Insight: Inside the race to remake lithium extraction for EV batteries

E3 Lithium

16/06/2023 12:00

By Ernest Scheyder
       LAKE CHARLES, Louisiana, June 16 (Reuters) - The global
battle to reshape the lithium industry is sucking in oil
producers, tech startups and entrenched mining giants, each
jockeying to be the first to reinvent how a metal key to the
green energy transition is produced.
    A fleet of direct lithium extraction (DLE) technologies are
on the verge of tapping salty brine deposits across Europe,
Asia, North America and elsewhere that the U.S. Geological
Survey estimates are filled with roughly 70% of the world's
reserves of the metal.
    At stake is influence over an industry expected to grow to
more than $10 billion in annual revenue within the next decade
as the successful DLE companies will supply lithium for electric
vehicle batteries in hours or days, not months or longer as with
existing large, water-intensive evaporation ponds and open-pit
mines. 
    "The world needs abundant, low-cost lithium to have an
energy transition, and DLE has the potential to meet that goal,"
said Ken Hoffman, co-head of the EV Battery Materials Research
group at McKinsey & Co.
    Chilean President Gabriel Boric spotlighted global attention
on the once-niche sector in April by outlining a radical plan to
phase out evaporation ponds and deploy DLE across his country's
vast lithium reserves, although he did not choose a specific
technology. Boric's shock announcement was all the more
surprising as no DLE technology has reached commercial
production without the use of those ponds, sparking competition
to be the first. 
    Interviews with more than two dozen potential customers that
have tested DLE technologies, industry analysts, consultants and
investors show that tech startups EnergySource Minerals and
International Battery Metals  IBAT.CD  (IBAT), as well as
oilfield service provider SLB  SLB.N  and mining giant Rio Tinto
 RIO.AX  are expected to be among the first to launch commercial
DLE projects within the next 12 to 18 months. French miner
Eramet  ERMT.PA  and Chinese resin producer Sunresin  300487.SZ 
are also seen as likely early winners. 
    "The industry is so close to a major leap forward," said
John Burba, who helped invent a prominent DLE technology and is
IBAT's executive chairman.   
    While DLE technologies vary, they are comparable to common
household water softeners and aim to extract about 90% or more
of the lithium from brines, compared to about 50% using ponds.
That's enticed not only the lithium industry's customers but its
investors, many of whom expect DLE to lower production costs. 
    "DLE technologies could increase the viability of resources
that aren't necessarily viable with evaporative technologies,"
said Alec Lucas of the Global X Lithium & Battery Tech ETF
 LIT.P .
    DLE technologies that are portable, able to recycle much of
their fresh water and limit hydrochloric acid use are seen as
most appealing. By 2030, 13% of the world's lithium will be
produced using DLE, projections by commodity price provider
Fastmarkets showed. 
    By contrast, the U.S. fracking industry - also born from
radical technological advancements - pumps just 5% to 9% of the
world's oil but is seen as a key influence on energy markets.
    Using the shale play-book, DLE is viewed as a potential 
swing producer in lithium as supply can be procured quickly and
stopped just as quickly. Global appetite for the metal is
projected to hit 2.7 million metric tons by the end of this
decade, a nearly fourfold jump from 2022.
    "Given those demand projections, there's definitely need for
more supply from DLE," said Jordan Roberts, a Fastmarkets
lithium industry analyst.
    
