Today’s lithium industry, it would
appear, is about predictions — or forecasts, as those
seeking assurance in more concrete terminology may wish to call
them. Much of the focus on lithium as a
'commodity’ to extract, sell or invest in, have
centred on future demand in a speculative manner, perhaps at
the neglect of assessing the present supply situation.
It is generally accepted that supply will fall
behind demand at some point in the foreseeable future
— potentially as early as 2020, according to a recent
Credit Suisse equity research report.
The Royal Society of Chemistry deems lithium to
have a high "supply risk", posting a score of 6.7, relative to
low supply risk materials like potassium (4.5) and sodium (4),
sourced from potash and soda ash, but behind the rare earth
element europium (9.5) in terms of production security.
Controlled by the industry majors —
Sociedad Quimica y Minera de Chile SA (SQM), FMC Corp. and
Rockwood Holdings Inc. (now part of Albemarle Corp.), which
owns 49% of another large supplier, Talison Lithium Pty Ltd
— the lithium industry’s supply situation
has been compared to that seen in potash in the past.
Control of the market by dominant companies and
an oligopolistic environment is similar to that of the
agrimineral, but with the critical difference that extra supply
is more achievable in the potash industry, where economic
deposits of potash are more widely distributed across the world
and the mining and processing of the mineral is relatively
Also unlike lithium, the potash business is
driven by the mantra that more fertilisers will be needed to
feed a growing population.
Expanding capacity at a potash mine is also a
fairly simple operation where the size of the resource
permits. Increasing lithium production from brines
– the world’s principal source of lithium
– is much more challenging, although a number of
explorers are now looking to develop scalable deposits of
spodumene, hectorite and other lithium-bearing clays and
Aside from the geological complexities, there are
also political factors affecting the lithium industry with most
of the world’s supply geographically concentrated
Lithium production started in many companies as a
by-product of potash extraction — this is the case for
Chile-based SQM, the world’s largest lithium
producer, which began production at its Salar de Atacama brine
The bottom line is that there are many more
impediments for expanding lithium production than for expanding
potash output, which has been one of the main driving factors
behind the recent boom in exploration and investor interest in
FMC’s Salar del
Hombre Muerto lithium
brine pools in Argentina.
Jesse Allen, NASA.
One industry player recently told
IM that the innovative thrust seen in other
mineral industries has not been expressed as effectively in
"The current production methods have not
developed a great deal since the seventies," the source
"Granted, it has worked for many years, but the
refining steps are becoming too complicated, too slow and too
restrictive if producers are to react effectively to future
requirements and quality demands by the consuming industries,"
Chile-focused Li3 Energy Inc. said in its most
recent corporate presentation in June 2014 that SQM, Rockwood
and FMC have not seen any technological advances in the last 20
In a high-margin — SQM achieved around a
40% gross margin in its lithium segment in 2014 —
high-capex industry, controlled by majors that can stamp out
juniors with price shifts, innovation in the sector has been
Many lithium juniors are now pushing for the
innovation which they believe has been lacking.
Indeed, traditional lithium brine evaporation
ponds require substantial production time periods of up to two
years, according to Credit Suisse.
They also have large capex requirements, a
relatively low lithium yield of around 40-50% according to Li3
Energy, and, importantly, are dependent on prevailing weather
Vancouver-headquartered Pure Energy Minerals Ltd
is looking towards solvent extraction and low-thermal
evaporation methods, which it hopes will result in swift and
high lithium recoveries from its Clayton Valley project in the
US state of Nevada, with no weather dependence and a lower
Li3 Energy is one of a number of producers
looking to improve the economics and efficiency of lithium
extraction from brines. It claims lithium recoveries of around
70-80% can be achieved with the use of Korea-based steel giant
POSCO’s proprietary processing technology.
POSCO’s process substantially
reduces the need for evaporation ponds, resulting in a lower
An eight hour wait, rather than a two year wait,
is also certain to be attractive to lithium purchasers, who
want supply timeliness just as much as supply security.
TSX-V-listed Stria Lithium Inc. and a number of
others are focusing on spodumene-based lithium production,
which was once the bulk supply source of the material.
Stria is developing the Pontax lithium project in
Quebec, Canada and the Wilcox deposit in Arizona, US.
Innovation is also seen as key to developing hard
rock lithium. Spodumene production is known to be more
expensive than brine extraction, but it is made attractive by
typically high grades (on average up to around 3%
Li2O). Processing of lithium from hard rock ores is
the focus of many juniors who are looking to improve
metallurgical flowsheets, and thus maximise operational yield
Realistically, for spodumene to be a viable
source for lithium, new efficient processing technologies must
emerge, or prices must rise significantly from current
Unintended resource inflation?
In a January 2013 paper entitled "Brines
Resources and Reserves: Analysis of and Practical
Recommendations for CIM’s Publication 'Best
Practices for Resource and Reserve Estimation for Lithium
Brines’," published by the Tru Group, Ihor Kunasz
noted the problem that some technical reports incorrectly
estimate lithium brine resources, due to a lack of "explicit"
guidelines relating to sediment sizes.
Clays and silts, which have high porosities, but
feature low permeability values, may be included in resource
estimates which are defined by three parameters: aquifer
geometry, specific yield and element concentration.
