We are drowning in information but starved for knowledge. – John Naisbitt

Caution; These kinds of posts often signal we are closer to the top than the bottom. Do your own research and don’t take investment advice from a panda.

My humble attempt at throwing some interesting bits together to get something that resembles a high-level overview. Plenty more info out there on the web for those willing to read & learn.

Where Does Lithium Come From?

There are two primary sources to obtain lithium:

Brines: Lithium brine deposits are accumulations of saline groundwater enriched in dissolved lithium. Although abundant in nature, only select regions in the world contain brines, mostly in South America in the “Lithium Triangle” — a region of the Andes mountains that includes parts of Argentina, Chile and Bolivia. Note: It is these operations that make for colorful pictures like those below. After pumping the brine to the surface, the sunlight is used to evaporate the water. In each ‘next’ evaporation pond, the concentration gets higher & higher as evidenced by the colors, before it gets collected and further processed.

Hard Rock: Lithium found in ‘hard rock’ is a part of minerals hosted in pegmatites, rock units formed when mineral-rich magma intrudes from magma chambers into the Earth’s crust.

Lithium found in hard rocks is typically hosted in ‘pegmatites’ which are intruding rock units that form when magma intrudes into the crust. As the magma cools, water and minerals are concentrated into metal-rich fluids that form the large crystals that define pegmatites.

Lithium can also be extracted from lithium clays, but there’s still no commercial scale of production for this method of extraction. So be aware of companies telling you otherwise.

Spodumene is a lithium mineral derived from pegmatite rock. Known for its high lithium content, spodumene is the most widely exploited mineral source of lithium. Other lithium-bearing pegmatite silicates include lepidolite and petalite. Spoiler: Keep life simple and stay away from lepidolite & petalite (unless you are an obscure Chinese player).

What we don’t want: Impurities. We want low alkalines, low iron (<1%), and low mica content.

Basalt is high in iron content (= not good) AND has a similar density as spodumene, meaning it can’t be separated effectively by DMS (Dense Media Separation, more on that later).

What we do want: Clean ore, coarse-grained, high grade (+1.5%) over mineable widths. As it’s a high-volume commodity, we want to be close to infrastructure (roads, ports, green energy) and a skilled workforce not too far away in a jurisdiction that is open to mining…

Is that too much to ask?

Point is, producing a high-quality product, needed for the battery industry, is just not that simple. Open up a flowsheet, and review how a hydroxide plant actually works. This is a challenging & technical industry.

Yes, Lithium is abundant on mother earth, but what we need is projects with size AND rock quality AND permits, and a decent location to complete the wishlist. What the industry needs is time & money. The higher prices are pulling in the money no doubt, but time, you just can’t buy.

Some random nice infographics on supply;

Lepidolite is environmentally unfriendly & should be seen as a proxy of how badly we need ANY supply!

Processing

Rocks matter…a lot.

I dissected the pains to process ore at Mt. Cattlin, operated by Allkem here. When a company needs to downgrade production guidance TWICE in a very hot market, it tells you…it just isn’t that simple.

The flowsheet

After blasting the rock and excavating it out of the open pit, the first ‘real processing’ step is crushing & grinding the ore to the desired size (9.5mm for example). The bigger, the cheaper. Unfortunately, it is mother nature that largely dictates what your optimal balance is between size & recovery rates.

If she is kind, you can make do with ‘only’ crushing & DMS plus magnetic separation steps.

Next up is adding floatation circuits to your process flow.

The Pilbara Minerals concentrator at Pilgangoora comprises of a four-stage crushing plant, closed circuit milling, gravity separation (spirals for recovery of tantalum and a reflux classifier to remove waste), flotation circuit (reverse and conventional flotation), low-intensity magnetic separation (LIMS), wet high-intensity magnetic separation (WHIMS), and filtration.

This is just a teaser, google away!

Simple run through

Lessons learned paper (more technical)

Speed to market

This graphic from Albemarle rings true for the wider exploration industry. This is real work, by real people, at the grace of mother nature and the local permitting authorities.

