Lithium Brine’s Economic and Ecological Benefits Present Strong Case for Investors
From extraction to production, lithium brine deposits represent a significant competitive advantage for exploration and development companies. Compared to their hard-rock counterparts, lithium brine projects are regarded as lower-cash-cost operations with genuine scale, and are seen as more environmentally friendly deposits, largely owing to recent innovations in extraction technologies.
Combined with the right geographic characteristics and expertise, lithium brine projects are worth considering as an investment opportunity, especially if located in the USA due the US focus on the complete battery supply chain.
This is particularly true given the lithium market’s recent focus on the geopolitics of supply and mounting production costs and declining lithium prices as well as a desire to capture the entire battery supply chain within one country. In fact, lower prices currently potentially create more upside for investors if they are considering counter cyclical investments, as the prevailing view is that lithium will be required for decades to come.
A critical resource for decarbonisation
As a key component in both rechargeable batteries and electric vehicles, lithium ranks among the most important resources in the world’s pursuit of a more sustainable future.
A 2022 article from McKinsey & Company has predicted demand for the battery metal will reach between 3 to 4 million metric tons by 2030. The resource, notes McKinsey, is used in the production of nearly every single type of electric vehicle battery, as well as consumer electronics, energy storage and aerospace.
“Raw materials will be at the center of decarbonization efforts and electrification of the economy as we move from fossil fuels to wind and solar power generation, battery- and fuel-cell based electric vehicles and hydrogen production,” the firm explains in another article. “No matter which decarbonization pathway we follow, there will be fundamental demand shifts — and these will change the metals and mining sector as we know it, creating new sources of value while shrinking others.”
Although lithium supply still lags behind, McKinsey’s outlook is optimistic. The organisation predicts that in addition to increasing the conventional lithium supply, the key to scaling the lithium industry to demand lies with direct lithium extraction (DLE). Through DLE, mining companies can simultaneously reduce production costs and decrease their environmental footprint.
By 2030, DLE lithium could account for more than 10 percent of supply, according to McKinsey.
Production potential of lithium brine resources
There are three primary types of lithium deposits — pegmatite, sedimentary and brine.
Pegmatitic lithium deposits, also known as hard-rock lithium deposits, are formed from coarse-grained, igneous magmatic rock. Lithium in these deposits is most commonly found in spodumene but can also occur in minerals such as lepidolite, petalite and amblygonite. Hard-rock lithium extraction is typically done via conventional open pit or underground mining.
Hard-rock lithium extraction tends to be quite expensive from an operating cost perspective. Typically, this is offset by the fact that hard-rock deposits have a higher concentration of the resource compared to other deposit types and usually require less capital to start operations. Unfortunately, the declining lithium price landscape, plummeting by more than 80 percent in 2023, makes hard-rock extraction less economically viable.
Sedimentary lithium represents something of a middle ground between pegmatitic lithium and lithium brine. Formed through the dissolution and gradual precipitation of lithium-bearing minerals in water, sedimentary lithium occurs in either lacustrine evaporates or clay deposits. Compared to pegmatitic lithium and lithium brine, sedimentary deposits are quite rare, accounting for only 8 percent of known lithium resources.
With that said, McDermitt Caldera — potentially the world’s largest known lithium resource — primarily consists of lithium clay. Lithium Americas (TSX:LAC,NYSE:LAC) currently holds the largest deposit in the region, Thacker Pass, which contains roughly 13.7 million tons of lithium carbonate equivalent. Construction of a shallow open-pit mine and processing facility on the deposit began in March 2023. However, due to legislative and regulatory challenges, it is not yet known when the mine will become operational.
Lastly, lithium brine deposits represent roughly 66 percent of global lithium resources. Though they typically contain lower concentrations of lithium than both sedimentary and pegmatitic deposits, brine deposits also tend to be considerably larger. It also benefits from significantly lower production costs compared to other types of deposits.
Continental saline desert basins represent the most common type of lithium brine deposit, with the majority found in the salt flats of Chile, Tibet, Argentina and China. Abandoned oilfields and orphan wells represent another compelling source of lithium brines.
While other deposits typically require extensive drilling and sampling to develop a resource estimate, all that’s required to assess a brine deposit are a relatively small number of drill holes with lithium brines with an appropriate grade and flow rate. Lithium brine projects also require far less land than other lithium extraction methods, when using modern direct lithium extraction technology.
Traditional lithium brine production pumps lithium-containing highly saline groundwater (brine) into large evaporation reservoirs, where it sits for up to a year, with water evaporating and concentrating the lithium and other salts. Direct lithium extraction, on the other hand, applies a specialised sorbent or bead, separating out the lithium and then returning the groundwater to its source. This is not only significantly more cost-effective, but it also requires around 95 percent less space.
The end result is a process that has minimal impact on the environment compared to other techniques. Once a brine deposit is depleted, the mining company can tear down its infrastructure and return the area almost entirely to its natural state. This is an important consideration for a resource so tied to sustainability.
Lithium brine assets to keep on your radar
Given the prominence of lithium brine assets and the sharp downturn in alternative lithium production methods, it should come as little surprise that there are numerous companies primed for commercial lithium brine production. Below, we’ve listed three of the most promising for investors to keep an eye on.
Arcadium Lithium (NYSE:ALTM,ASX:LTM)
Formed from a recent merger between Livent and Allkem, Arcadium Lithium is one of the biggest players in not just DLE, but lithium production as a whole. Prior to the merger, Livent had already been using its own form of DLE for several decades, with multiple holdings throughout Argentina. Allkem, meanwhile, owned and operated the world-class Olaroz lithium carbonate project in Argentina, as well as several spodumene projects in Canada and Australia.
The vertically integrated company began trading on the NYSE on January 4 of this year.
QX Resources (ASX:QXR)
Based in Australia, QX Resources’ primary focus is on the exploration and development of battery minerals.
The company maintains several hard-rock lithium assets in Western Australia, a strategic nickel sulphide investment in Sweden and a highly prospective lithium brine asset in the US. The brine project, known as Liberty Lithium, covers approximately 25,300 acres in California.
Notable for being one of the few large brine projects in the US, Liberty contains an extensive lithium brine surface anomaly with elevated lithium results of up to 215 milligrams per litre. Drilling and geophysics have confirmed multiple aquifers, and show that the basin is large and deep, mirroring the geological setting of Albemarle’s (NYSE:ALB) nearby Silver Peak mine. Potential drilling is planned to intersect deep lithium brines in the centre of the basin at higher grades.
Volt Lithium (TSXV:VLT,OTCQB:VLTLF)
Volt Lithium’s most significant resource is the Rainbow Lake project. Situated in a depleted Alberta oilfield, the world-class deposit spans roughly 430,000 acres. The project also benefits from an extensive pre-existing infrastructure.
Late last year, Volt announced it had pioneered a new DLE technology capable of recovering up to 97 percent of lithium from oilfield brines with concentrations higher than 120 milligrams per litre — the precise concentration present in Rainbow Lake.
Investor takeaway
The sharp decline in lithium prices over the past year came as both a shock to investors and a blow to the economic viability of traditional hard-rock lithium deposits. Lithium brine projects offer a more economical and sustainable alternative, with projects operating at low costs and high margins. As such, mining companies with brine resources are well-positioned in the current market, representing a promising potential investment.
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