However, "these sediments will never yield
brine," Kunasz said. This could result in an "erroneously
inflated resource number," he added.
Kunasz said that in practice this could be
prevented through core observation by a site geologist, but
that some reports had calculated for all sediments in the
Kriging techniques, used to extrapolate data into
continuity using key sampling points, could only be applied to
identified, known aquifers, he said.
Whatever the weather
One factor that features more peripherally in
lithium supply concerns is the weather dependence of brine
sources. Output difficulties owing to weather are not unusual
— in 2011, FMC was impacted not only in logistical
terms, but also in terms of brine dilution by heavy snowfall at
and around its Salar del Hombre Muerto production base.
The question of whether stockpiles can be created
to alleviate such temporary production setbacks in a projected
demand-growth driven industry is an important one, as it leads
directly to the question of whether major industrial consumers
will be able to tolerate supply flux.
As one industry player told IM,
supply is of course hitched to demand, but this has the proviso
that major consumers are unlikely to be willing to enter
high-risk, high-return industries without a more substantial
degree of supply security.
This being said, rare earths producers have said
the same for years concerning the dominance and insecurity of
Chinese supply, but as rare earths industry delegates told
IM at the Prospectors and Developers
Association of Canada (PDAC) 2015 conference in Toronto, Canada
in early March, enthusiasm for supply security soon subsides
once the balance sheet implications of secure supply are
Additionally, brine sources are affected by more
than just precipitation – water is actively needed to
flush the lithium salts from source rocks. There is only so
much extraction that can take place before this flow rate is
exceeded and extra production will be limited.
The depth at which brine can be plumbed from is
also limited, as halite porosity decreases deeper into the
salar resources. Salar de Atacama can produce brine from no
deeper than around 30 metres, according to a 2008 research
report entitled "The Trouble with Lithium 2: Under the
Microscope" by Meridian International
Further to this, climate change could act both
ways to prevent extra production. Increased rainfall from
climate change could result in delayed production as brines are
diluted, while less rain may result in less brine being created
to be extracted for solar evaporation.
Environmental concerns are starting to become
important for brine pools too. Several industry insiders told
IM that it is becoming increasingly unlikely
that new brine pools will receive permits.
The polyvinyl chloride sheeting used to contain
the brines is a source of concern to some.
"PVC barriers for the evaporation basins may leak
chemical substances such as softeners into the environment. An
evaluation of PVC drinking water pipes revealed that various
compounds pose severe reproductive and functional health
concerns to humans," a report entitled "The Lithium
future—resources, recycling, and the environment" by
Thomas Wagner, stated.
"Chemical leakage may be worse for material
involved in lithium extraction and not related to human
consumption. It has also been shown that aquatic diversity in
the neotropics is strongly affected by water pollution,
landscape modifications and introduced sediments," the report
"Negative effects on native biodiversity may have
far-reaching consequences, also reflecting back onto local
people," Wagner concluded.
The possibility of lithium production in Bolivia,
which holds the world’s largest lithium reserves,
at Salar de Uyuni, was also questioned by Wagner.
"Lithium processing in this region may cause
changes in freshwater availability and water pollution with
severe consequences for human health and native biodiversity,"
There are a number of questions hanging over the
future of lithium production in Chile, the world’s
largest producer. The country has not issued any additional
lithium concessions since 1982, according to mining
undersecretary Pablo Wagner.
A change in the law in 1979 over potential use in
nuclear applications made it illegal to exploit lithium via
regular mining concessions.
Wagner resigned in October 2012 after an attempt
to re-open lithium tenders ended in a scandal over allegations
that the relevant commission falsified documents to guarantee
The tender result was cancelled less than a month
after it was granted, meaning that only SQM at its existing
Salar de Atacama site, and Rockwood, via its subsidiary
Sociedad Chilena de Litio Ltda (SCL), which works on a
different portion of the same resource, can produce lithium in
Chile, operating on a pre-1979 concession.
The Contratos Especiales de Operacion del
Litio (CEOL) concessions granted to SCL by the Chilean
Nuclear Energy Comission (CChEN) only allow for total
cumulative production of 200,000 tonnes via temporal contract
Meanwhile, SQM is permitted by the CChEN to
produce no more than 180,100 cumulative tonnes, or until 2030,
whichever is sooner.
The failure to restart the concession process
raised questions over how amenable Chile may be towards
producing additional volumes of lithium. Li3 however, which
missed-out on the original 2012 bid that ended in failure,
expects a change in the laws by around mid-2017
In Australia, Talison Lithium’s
spodumene-gathered lithium concentrates extracted from the
Greenbushes mine in Western Australia are shipped to China for
processing. Talison is now majority owned by
China’s Tianqui Lithium Group, which took over the
company in September 2013.
Due to logistics costs, the expense of
constructing additional concentrate processing facilities and
substantial internal Chinese consumption, it seems unlikely
that worldwide consumers of lithium would view additional
production from Greenbushes as a viable additional secure
The bottom line for lithium is explained
succinctly by The Financialist, a Credit Suisse
publication: "While there’s no shortage of lithium
in the world, prices will at some point start moving higher,
until they are high enough to encourage investment in
higher-cost production methods that can boost total output
– similar to how higher oil prices spurred investment
in expensive deepwater and oil sands production