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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Could The U.S. Become Lithium Independent?

  • The McDermitt Caldera, a volcanic crater on the Nevada-Oregon border, houses 20 to 40 million metric tons of lithium deposits.
  • Last month, the DoE announced a conditional loan of $2.26 billion to Lithium America’s Thacker Pass project in Nevada to be used for the construction of the company’s on-site refining facility.
  • Despite having some of the world’s biggest lithium resources, the United States currently has limited capabilities to extract, refine, and produce domestically sourced lithium.
Thacker pass

Last year, the U.S. made major lithium breakthroughs with the potential to make the country self-sufficient in the critical battery metal for decades. In September, a group of scientists funded by Lithium Americas Corporation (NYSE:LAC) reported that the McDermitt Caldera, a volcanic crater on the Nevada-Oregon border, houses 20 to 40 million metric tons of lithium deposits. For perspective, that volume is nearly double the 23 million metric tonnes found in Bolivia. 

In December, the U.S. Department of Energy announced that it had confirmed that a massive lithium deposit tucked underneath California’s Salton Sea has a resource of more than 3,400 kilotons of lithium--enough to support over 375 million batteries for electric vehicles. Both estimates dwarf the 14 million metric tonnes of lithium resource the U.S. Geological Survey has so far managed to map.

Well, the Biden administration appears to be wasting no time trying to achieve the American dream of energy independence. After a dozen years of engineering, permitting and financing, Australia's Controlled Thermal Resources has finally begun construction of their Salton Sea lithium mine and geothermal power plant. The project will initially produce 25,000 metric tons of lithium hydroxide per year and potentially up to 175,000 metric tons once completed. The plant will also generate 350 megawatts of round-the-clock geothermal power--the DoE estimates that Salton Sea’s  Known Geothermal Resource Area (KGRA) has about 2,950 megawatts (MW) of geothermal electricity generation capacity. Related: Russia Is Bringing Back Refining Capacity Hit by Ukrainian Drones

Meanwhile, last month, the DoE announced a conditional loan of $2.26 billion to Lithium America’s Thacker Pass project in Nevada to be used for the construction of the company’s on-site refining facility. 

According to the company, the illite-bearing Miocene lacustrine sediments at Thacker Pass contain extremely high lithium grades (up to ~1 weight % of Li), more than double the whole-rock concentration of lithium in smectite-rich claystones in the caldera and other known claystone lithium resources globally (<0.4 weight % of Li). 

The scientists have hypothesized that the unique lithium enrichment of illite at Thacker Pass resulted from secondary lithium- and fluorine-bearing hydrothermal alteration of primary neoformed smectite-bearing sediments, a phenomenon previously unknown. LAC plans to begin lithium production on the Thacker Pass project in 2026. 

"If they can extract the lithium in a very low energy intensive way, or in a process that does not consume much acid, then this can be economically very significant. The U.S. would have its own supply of lithium and industries would be less scared about supply shortages, "Belgian geologist Anouk Borst has told Chemistry World.

Federal investments by the Biden administration are supercharging America’s domestic lithium supply chain. Last year, Albemarle Corp. (NYSE:ALB) received $150 million to build a new processing plant in Kings Mountain. American Battery Technology Company (NASDAQ:ABAT), Applied Materials (NASDAQ:AMAT) and Cirba Solutions have received a combined $2.8 billion doled out by the administration to support 21 new, retrofitted and expanded?commercial-scale lithium processing and battery recycling facilities.

Bad News For Lithium Bulls

Source: Trading Economics

Despite having some of the world’s biggest lithium resources, the United States currently has limited capabilities to extract, refine, and produce domestically sourced lithium, typically importing nearly half of the lithium it consumes. However, the country could soon become self-sufficient in lithium, thanks to a rapidly-developing technology: direct lithium extraction (DLE).

DLE technologies are capable of extracting up to 90% of lithium in brine, much higher than ~50% extraction rates using conventional ponds. Another major benefit: they are capable of harvesting the metal in a matter of days compared to upwards of one year required to extract lithium carbonate from conventional evaporation ponds and open-pit mines. Direct lithium extraction also comes with an added ESG/sustainability bonus because they are able to recycle their fresh water and limit the use of hydrochloric acid.

Fastmarkets has forecasted that commercial-scale DLE projects could start coming online as soon as 2025 and could supply 13% of global lithium demand by 2030. 

Unfortunately for lithium bulls, a flurry of new mines coming online as well as novel extraction technologies are likely to put lithium prices under extreme pressure. Goldman Sachs has forecast that lithium carbonate supply will grow at a brisk 33% annual clip, outpacing lithium demand which is expected to grow at 25% p.a. 

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Our analysis suggests that DLE will widen, rather than steepen, the lithium brine cost curve with an average project likely sitting in the second or third cost quartile. With resulting additional lithium supply we also see risk that DLE implementation could extend the size and duration of lithium market surpluses/reduce deficits vs. our base case SD balance (without a pull forward of demand with new supply), where ~20-40% of LatAm brine projects implementing DLE (recovery from ~50% to ~80%) could add ~70-140ktpa LCE from 2028+, increasing GSe global raw supply by 8%,’’ according to Morgan Stanley.

Lithium carbonate in China is currently quoted at CNY 112,000 ($15,480) per tonne, struggling to stage a significant rebound since plunging to under CNY 100,000 ($13,820) earlier this year, a two-and-a-half-year low, thanks to a lithium oversupply and sluggish EV demand. EV sales in China in Q1 2024 increased 14.7% Y/Y, slowing from 20.8% in 2023 and well under the triple-digit growth rates commonly seen in late 2022. Experts have warned that the lithium market could remain oversupplied until 2027.

By Alex Kimani for Oilprice.com

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