Some examples;

Products

What’s out there (Hard Rock)

I first made this point back in 2018. Spodumene resources in tier 1 jurisdictions of >50MT+ will get acquired. Possible other candidates in the future: $PMET $WR1 $GL1 $FL.V $CRE $PLL As downstream #lithium chemical processing goes global, tier 1 SC assets will be in demand. https://t.co/odISypRMOx

— Rodney Hooper (@RodneyHooper13) March 28, 2023

Costs (2019)

Lithium spodumene (6% conc) is a high volume product. An example of three bigger mines, courtesy of MinEx Consultancy. Roche Dure’s has to travel +2000k to the nearest Port (Dar es Salaam), Pilgangora only 120km to Port Hedland. This has a big impact on the cost structures as seen below;

Some other random cost charts;

Random blips

Grades matter: From a recent Stifel Research Note; 2015-’22 saw the averaged mined lithium grade drop 29% while growing output from 200kt LCE to 700kt LCE. The implication: A 33% reduction in grades requires a 50% increase in throughput (Mtpa). This means a lot more work has to be put in to get the same output. Hello cost inflation.

A rough rule of thumb for drill results: 1% is a decent grade, over 1.5% is high grade. Watch for crystals that can run 0.1-10meter at 5-7% Lithium. Keep in mind ALL depends on the context; What widths, at what depth, total tonnage potential (Under 10Mt: Why? Over 100Mt: When?!), etc.

Hard Rock Recoveries: Recoveries are generally on the low side of the mining spectrum. 50% on the low side, 70% probably around the average. It’s a balance between volume, cost & end quality that is heavily influenced by your initial rock quality.

Dough in the industry: Stats courtesy of Stifel. Plenty of companies are expediting expansion plans. Some will use cash (& shares) for M&A, and just recently Pilbara Minerals for example, announced its maiden dividend. At this point in the cycle, I don’t want to see share buyback programs.

Podcasts

1. The Global Lithium Podcast

Arguably the most respected expert out there, Joe Lowry has a long-running podcast on Lithium & the wider battery industry. Speaking to CEOs, and industry experts but also answering questions of regular listeners. Dig into his extensive archive to find your suitable toxic. Joe also visited most Lithium projects out there, you can find more content on his twitter.

https://www.globallithium.net/podcast

2. Rock Stock Channel

Rodney Hooper & Howard Klein are the driving force behind this podcast originating out of their RKEquity advisory firm. Again, two well-respected voices in the industry.

https://linktr.ee/rkequity

Recent industry deals & industry links

Industry Lingo

Spodumene: A lithium aluminum silicate mineral (LiAlSi₂O₆). An important ore of lithium and a source of ceramic materials. It is ordinarily found in lithium-bearing granite pegmatites.

SC6 Spodumene: An important economic concentrate of spodumene, known as spodumene concentrate 6 or SC6, is a high-purity lithium ore with approximately 6% lithium content being produced as a raw material for the subsequent production of lithium-ion batteries for electric vehicles.

LCE = Lithium carbonate Equivalent. Basically, a way to try and compare apples with apples. Conversions;

DMS: Dense Media Separation. As it says, you separate materials based on their different densities.

Pegmatite:  An igneous rock showing a very coarse texture, with large interlocking crystals. We are interested in the Spodumene-bearing ones. So watch out for companies valued on untested ‘pegmatite outcrops‘, there is only a small percentage (2-3% is often cited) that is actually Spodumene bearing. And even then, there are no guarantees on rock quality & deposit size.

Lithium Hydroxide Monohydrate (LiOH): is used in the production of cathode material for lithium-ion electric vehicle batteries as it provides the best energy balance.

DSO: Direct Shipping Ore. Forget about processing it, we want the raw material! Typically this only runs at a 1-2% Lithium concentrate (as opposed to 5.5-6% con). This hugely increases the volumes shipped (costly), but can provide a fast profit for miners. Often just a small portion or temporarily move by miners.

DLE: Direct lithium extraction is a new technology being developed to efficiently extract lithium from brine sources. McKinsey (May 2022) said it could double the current brine recovery of about 40% in a shorter period (Brines need time to dry out). Once the DLE code is cracked, it could make a significant impact. Look for deposits with >250mg/L to make it worthwhile. One to watch, but not for tomorrow. Closest: Standard Lithium

Different battery types: TLTR; Most contain similar levels of Lithium

Thanks for reading, hit me up if I’m missing crucial info!

Panda out

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