To Save on Lithium, Buy Local

people talking about electric cars back then. Side note, go check out Benf's Electric Vehicle Outlook, our forecast for this market out to twenty forty, published last week. It'll absolutely be worth your time. You can get it quick search for benef Electric Vehicle Outlook. Anyway, the company was called Symbol Materials, and they said they had a new process

for cheaper and more efficient lithium extraction. They got a demo going in the salt and sea area of the California Desert in then we're planning a big commercial scale plant. Then it stopped. It's unclear, but the word is they ran into money. But then they got a letter from Elon Musk offering to buy Symbol for three twenty five million in Tesla stock, but the deal fell through. I'm not sure Symbol isn't around anymore. It looks like they were about ten years too early, but it appears that

the company has been revived. It is a new startup called International Battery Medals. What's interesting about the story of Symbol is that it seems to illustrate most of what we'll talk about today, interest from car and battery manufacturers securing additional and preferably local lithium supply, and from suppliers trying to catch the wave of growing demand for lithium.

This week on the show, we've got Sharon Moustrie, Medals and mining analysts for BENF here to tell us about unconventional lithium, what it is and what to expect from it. Our discussion is based on report titled Unconventional Lithium the Road to Supply Security. BENOF users can get this report on BNF dot com, the BENF mobile app, or the Bloomberg terminal. As a reminder, BENIF does not provide investment or strategy advice, and you can hear the full disclaimer

at the end of the show. I'm Mark Taylor and you're listening to Switch on the BENF podcast. Sharon, thanks for joining. Thank you Mark. Can you start us all the way back and just quickly tell us why is lithium important. Lithium is a key element that we need to make lithium my own batteries, which today are the best technology that we have for energy storage, and we need that in order to make our transportation systems and

our power systems cleaner. So if we want to decarbonize those systems, we're going to need a lot more the family in the world, in the energy storage markets picking up, the electric vehicles markets picking up, So lithium is just going to become more and more important in that story.

I assume, yeah, exactly. There are some competing technologies, but so far there's nothing that has proven to be a real competitor with lithium my own batteries, oh, topic of another day, like the glass batteries or something like that. That sounds cool. We'll definitely do that. Can you tell us though, where do you find it? Most of lum today is extracted roughly even we split between rock deposits in Australia and Brian deposits in Latin America, mostly Chile

and Argentina. Today, that accounts for about of lithium production today. There's a little bit more around the world, especially in China, but Chinese assets tend to be quite expensive because of their mineralogy, the way they're composed. They're mostly Brian deposits in China, but they tend to have more contaminants that make them more expensive. Okay, so whether it's a Brian deposit or a rock deposit, you have to pull up the resource and then pull out the lithium out of that,

so that can be kind of expensive. I guess you could say, yeah, that's exactly it's. So the reason why Brian in China is more expensive than Brian in Latin America is because in Latin America it is in this really really arid landscape where there's almost no wainful and basically the process of extracting the fium is just putting it in a pond and waiting for the other stuff to evaporate. That means that you have very little input costs.

For China, that's going to be a different story because they don't have as much solar radiation and the evaporations will not be the same. Wow, so really hot high pond that evaporates and you just left with some pretty great lithium. Yeah, it takes about a year and a half to two years for the whole process. It's really slow, but those are some of the cheapest assets we have today.

So the electric car market, as we just saw this week, there are electric vehicle outlook launching by when our forecast goes out to that market is going to grow quite a bit, and so is the stationary storage market for batteries. That means we're gonna need a lot more lithium. Is there a shortage? Is there a risk of shortage where we at? Yeah, that's actually a really interesting question. A few months ago, it would have been a quick, easy answer.

Were oversupplied. The reason why is because the lithium market got really excited for the huge spike in prices about two years ago. The suppliers added a ton of capacity and that led to an oversupply that has been happening for the last almost two years, and prices have been coming down, making it harder to finance and supplied today. So now we see that with the impact of coronavirus, those finance troubles and those capacity editions might be delayed,

causing a shortage in the mid term. Whereas in the beginning of the year we were projecting the market to be comfortably supplied until twenty thirty, today we see it might be a bit more of a rocky road. Okay, that's really interesting. So people were trying to chase a high price, so they built a bunch of assets in mostly what Australia, Latin America, anywhere, in particular Australia Latin America.

