Elon Musk Is Right, Lithium Refining Is A License To Print Money

Lithium mining and refining: the vital to all things mid-21st century. And on Tesla’s (TSLA) conference simply call, Elon Musk known as lithium refining a license to print cash. He’s not far from the real truth. With need ramping up and supply gradual to arrive on the web, there is an massive gap predicted that ought to preserve prices superior and margins generous for these in the lithium industry: miners and refiners.

License to Print Cash

Musk’s reviews on Tesla’s convention get in touch with pointed out the critical problem in lithium provide is receiving it. He is proper in that there is, in reality, a large amount of lithium. On the other hand, I feel this remark (however mostly appropriate), understates some of the difficulties confronted in mining.

Some commodities, the pricing of lithium is insane. I would like to when yet again urge business people to enter the lithium refining business. The mining is relatively straightforward. The refining is considerably more challenging. So, the lithium is basically a quite frequent – sort of really – like lithium pretty much everywhere you go. But you have to refine the lithium into battery-quality lithium carbonate and lithium hydroxide, which has to be really higher purity. So, it is essentially like minting money right now. There is like software program margins in lithium processing right now. So, I would actually like to stimulate, once once more, entrepreneurs to enter the lithium refining company. You won’t be able to shed. It is really a license to print income.

(Emphasis by author)

Lithium mining is not just a stroll in the park possibly, involving the funds desired, permits, technological surveys, construction time, transportation, and water rights. And many mining firms are very lucrative, even if they really don’t refine all the way to the level of lithium carbonate (such as Sigma Lithium (SGML), which designs on making lithium focus, 1 stage beneath carbonate or hydroxide). The purpose lithium is so profitable irrespective is that there is this sort of a distinct supply hole, that is only anticipated to widen.

And most providers (outside the house of China) that are associated in lithium refining also have a hand in the mining small business. The most significant new lithium growth job in the United States, Thacker Go by Lithium Americas (LAC), not too long ago introduced the formal opening of its lithium specialized progress centre in advance of the real mine has even started building. This facility commenced production in June and shows the firm’s processing ability from the ore to refined lithium carbonate.

On top of that, Lithium Americas is now looking for a contractor to oversee the development of the mine itself and is anticipating a ultimate determination from the Federal court as to regardless of whether the job can carry on in just the upcoming thirty day period or two immediately after briefings conclude on August 11. If prosperous, the company’s web page is very very well positioned to be a lithium carbonate company to Tesla’s Nevada gigafactory and other firms on the West Coast.

This built-in extraction to lithium carbonate or hydroxide style and design would seem to be predominant in a lot of new projects as firms sign offtake agreements immediately with the mining corporations for lithium carbonate/hydroxide.

A couple organizations have opted for the refining-initial route, securing spodumene ore and creating crops to refine it into lithium hydroxide, but they are considerably from the bulk. A single these types of corporation is Piedmont Lithium (PLL), a organization I previously talked about as becoming extra of a refiner than a producer. The organization has offtake agreements with several mines for ore that it plans to switch into 30,000 tonnes per annum of lithium hydroxide (possibly much more if it can develop a next Canadian plant). But the rationale Piedmont is turning out as a refiner is that the firm has had immense difficulties getting its personal mine permitted. For companies concentrated on refining, margins might confront tension as the uncooked lithium is not particularly inexpensive (spodumene selling prices have soared earlier $6000 for every tonne in latest months) and the terms of offtake agreements for individuals centered on processing will be essential.

And other current lithium juggernauts are not to be counted out both, like SQM (SQM), Albemarle (ALB), and Livent (LTHM). These gamers are built-in and all have strategies for additional expansion to capitalize on expanding demand.

There is also a solid scenario for recycling plays like Li-Cycle (LICY) to be an integral section of the lithium supply chain. As battery creation ramps up, reprocessing the scraps and conclude-of-everyday living batteries into new battery-grade elements will be a critical supply of lithium (and other metals) that is effortlessly obtainable and shut to the hubs of battery production.

Tesla Is just not Obtaining Into the Lithium Sector

Regardless of his convention connect with opinions about the scarcity of refining ability to supply battery-quality lithium carbonate and hydroxide, Musk was pretty obvious on a podcast back again in early July that Tesla will not instantly enter the lithium business enterprise as some have speculated:

“Properly, we do not want to go into the mining business or the form of refining market since the limitation, I feel, is basically additional. For example, with lithium, it is really a lot more lithium refinement than it is the precise mining. So you better get the ore that includes lithium, and you’ve got bought to refine it and get it to battery-grade lithium hydroxide or lithium carbonate. And it has to be really pure. Usually, you could have a breakdown in the mobile.

Nevertheless Musk did add an asterisk on the convention simply call that implies Tesla might yet get into the lithium organization if it cannot secure sufficient provide:

Yes. If our suppliers never solve these complications, then we will.

Modifying Battery Chemistry

Musk also talked about on the convention phone that he thinks that a substantial amount of batteries will be iron phosphate around the up coming several many years:

As it was also difficult to create the anode and cathode, I assume – my guess is possibly two-thirds of batteries will be iron phosphate or probably iron phosphate with some manganese.

Nevertheless, in spite of the way it could seem, this is nonetheless a lithium-based battery. Lithium iron phosphate batteries (LiFePO4) have been gaining in popularity as they are cheaper, safer, and final extended than lithium-ion batteries (nevertheless they can have fewer assortment in EVs).

Just this 7 days, Ford (F) declared that it is partnering with CATL to source lithium iron phosphate batteries for some of its less costly types. Ford also explained that it has secured 70% of the batteries it demands for its goal of producing 2 million EVs by 2026. This was served alongside by one more offer to secure 7,000 tonnes for each annum of lithium carbonate from ioneer’s (IONR) Nevada undertaking. Though this does show Ford is doing the job to protected its source, a 30% hole is nothing at all to be trifled with and shows there is even now lots of demand from customers out there for new lithium supply.

Takeaway

Lithium is the fuel of the long term, that considerably is very clear. Elon Musk’s emphasis on the significance of refining is also noteworthy and points out how the US specifically lacks a domestic supply chain. However, entry to uncooked lithium is also important and a prerequisite to getting in a position to refine in the to start with place. More than the coming ten years, I feel some of the most profitable lithium performs will be lower-charge built-in producers that can extract and refine lithium at the identical website, this sort of as Lithium Americas.