earth's surface. Extracting this metal involves evaporating the brine in massive pools, leaving behind high concentrations of lithium. It takes up vast swaths of land, is inefficient, often controversial

and ecologically disruptive. But until recently, there hasn't been much pressure to change. There was no EV revolution happening, so there was no reason for people to innovate. But as automakers around the world struggle to meet extraordinarily ambitious electric vehicle production targets, there's a growing interest in doing things differently. The auto industry requires a 20x increase in lithium supply, and there's just no way to achieve that

chain for batteries. North American companies like Lilac Solutions, EnergyX and Standard Lithium are looking into DLE opportunities in places like Arkansas, California's Salton Sea and Utah's Great Salt Lake, as well as abroad in Chile, Argentina and Bolivia. The Chilean government has even announced that all new lithium projects in the country will be required to utilize DLE technology. So the timing is right and ripe for this

to see the light of day very, very soon. For all of its recent buzz, research into direct lithium extraction from seawater and other solutions actually began in the 1970s. But back then, traditional methods of brine mining and hard rock mining more than sufficed. The world didn't need DLE for the last 50 years. Lithium's primary use was industrial - ceramics, glass and lubricants. But with demand for

EVs and lithium-ion batteries booming, now there's a supply crunch. Now over the last ten years, 90% of new lithium production has come from hard rock projects. But hard rock projects are increasingly expensive. And if you add up all the hard rock projects, there's just not enough resource out there to meet automaker goals. It's the brine resources that are large enough to electrify the vehicle industry. But

the limitations of traditional brine mining are clear. So when I first learned about evaporation ponds, you can immediately see the inefficiencies. One it takes up a huge land area, right? Some of these ponds in Chile are ten square miles. Number two, it takes a really long time for the brine to go through the pond sequence. So you're looking at about 18 months of lead time that

it takes to produce the lithium out of the back end. And number three is that they have really low recovery rates, only 30 to 40% recovery rate. Instead of concentrating lithium by evaporating brine in large pools, with direct lithium extraction the brine is pulled directly into a processing unit where it's put through a series of chemical processes to separate the lithium before being re-injected back underground.

Refined, battery-grade lithium carbonate or hydroxide can be produced in a matter of hours, without the need to transport concentrated brine to a separate processing facility. And unlike evaporation ponds, DLE technologies have the potential to recover the vast majority of the lithium. So when you apply these technologies, the sort of headline expectations are somewhere between 70 to 90% yields, which has a very, very significant impact on

both the cost of production and ultimately the level of output and the lithium units that enter this market. But as a number of new companies jump into this space and test out novel technologies across a variety of brine conditions, questions remain about how well some of these new approaches will scale. While there are a variety of approaches to direct lithium extraction, the oldest and only commercially

proven method involves using adsorbents. In this process, lithium molecules in the brine adhere to the adsorbents and are thereby selectively removed from surrounding impurities. This is the method used by Livent, a Philadelphia-based supplier for Tesla and BMW that's operated a DLE facility in Argentina since 1998. But the company still uses evaporation ponds as a part of its process too, and experts say that adsorption-based technologies use

a lot of fresh water, a big problem considering many of the world's best brine resources are in arid areas that can't afford to adopt more water-intensive tech. So, for example, sorption, that requires fresh water as part of that stripping process once the lithium has been selectively removed from the brine itself. According to Livent's most recent sustainability report, it used 71.4 metric tons of fresh water per

metric ton of lithium carbonate equivalent or LCE produced. Lilac reported that in pilot testing, it uses between 10 and 20 metric tons of fresh water, while EnergyX says that it uses less than 20 metric tons. Sunresin, a Chinese DLE technology provider, also uses adsorption as its primary technology. Every significant new lithium brine operation to come online in the past five years has been in China, and

Sunresin's DLE tech is behind a lot of them. As of 2019, our first unit started and they have been since then operating without interruption. And we have a very strong industrial track record in that area, which is globally quite unique. Sunresin's commercial operations are primarily brownfield projects, in which lithium is extracted from the waste brines of existing evaporation ponds, which were built to produce potash salts

that are used in fertilizers. That means that the lithium containing brine is pre-concentrated in evaporation ponds before it goes through Sunresin's DLE process, though the company says that this step is ultimately not necessary and that most of its newer projects will not be tied to potash operations and will operate without ponds. But all over the world, any person who has a resource is talking with us.

And we have literally tested between 500 and 1,000 different brines from all over the world in the U.S., in Argentina, in Chile, in Bolivia, everywhere. Total lithium production from DLE was 54,500 metric tons last year, representing 7% of overall lithium production. This mainly comes from Livent and Sunresin's tech. But a host of other companies have new projects in the works and are testing out alternative technologies,

which they say will not only eliminate evaporation ponds altogether, but increase yields while lowering energy and freshwater requirements, hopefully helping to bring DLE into the mainstream. For its part, Bay Area-based Lilac Solutions is using a technology called ion exchange. It's currently piloting its tech in Argentina in partnership with Australian lithium company Lake Resources. Every ion exchange process is based on a small bead which is selective

for certain metals. And with the Lilac ion exchange bead we've developed a ceramic material. This ceramic selectively absorbs lithium from the brine while releasing a proton. Once the lithium is absorbed, we then flush the lithium out of the bead using dilute acid and that produces a lithium chloride concentrate which can be easily processed into battery-grade chemicals. Lilac expects to have its first commercial-scale module operating before