They built too much. Now they're kind of paying for it, and I guess you're saying they're not willing to build anymore, and that could lead to a shortage in the future. Exactly is that concern about the future where these unconventional resources come in. In part the unconventional resources are an interesting set of resources because they are more geographic leep diverse.

Of course, part of what the coronavirus has showed us is that if we concentrate our resources in just three countries, that's a huge risk to the rest of the supply chain. And it also means that if there's an interruption in Latin America, or in China, there's no backup. So part of the reason why we want unconventional resources is not because they're unconventional. It's just because they're closer to centers

of demand like Europe and the US. That means that countries that are seeing electrification pick up quickly or that are pushing for electrification in their policies are going to want to secure supply, and that's a huge push for unconventional resources, both in North America and in the U, were lithium is classified as a mineral of special importance. Beyond that, I think another really big push for unconventional resources came from technology developments actually, so this was separated

from supply and demand in the market in general. That has just been a lot of new companies, mostly startups actually, which have been developing the technologies to extract lithium, especially for brian in a faster and more efficient way. And once you do that than unconventional deposits, which are usually harder to extract from because they have lower lithium concentrations, they become economically vient. So it's really a political and

technological story that's making these viable in the future. So let's go back and talk about what they are. So can you tell us about what the unconventional resources are. Yeah. For Bloomberg an EF, we classify the major groups into clay,

geothermal brine, and oil field brian. What's common of all these resources is that they don't come from traditional deposits, which have usually higher lithium concentrations, lower contaminant concentrations, and therefore can use conventional extraction methods to get the lithium out of either the rock or the brine. For unconventional resources, it's going to take new technologies and it's also going to take new business models to make them economically viable.

Why is that new business models? Well, for example, this particularly salient for geothermal and oil field brines since they have such low concentrations. In order to make it economically viable to extract I feel we usually have to partner with a company that already extracts the brian but just doesn't extract the lithium from the brind. So a company that has been doing that in the US quite successfully

now is Standard Lithium. They partnered with Lenses, which has really big wells where they extract brian to get bromine out of and now they're implementing a new process to extract lithium from it. But they don't have to incur all the drilling costs for the well is all the extraction costs. They just add a new step and that makes it a lot cheaper. Is the process proprised terry, Why doesn't the other company just do it themselves? Yeah,

so it is proprietary. And the tricky part about lithium is that it's not easy to use one process developed for one brian and in one location and apply it to another brand in a different location. So this this has actually taken years of iterations to refine the process and make it particularly successful in this briand which is the oil field brine, and it's near the macro reformation.

So in the US, where is that this macro information is the oil field formation, which with highs this theme concentrations in the world, and it's in Arkansas in the US. It bleeds a little bit into Texas as well. That's really interesting. I remember I used to work with scientists that we're studying geothermal technology, and this came up back in two thousand seven when I was last looking at it. I think it was Lawrence Berkeley National Lab that was doing a lot on this, pulling the lithium out of

the geo thermal brine. It's interesting to see that's come not full circle yet. I think I was going to say that I think they were maybe ten years early, but reading your note saying you know that things are going to pick up a bit later even from now, they could be even ten years too early right now, I don't know. I think we'll wait and see. There. Yeah, for geo thermal, it's mostly California that's pushing this type

of lithium, and they exactly insulted. And Saltancy also has the highest lip in concentrations of geothermal Brian's recorded up to today in the entire world. So they're in a really unique position. And the California government has been very excited about this because it not only becomes a local source of lithium, but it also means that they're geothermal plants which sometimes struggle to get financed because they're so

CAPEX intensive. They're going to have another source of revenues to make this type of clean energy viable in the state. So it's really exciting for many reasons. I think California's have been excited about it and cycled through the excitement, and as companies come, they try it out and fail.

