Categories: Energy Stocks
Topics: Lithium Stocks

Lithium Shockwaves: Navigating the 2023 Lithium Sector

The country with the world’s largest lithium reserves, Chile, sent shockwaves through the market last month as the nation’s president declared the nationalization of its lithium industry.

Argentina and Bolivia could soon follow suit. 

And while that’s bad news for North American miners who are there now or were planning to be — it’s great news for the ones that have maintained their focus on far safer mining jurisdictions such as the US, Canada, and Australia. 

You see, Chile, Argentina, and Bolivia make up the Lithium Triangle, which holds about 67% of the world’s proven lithium reserves.

Hence, removing a very, very large chunk of the world’s lithium resources from North American miners instantaneously makes lithium projects nestled in politically safe jurisdictions that much more desirable and, potentially, that much more valuable to boot.

Chile’s government said it will not terminate current lithium mining contracts, which must have North Carolina-based Albemarle Corp. (NYSE: ALB) breathing a massive sigh of relief since its contracts there are not set to expire until 2043.  

Yet, the move will undoubtedly spur a major shift in future lithium investment away from South America and into places like Australia (the world’s biggest producer at nearly half of global production), the United States, and Canada.

A Boon to North American Lithium Producers:

In a world where jurisdictional and political risk is sharply on the rise, North American mining firms are becoming increasingly focused on projects that are located in politically stable countries as no company wants their deposit taken away by a rogue government. 

A big focus shift is set to occur in the United States, which boasts the world’s fourth-largest lithium reserves — measured at 6.8 million tonnes according to the USGS — yet, surprisingly, only has one active lithium mine. 

That mine is Albemarle’s Silver Peak lithium brine operation in Clayton Valley, Nevada, which has been in continuous production since the 1960s.

Several North American miners have active lithium exploration projects in the area surrounding Silver Peak. And there are numerous hard rock pegmatite lithium exploration hotspots on US soil that may soon add to the supply chain as lithium demand increases in the coming years and decades. 

Canada has the world’s sixth-largest lithium reserves and has been stealing the headlines of late with news of a major (spodumene-bearing pegmatite) lithium discovery in the James Bay region of Quebec by a junior mining firm. 

Our team was in on that deal — Patriot Battery Metals (TSX-V: PMET)(OTC: PMETF) — very early on, which, suffice to say, has turned out to be the score of a lifetime for many with plenty of runway left. 

We currently have our eye on a number of other juniors that may be NEXT to join the North American lithium discovery party.

With the EV boom continuing to drive demand for lithium, aka, the “white petroleum,” it’s a report you simply do not want to miss. 

New Extraction Techniques Showing Promise:

New innovations in lithium extraction are opening up new frontiers for North American lithium miners. 

Over the decades, the vast majority of lithium production around the globe has been derived from brines. This is especially true in the aforementioned Lithium Triangle of Chile, Argentina, and Bolivia, which is endowed with massive salt flats — which the locals refer to as “salars.”

Lithium extraction from brines is a relatively straightforward process whereby the brines are pumped to the surface allowing the sun and wind to work their evaporative magic.

The remaining saline solution is further processed in several stages until the lithium material is suitable for use in lithium-ion batteries: for example, lithium hydroxide and lithium carbonate.

The other traditional main source of lithium production is from the underground hard rock mining of spodumene — an ore that contains high levels of lithium as well as aluminum. 

Australia is by far the world’s biggest hard rock lithium producer.  

In hard rock lithium mining, the spodumene ore has to be processed, which involves the separating of the metal from the source rock followed by further refining to attain battery-level quality. 

North America is endowed with both types of primary lithium sources; for example, Albemarle’s (NYSE: ALB) Silver Peak lithium brine mine in Nevada and Patriot Battery Metals’ (TSX-V: PMET)(OTC: PMETF) recent hard rock spodumene lithium discovery in the James Bay region of Quebec.

Yet, lithium extraction from brines and hard rock sources both have huge land footprints and are often very water intensive and can create tons of contamination and waste. 

Those issues are giving way to new technologies that could literally rewrite the way lithium is separated from its source material. 

The Rise of DLE:

In terms of lithium production from brines, a new extraction technique called Direct Lithium Extraction (DLE) — pioneered by Bill Gates’-backed Lilac Solutions — is being tested and developed by a number of mining companies and research institutions.

Albemarle, for example, is working toward implementing DLE at its Atacama salar in Chile. 

So far commercially unproven, the method could preserve water tables by allowing the brines to be reinjected underground after the lithium is extracted.

In DLE, lithium is selectively extracted from brines using various techniques often involving the use of chemical agents. The goal is to separate lithium ions from other elements present in the brine and concentrate them for further processing.

There are a number of DLE technologies and processes under development but they generally involve the following steps:

1. Pre-treatment: The brine is first processed to remove impurities and to adjust pH and composition to optimize lithium extraction.
2. Extraction: Various techniques are used to selectively extract lithium ions from the brine, which can include ion exchange, adsorption, solvent extraction, or other separation methods.
3. Concentration: The extracted lithium ions are concentrated to increase the lithium content for subsequent processing and refining.
4. Recovery: The concentrated lithium is further processed to recover lithium in a usable form. This may involve chemical precipitation, electrolysis, or other methods to obtain lithium compounds suitable for battery production or other applications.

Direct Lithium Extraction offers potential advantages over traditional evaporative methods as it can be more environmentally friendly, requiring less land and water and producing fewer waste materials. 

It can also have faster processing times and higher lithium recovery rates.

The goal for lithium miners such as Albemarle and others is to optimize the efficiency, cost-effectiveness, and scalability of DLE through pilot programs as a means of proving the methodology’s commercial viability.