the end of 2024. The company is backed by BMW and the Bill Gates fund Breakthrough Energy Ventures, and Ford has signed a non-binding agreement to buy lithium from its Argentina plant. Lilac also recently received a $50 million grant from the Department of Energy to build out domestic manufacturing capacity. The Lilac technology is broadly applicable to a wide variety of different brines. This includes conventional salar type

brines like you find in Chile or Argentina or Bolivia, as well as new, more challenging brines like you would find in the U.S. or Europe. EnergyX, which is based out of both San Juan, Puerto Rico and Austin, Texas, started off developing membranes to filter lithium and now uses a combination of technologies. Step one is traditional adsorption, followed by a method known as solvent extraction, in which

the concentrated brine is mixed with an organic liquid. The lithium is then transferred to the organic before it's stripped free and concentrated. Membrane filtration is the final stage, which removes all remaining impurities. And now you have an integrated system which in three steps separates the lithium, purifies it and concentrates it. So you see these, all these loops and synergies that come out of combining these technologies.

And that is another big differentiator and what really drives the cost of the technology much lower compared to anybody else. EnergyX says this hybrid approach drastically reduces fresh water use. It's building demonstration plants with undisclosed partners in Argentina, Chile, California, Utah and Arkansas. And we think that our direct lithium extraction can either complement existing ponds, because some of these companies have spent a lot of capital

building the ponds, or eventually completely replace the ponds. Egan says the company is aiming to have its first two demo plants up and running by the end of this year, and the following three in 2024. Recently, the company secured $50 million in funding from GM to help scale its tech. Vancouver-based Standard Lithium also has big backers. The public company's largest investor is Koch Industries, and it's

been running a demonstration plant in south Arkansas for the last three years, producing lithium at a preexisting bromine plant. We don't have to put in production or reinjection wells. We're operating on a brine processing facility that's been running for six decades to extract bromine. Standard Lithium also uses both ion exchange and adsorption technologies, depending on the resource. It expects to begin construction on a commercial-scale DLE

facility next year, in what could be a first for North America. We have an opportunity as we expand from Arkansas to Texas to be the largest producing area for lithium chemicals in North America, utilizing DLE in an area that's not under water stress, that has a social license to operate. It has low cost power and a highly skilled workforce. Companies like Standard Lithium, which are leaning

into the U.S. Market, stand to benefit from Biden's Inflation Reduction Act, which ties electric vehicle subsidies to domestic sourcing of battery materials. Automakers can also receive the full EV credit if they source from countries that have free trade agreements with the U.S., like Chile, which is going all in on DLE. All lithium production moving forward in the country will only be allowed to use direct lithium

extraction. So what we have figured out and patented is how to complement our direct lithium extraction technology into their existing pond system to try to recover that remaining 60 to 70%. Albemarle and SQM, the only two lithium producers in Chile, have not announced who they will be partnering with for future projects, though both companies have laid out plans to pipe desalinated water from the coast to

the Atacama Desert to run facilities without depleting the region's scarce freshwater resources. But that's bound to be both expensive and complex. I mean, certainly it makes sense for an industry leading nation like that to target the application of DLE. I think the commercial reality is going to be very, very difficult to overcome. Operating in these extreme environments is challenging, at the level of altitude, at the

distances away from some of the kind of key logistics centers. Bolivia is also looking to utilize direct lithium extraction to help unlock the country's vast, but largely undeveloped, lithium resources. While the country was considering technology from both EnergyX and Lilac Solutions, the government ultimately tapped a consortium of Chinese companies led by battery giant CATL to spearhead DLE efforts in its salt flats. CATL is the world's

largest battery producer, and with this new $1 billion deal in Bolivia, the company aims to use DLE to produce 25,000 metric tons of lithium by 2024. The process of going into first production is incredibly capital intensive. It's not the kind of core skillset of a startup to be able to develop these resources. And so we can see the opportunity for a company like CATL. Mills says

that as the market develops and the technology is proven at scale, we could start to see acquisitions in the space. We have over 60 patents that protect the IP that we've developed over the last four years. So whether that makes an attractive candidate for an acquisition or a partnership, we're excited about that. But first, these new technologies need to be proven across a range of brine

conditions, and there have already been some struggles. California's Salton Sea is thought to contain some of the largest lithium deposits in the world, trapped within superheated geothermal brines. Lilac was previously working on a project there, in partnership with the Australian company Controlled Thermal Resources, but had to pull out because the brine was so difficult to handle. That brine comes out of the ground at 600F, three

times the boiling point of water, and it has dissolved in it many toxic species, including lead, arsenic and even radioactive materials. It's going to be very challenging for project developers to bring that type of project online. While the Salton Sea remains a promising but tricky resource, companies from Sunresin to Lilac are planning to bring other new projects online as soon as next year. Mills thinks that

that timeline is slightly optimistic, but not so far off. You're looking at development risk of the asset itself. You're then compounding that with technology risk, this innovative application of technology. And so I think realistically we're looking at a timeline of 2026 and beyond for real commercial volumes to impact a lot of that global production. Snydacker says that in this decade, most new lithium supply will continue

to come from hard rock projects. But by the end of this decade, we'll see very large-scale brine projects coming online. And going out into the next decade, this technology will provide a majority of new supply. Lithium production from DLE is projected to grow from about 54,000 metric tons today to over 647,000 metric tons by 2032. That's forecast to be worth about $21.6 billion. Incredible growth of

the DLE space, but when we place that in relative terms against the rest of the global market, that only represents around 15% of total supply. We're still going to have to rely on traditional forms of production for the lithium units, whether it's evaporation ponds or hard rock mining. But for all those new projects, we can expect to see less of this and more of this.