Llithium mining stocks had a strong year. Shares of the three largest lithium producers listed on a major U.S. stock exchange — Albemarle (NYSE:ALB), Sociedad Quimica y Minera de Chile (NYSE: m²)or m², and Livent (NYSE: LTHM) — returned 57%, 155% and 63%, respectively, over the one-year period to May 31. S&P500 the index returned negative 0.3% during this period.
The growing demand for lithium is mainly due to the growing adoption of electric vehicles (EV) by consumers. The silvery-white metal is used to make the lithium-ion batteries that power electric vehicles.
This article covers the two current types of lithium mining and briefly mentions several other types that are under investigation. It is intended to lay the foundation for a series, the aim of which is to help investors make smarter investment decisions in this complex and rapidly growing industry.
Although the “who” and “where” of lithium mining is not the focus of this article, it will briefly touch on some of the major companies and geographies that fall into each section. These topics will be covered in more depth in future articles.
In the most common method of lithium brine extraction, brine (salt water) that contains lithium chloride and other salts is pumped from reservoirs beneath the beds of dry lakes to surface evaporation ponds. The arid weather conditions and high altitudes help the water in these ponds to evaporate faster than in other climates and geographic areas.
The remaining lithium chloride is then turned into lithium carbonate, which is then sometimes turned into lithium hydroxide, as well as other premium lithium products. Lithium carbonate and lithium hydroxide can be used to produce lithium-ion batteries, but lithium hydroxide has become the preferred compound for making EV batteries.
Livent, based in the United States, has a proprietary brine extraction technique, which differs somewhat from the process we just described.
Leading players in Lithium Brine Extraction include Albemarle in the United States, SQM in Chile and Livent. Albemarle and SQM both have operations at the Salar de Atacama in Chile. (Salar is the Spanish word for salt dish.) They pay royalties to the Chilean government, which owns this resource. It is Albemarle’s main brine operation and SQM’s sole source of lithium. Livent’s only source of lithium is the Salar del Hombre Muerto in Argentina, which it owns.
China Ganfeng Lithium is on its way to joining the major players in the extraction of lithium from brine. It is co-owner of two brine resources in Argentina, with a project close to commercial stage.
Extracting lithium from underground brine has always been a more cost effective method than extracting it from hard rock.
Hard Rock Mining
Hard rock mining is the other way lithium is currently obtained for commercial purposes. This type of mining is what most people probably think of when they hear the term “mining”. It is an open-pit mining of ore containing the lithium-bearing mineral spodumene.
The spodumene is processed into concentrate and then processed into premium lithium products including lithium hydroxide. Unlike lithium chloride obtained from brine extraction, spodumene concentrate can be directly transformed into lithium hydroxide.
Most hard rock lithium mines are in Australia and China. China Lithium Tianqi, Albemarle and Ganfeng are the major players in this field. Along with Albemarle, SQM and Livent, the Chinese duo Ganfeng and Tianqi constitute the five main producers of lithium. (Tianqi has a 24% stake in SQM, so it’s indirectly a notable player in extracting lithium from brine.)
Other types of mining operations are explored and developed
The surge in lithium prices has led many companies to explore other potential lithium sources and extraction methods that may now be economically and technically feasible.
Many companies are in the exploration and development stages to obtain lithium from clay, geothermal brine (a by-product of geothermal power generation), and oilfield brine.
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Beth McKenna has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.
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