Over the past few years, the lithium boom went into overdrive as EV makers like Tesla Inc. (NASDAQ:TSLA) scrambled to secure supplies amid rapid EV growth and tight supplies. The lithium bonanza sent lithium carbonate prices up more than six-fold and spodumene up nearly tenfold in the space of just two years.
Unfortunately for the bulls, the lithium bubble finally burst in late 2022 and sent prices crashing thanks to slowing EV demand as well as an influx of fresh supply mainly from China, Australia and Chile. Lithium carbonate prices in China currently sit at CNY 205,000 per tonne, a fraction of the nearly CNY 600,000 per tonne peak they hit in November 2022.
And, it appears the lithium bulls might not catch a break any time soon. Reports have now emerged that the U.S. may have fortuitously discovered lithium deposits bigger than Bolivia’s salt flats, home to the world's biggest lithium reserves.
While the discovery itself is not news, a new study published in the journal Science Advances now estimates that the McDermitt Caldera, a volcanic crater on the Nevada-Oregon border, harbors 20 to 40 million metric tons of lithium deposits, nearly double Bolivia’s 23 million metric tonnes at the upper range.
"If you believe their back-of-the-envelope estimation, this is a very, very significant deposit of lithium. It could change the dynamics of lithium globally, in terms of price, security of supply and geopolitics," Anouk Borst, a geologist at KU Leuven University who was not involved in the study, has told Chemistry World.
The caldera is estimated to have formed approximately 16.4 million years ago after a massive magma eruption. The lithium is deposited in a uniquely lithium-rich illite over 600 feet deep. To sweeten the deal further, the deposits are mostly concentrated in one spot, limiting the area impacted by mining.
"They seem to have hit the sweet spot where the clays are preserved close to the surface, so they won't have to extract as much rock, yet it hasn't been weathered away yet," Borst has told Chemistry World.
One small conundrum for the burgeoning U.S. lithium industry: although the McDermitt Caldera's lithium is locked up in clay, meaning mining costs are likely to be cheaper compared to mining spodumene deposits, extracting lithium from clay has never been done commercially. Bolivia has tried unsuccessfully for years to commercially produce lithium using its state-owned firm. It’s the reason why industry experts remain skeptical about the real value of Mexico’s newly nationalized vast lithium deposits because the country's lithium is found mostly in clay.
Then, there are serious environmental issues to contend with. The extraction of lithium can release huge amounts of CO2 and contaminate groundwater with harmful heavy metals, not to mention consume vast amounts of fuel. Indeed, Native American tribes are not celebrating the new discovery because they consider the land sacred. Even NASA has spoken out against mining in the area.
Lithium buffs, however, can take some comfort in the fact that a federal court struck down appeals in July to prevent mining in Thacker Pass.
Lithium Americas Betting On Thacker Pass
But these technical challenges have not prevented some American companies from betting on the new lithium find. To wit, lithium junior mining company Lithium Americas Corp. (NYSE: LAC) plans to begin lithium production on the Thacker Pass project in Nevada in 2026. According to the company, new in situ analysis reveals an unusual claystone that contains 1.3%-2.4% of lithium in the volcanic crater, nearly double the lithium present in the more commonly found magnesium smectite.
"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.
Luckily, lithium production companies can count on ample support from the Biden administration. On Tuesday, Albemarle Corp. (NYSE:ALB) announced the U.S. Department of Defense has approved a $90M grant to support the expansion of domestic mining and lithium production for the U.S. battery supply chain. ALB says it will use the funding to purchase a fleet of mining equipment and reopen its lithium mine in North Carolina. The company’s planned mine-- one of the few known hard rock lithium deposits in the country–is expected to feed sufficient material for 50 kt LCE of conversion capacity, enough to support the manufacturing of ~1.2M electric vehicles annually.
As you might expect, the lithium price crash has triggered a big selloff for stocks of lithium producers: LAC has gained 9.1% in the year-to-date but has pulled back 23.8% from its February high; ALB has lost 13.1% YTD while Sociedad Química y Minera de Chile S.A (NYSE:SQM) has tumbled 23.2% YTD. This provides a nice entry point for these erstwhile high-flyers.
By Alex Kimani for Oilprice.com