    TANKS AND PIPES
    In a rural Louisiana workyard, IBAT has built an automated
DLE plant fabricated with thousands of feet of forest
green-colored pipes and tanks that are able to filter 5,000
metric tons of lithium annually. 
    "We're confident we can be the first to market," said IBAT
CEO Garry Flowers. The company engineered its 450 foot-long
plant to be ported in 32 pieces and stacked like LEGO bricks, a
design the company is hoping will be commercially producing
lithium by December.
    A customer aiming to produce 15,000 metric tons of lithium
each year, for example, could buy three stackable IBAT lithium
plants. The entire IBAT facility is less than three acres,
compared to hundreds of acres for evaporation ponds or open-pit
mines.
    As part of a deal to buy more than 100,000 lithium-rich
acres in Arkansas from Galvanic Energy earlier this year, Exxon
Mobil  XOM.N  acquired test results showing IBAT's DLE
technology could recover more than 91% of lithium from that
acreage's brine. IBAT has held talks with Exxon Mobil  XOM.N 
and Chevron  CVX.N  about licensing its DLE technology,
according to three people familiar with the matter and documents
seen by Reuters.
    Exxon has also held talks with EnergySource Minerals about
licensing DLE technology, two of the people said.
    EnergySource is building a lithium facility in California's
Salton Sea and has licensed its technology to Koch
Industries-backed Compass Minerals International  CMP.N  to
extract the metal from Utah's Great Salt Lake starting in 2025.
Ford  F.N  has agreed to buy lithium from both projects. 
    Exxon, Chevron and EnergySource declined to comment. IBAT
said it does not make forward-looking statements and cannot
confirm any discussions that have taken place to date. 
    For oil producers, DLE offers the tantalizing prospect of
filtering lithium from water that is already extracted alongside
hydrocarbons. Typically that water must be injected back
underground at a cost, but DLE could allow oil firms to generate
income. Much of this so-called produced water holds 10 to 15
times less lithium than in Chile, for example, a lower
concentration that is uneconomic to filter with just evaporation
ponds.
    "It's absolutely the smart thing for them to be looking at,"
said Eli Horton of Exxon shareholder Engine No. 1, which helped
elect three candidates to the oil giant's board in 2021. "It's
always nice if you can turn a cost center into a profit."
    SLB, the world's largest oilfield services provider, is
expanding into lithium and plans to be operational by early next
year using a DLE process that includes EnergySource's technology
and water treatment equipment from others. 
    The company, previously known as Schlumberger, is building a
portable DLE plant in Nevada and is in talks with 10 potential
customers, said Gavin Rennick, president of SLB's New Energy
division.
    "The fact that you can have a completely domestic brine
resource that is now economic is an enormous driver for DLE,"
said Rennick. 
    Mining giants are not letting new entrants dominate the
space, though. Rio Tinto paid $825 million last year for a DLE
project in Argentina and expects to have it producing 3,000
metric tons of lithium annually by next year. 
    "We are doing a lot of work on the process and are
comfortable with the technology," said Sinead Kaufman, chief
executive of Rio's minerals business.
    
    'TAILORED TO EACH BRINE'
    DLE has not garnered universal praise. Last year,
short-sellers criticized processes developed by Standard Lithium
 SLI.V  and Lilac Solutions as likely inoperable. Both companies
denied the claims.
    Standard last month signed an agreement with Koch Industries
- its largest shareholder - to deploy Koch's DLE technology in
Arkansas and also hired French bank BNP Paribas to help secure
debt financing.
    Lilac, which is backed by BMW  BMWG.DE  and Breakthrough
Energy Ventures, said in April that a lithium pilot plant it
built in Argentina with Lake Resources  LKE.AX  produced 2.5
metric tons of lithium. Most of that lithium was produced since
January, said CEO Dave Snydacker. 
    Many brine deposits have varied chemical compositions,
meaning it's unlikely that one DLE technology will emerge as a
global leader. Many Chinese deposits have high concentrations of
magnesium, for example, and Bolivian deposits have high
potassium levels.    
    "One of the main disadvantages of these DLE technologies is
that they really have to be tailored to each brine," said Steven
Schoffstall of the Sprott Lithium Miners ETF  LITP.O . 
    Stellantis  STLAM.MI , General Motors  GM.N  and others have
poured hundreds of millions of dollars into DLE firms, with
aggressive timelines to launch electric fleets. 
    "Our window of opportunity doesn't last long," said Chris
Doornbos, CEO of E3 Lithium  ETL.V , which is developing a
Canadian DLE project with support from Exxon subsidiary Imperial
Oil  IMO.TO . "We need to get commercialized now."

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 (Reporting by Ernest Scheyder; Editing by Veronica Brown and
Claudia Parsons)
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder;
+1-713-210-8512; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))