Big Implications for California’s Salton Sea:

Direct Lithium Extraction (DLE), if proven to work at scale, could have enormous implications for the Salton Sea near Palm Springs, California, which the CA Energy Commission estimates holds enough lithium to meet all of America’s projected future demand and 40% of global demand.  

The new US Inflation Reduction Act, which prioritizes domestic sourcing of minerals for EV batteries, combined with California’s new rule to end sales of new gasoline cars over the next decade, will only intensify that demand. 

And the opportunities there are much more than just the potential for the utilization of DLE. 

Three companies — Berkshire Hathaway Energy, Controlled Thermal, and EnergySource Minerals — are developing DLE processes in a much cleaner way, taking advantage of the Salton Sea’s rich geothermal resources.

Near the lake, there are 11 operating geothermal power plants, 10 of which are owned by Berkshire Hathaway’s renewable energy division — BHE Renewables.  

Alicia Knapp, president and CEO of BHE Renewables, says, “We are already pumping 50,000 gallons of brine per minute across all of our 10 geothermal facilities to the surface, and we’re using the steam from that brine to generate clean energy. So we’re really halfway there in that we’ve got the lithium right here in our hands.”

Our own John Carl of Profit Cycle Pro visited one particularly interesting company near the Salton Sea in mid-May — with camera crew in tow — to check out the immense profit potential for himself and for his readers.

He’s currently putting together a full-length report on his exciting findings — something you definitely don’t want to miss.

Lithium from Clays in Nevada:

We talked about lithium production from brines and hard rock sources (spodumene), which represent the two primary types of lithium deposits around the world. 

There are also lithium-rich clays, which are particularly prevalent in Humboldt County, Nevada, located about 230 miles northeast of Reno.    

There, Lithium Americas (NYSE: LAC)(TSX: LAC) is developing the Thacker Pass Lithium Mine project, which boasts reserves of 3.7 million tonnes LCE (Lithium Carbonate Equivalent) at 3,160 ppm Li.

The project has drawn the attention of General Motors (NYSE: GM) — which, of course, requires vast amounts of lithium carbonate for batteries for its growing fleet of EVs — who recently announced a US$650 million investment in the project. 

Lithium extraction at Thacker Pass will involve crushing the ore and then transferring it as a slurry to a leaching circuit where sulfuric acid will be added to attack the ore and liberate the lithium from the clay (followed by further processing to produce battery-grade lithium carbonate). 

In addition to Lithium Americas (US$3.5B market cap), there are a number of junior explorers presently involved in lithium-in-clay opportunities in Nevada, including Nevada Sunrise Metals (TSX-V: NEV)(OTC: NVSGF), which is advancing the early-stage Gemini Lithium Project in Nevada’s underexplored Lida Valley.

Lithium from Alberta’s Oil Sands:

Finally, processes are emerging for potential lithium extraction from brines produced from Alberta’s vast oil sands. 

As part of the oil extraction process in Alberta, millions of gallons of “wastewater” brine are produced as a byproduct. 

Those brines are reinjected into aquifers… but they may not be wastewater after all. 

The vast majority of these brines are extremely rich in lithium, and the idea is to extract the lithium using Direct Lithium Extraction (DLE) techniques.    

Contrasted with the Lithium Triangle where man-made brine ponds are typically evaporated over the course of a year-plus, Alberta’s brines would be reinjected into the ground once relieved of their lithium content. 

That, proponents say, means a quicker extraction process, less impact on aquifers, and little or no use of freshwater.

At present, no one is extracting lithium from Alberta’s brines just yet… but a handful of firms are poised to do so in the near future.

For example, E3 Lithium (TSX-V: ETL  )(OTC: EEMMF) has acquired a significant foothold in lithium-rich areas of Alberta and has partnered with Imperial Oil to extract lithium from the brine beneath Leduc No. 1 — the giant oil well that launched Alberta’s initial oil boom back in the 1940s.

If proven to work at scale and at a low environmental impact, lithium extraction from Alberta’s oil sands brines could open up a whole new industry in Alberta along with new opportunities for North American companies.

In Closing:

Lithium prices are beginning to tick higher for the first time in 5 months after falling some 72% following China’s curbing of EV subsidies in January.  

We could see prices rise substantially in 2H 2023 and into next year as demand intensifies on the strength of EV sales around the world.   

Global EV sales jumped 55% last year to 10 million units and are expected to climb another 35% this year. 

In South America’s Lithium Triangle, Chile’s brazen decision to nationalize its lithium sector could have a negative impact on long-term lithium supply growth… and there’s speculation Argentina and Bolivia may soon follow suit. 

Those factors are combining to create a tectonic shift in future lithium investment away from South America and into far safer mining jurisdictions such as the US, Canada, and Australia. 

A lot of that investment will likely find its way into the United States, which has the world’s fourth-largest lithium reserves, yet, as mentioned, has just one active lithium mine. 

Canada also holds great promise for additional world-class hard rock lithium discoveries in Quebec, as well as the potential for lithium extraction from brines from Alberta’s vast oil sands operations. 

There are also a number of new extraction methodologies in the works — including DLE and geothermal-based DLE — the latter of which could open up a whole new frontier of lithium extraction in California’s lithium-rich but technically challenging Salton Sea. 

In terms of investing in lithium stocks, we covered several that we believe are worthy of your continued due diligence… especially factoring in the recent sector-wide pullback. 

Looking ahead, we have our collective eye on a number of junior lithium explorers that you can learn more about here.

And you absolutely DO NOT want to miss John Carl’s forthcoming report from his site visit to the Salton Sea. 

In other words... lots happening in the lithium space... and you definitely have not missed the boat!

Mike Fagan
Editor, Daily Profit Cycle