Now a lot more companies are trying, and that's a sign of not only it being like a good idea, but maybe the technology is ready now, so potentially it'll come online, but it's still a few years away and it still requires us to try the technology and refine it. As I was saying through a lot of iterations, it was interesting in your section on geothermal. I noticed there was a lot of the logos of the companies there. I remember from when I was looking at geothermal those

years ago. It sounds like they're evolving as companies or as a micro industry. I guess you could say, I don't know. When I saw this note, I thought, oh, this is so cool. This is really interesting to me personally because of my past life in geothermal. But I thought when I opened it up that it was gonna say, Okay, this is gonna be huge, gonna be a big thing. But then you say five percent of the lithium market, and I was like, alright, okay, it's a bit of

a letdown, but let's put that into context. My assumption there is that the market a four team is going to be a lot bigger in and so five could be a fair bit today. Can you help us out with that, Yeah, exactly. So five percent in twenty would be huge today it would require like like a decent

amount of big projects to come online. That five percent actually is on the lower side of what could happen for unconventional lithium, and the reason why is because it's based on our lithium database, which only takes into account for our supply forecast projects that have reached feasibility, and for unconventional lithium today that's only really clay projects in

North America. So actually, if we see Standard withium become successful with their demo plant in the US, and other projects become successful, then all of those projects will add to that five percent and will include them in this

forecast that we do for supply. But even then that five percent out to is a pretty decent amount considering that most of the growth in the market today is coming from conventional resources that are really big in Australia and in Latin America and that can expand for relatively cheap because their production costs keep getting lower. As as it expand, so it's just economically a no brainer for

them in many cases. The other side of it is that if withinum prices keep coming down, it might become really difficult for new projects, especially projects that require new technologies and a lot of testing to come online. So, for example, with what we call petrolithium or withinum from oil field brands. In the note, we forecast that today actually very very few old oil field brands would be economically viable because prices are so low. Who stands to

benefit most from this growth and unconventional resources? I think actually the people who can bend if it the most are auto manufacturers because it means that they will have supplied closer to them and it will be less risky

to make contracts for lithium. It also means that potentially costs can go down because a lot of the transportation positive costs, everything related to you know, getting with him all the way from China instead of California, if you're Tesla and Nevada, all of that will change and they can potentially even invest in lithium assets that are closer to them because it's less risk. Have you seen that or are they taking more of a watch and see approach.

It's more of a watch and c approach today for lythium since it became oversupplied quite quickly since this whole electrification story came along. I think auto manufacturers are not as worried as for other metals like cobalt and nicol. But we have seen rumors from time to time where auto manufacturers say they're going to invest. For now, that's probably not their priority, so we don't think that will happen soon. What's the next unconventional project to go online?

Do you think? For claim, the most advanced projects is the Sonora project from BAA in Mexico. They're pretty advanced in their construction and we think they'll come online the soonest of all unconventional projects after that. If you talk about oil field Brian's, it's probably going to be standard clithium.

Actually this week, a few days ago, they fully commissioned their demo plant, and that means that if it's successful, it will not only lead them to finance and invest the full plant that they're planning for a few years from now, but it will also signal to the market that these like direct liium extraction technologies are viable and that you can partner with companies and be more creative about how you extract with them this demo plant. Yeah, it'll be a very cool part for innovation in the

lithium market. Since for minors, innovation is not their strong suit, they'll go with the conventional of the tried and true. So to close this off, is there anything that was surprising or interesting that you'd like to dip into that

we haven't yet. Yeah. So the main reason why we devoted our time to this research on unconventional resources that are still so new to the market and so risky potentially not coming online, is because we kept getting client questions, especially about lithium from oil field brands, which is a great story because oil companies could shift to lithium and

produce lethium as well. However, a really surprising realization that came really early on in the research actually is that oil field brands are not viable, and not because of technology. That technology might end up working, there's a few companies testing it and having good results, but rather because of the economics because lithium prices have gone down so much

in the last two years. So we think that Petro lithium or earlithium from oil field Briand's and also relatedly from geothermal might be more risky than than for clay. And that doesn't mean that we shouldn't invest in these technologies or in these resources. It just means that less of the global resources, global oil fields, global geothermal fields

might be viable for lithium extraction. Another really interesting realization was actually the fact that North America has so many unconventional resources, and that means that if they were to rely only on conventional resources, they can't really supply their demand. But if they push for ound conventional resources, they might become actually quite independent from other countries to source their lithium and they could become an important focal point for

the market. So it would be very interesting that as the auto manufacturers start to pick up as demand starts to pick up for electric vehicles in the US, they're also able to source there with him locally and therefore even reduce the emissions the life cycle emissions related to electric vehicles shortened. The supply change reduce the risk for auto manufacturers potentially even decreased prices, which are a huge cost component for batteries in cars. Okay, so North American

Clay could be the future. Everybody, Sharon, thanks for coming in today. Thank you. Mark. Bloomberginn ea F is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed, as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloomberguinnia should not be considered as

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