You may have heard, but lithium is a big deal these days. Between other thingsit is a crucial component in electric car batteries.
The problem is supply. As mainFT reported, there is a “global race for lithium” ongoing, with countries and companies scrambling to secure reliable international sources or to take control of domestic ones.
Then a Goldman Sachs relationship “direct lithium mining” certainly caught Alphaville’s attention. The investment bank’s analysts argue that DLE, the extraction of the metal from brine, could do for lithium what fracking has done for the oil industry. Our emphasis below:
Direct lithium mining (DLE) has the potential to significantly impact the lithium industry, with the implementation of lithium brine mining potentially game-changing in production/capacity, timing, and environmental impacts/permits.
Just as shale has done for oil, DLE has the potential to significantly increase lithium supply from brine projects, nearly doubling lithium production/yield (bringing recoveries from 40-60% to 70-90%+ ) and improving project returns, albeit with the added benefit of offering sustainability benefits and ESG credentials for its implementers (land use due to lack of ponds decreases >20x, water use and metrics improve on potential brine reinjection), also widening (rather than sloping) the lithium cost curve.
A number of proven DLE technologies are emerging and being tested at scale, with a handful of projects already under construction on a commercial scale (some Chinese projects in production). While the application of technologies used in DLE processes may be fairly new to the lithium industry, many are already being used in other products.
While there may still be key challenges in terms of scalability, water consumption and brine reinjection, with ongoing efforts, DLE could be implemented between 2025-2030 in both Chile and Argentina, in our view, as well as greenfield projects that brownfield expansions, or to improve recoveries of existing pond operations. Chile’s recent National Lithium Policy (NLP) also pushes for new lithium projects to implement DLE for water/environmental concerns, further supporting an acceleration of the implementation of DLE technologies. This compares with market skepticism about commercial development of DLE by the end of the decade (from discussions with investors).
More production, more profits AND better ESG credentials: the holy trinity of capitalism in 2023!
So what does all of this actually mean? Alphaville won’t pretend to understand the science behind it, but here are two GS schematics that explain the differences.
The traditional way:
AND DLE:
OK, OK, actually that might not help much. But if you want more, we’ve uploaded Goldman Sachs’ full report here (although redacted in part removes recommendations on stocks most sensitive to compliance).
How truly ESG-y is also uncertain, given the iintensity of water use DLE entails. But it’s an interesting idea at the very least, with even US Energy Secretary Jennifer Granholm recently calling it a “game changer”. And Goldman seems to agree.
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