Direct lithium mining poised to ramp up battery production

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Lithium is a key ingredient in electric car batteries and renewable energy storage, making it a critical commodity for the energy transition to reduce greenhouse gas emissions. Most of the world’s supply of lithium is currently produced in Australia and processed in China, but that could change over the next decade as new technologies like direct lithium mining, or DLE, help scale up production of this key resource from brine , according to Hugo. Nicolaci, analyst at Goldman Sachs Research.

Lithium is typically extracted through hard rock mining or from underground salt water. Unlike traditional methods for producing lithium, DLE uses filters, membranes or resin materials to extract the mineral from salt water. And just as shale technologies have done for oil, Nicolaci says DLE could significantly increase the supply of lithium, nearly doubling production from the same resource and improving project yields through a process that could be more sustainable. We spoke to Nicolaci about his predictions for the lithium market and the impact DLE could have on the transition to renewable energy.

Why is lithium important?

Lithium is a big enabler of the energy transition from a battery perspective as we move to electric vehicles and add energy storage to electric grids, allowing for greater penetration of renewables. As a result, lithium is increasingly seen as a critical mineral by governments, where they want to secure supplies for that transition, and this has made it an increasingly important commodity over the past couple of years.

Traditionally, lithium produced from brine is stored in evaporation ponds. As the water evaporates, other elements in the brine such as magnesium or calcium precipitate out, leaving the brine more concentrated to produce lithium carbonate. The evaporation process, however, only produces 40% to 60% of the potential lithium in the brine. DLE has the potential to produce 80% to 90% or more. It’s also much faster. The evaporation process can take from nine to 18 months depending on the type of project and weather conditions. With DLE, that process can be reduced to days or even hours. And you don’t need all the land for the evaporation process of the pond. Furthermore, residual salt water can be re-injected after the process, further reducing the environmental impact.

At the end of last year, lithium prices soared to a new record. How did this affect the potential of DLEs?

High prices have spurred new lithium mining technologies, such as DLE, which extracts lithium from brine. It has the potential to revolutionize the production, timing and environmental impact of lithium mining. Just as hydraulic fracturing in shale formations has unleashed an abundance of oil production, DLE could nearly double lithium production from brine resources while increasing yields with less damage to the environment than mining.

Is DLE likely to have a short-term impact?

We expect a lithium surplus for 2024 and 2025, mainly from new Chinese supply coming to market rather than technologies like DLE. But DLE can improve lithium recovery rates from a range of projects by increasing medium- to long-term supply for the same projects. As DLE moves from emerging technology to commercial implementation, it could indeed ramp up lithium production. It could also increase production from smaller or low-concentration resources that would otherwise not have been economically viable, as well as potentially unlocking less conventional brine resources. At the moment, it’s still very much a Chinese story and the new supply being brought into the market there. But from 2025 through 2030, there will be more Latin American brine supply. Our recent trip to Argentina highlighted the huge number of projects in the pipeline, with DLE adding upside risk to our medium to long-term supply view, particularly in Argentina and Chile.

What are the challenges for DLE?

These types of projects tend to take longer than companies expect to complete and bring them to full production, and this is a real concern. But this supply is brought to market to meet the growing demand that is there. Given the sheer number of projects planned, we continue to see the risk that the additional supply will help balance or in some years exceed demand and have a larger overall impact on pricing.

We will certainly see cycles between now and 2030. It will not just be a straight line to growing deficits for the lithium market. It is a commodity after all and will have fluctuations in supply and demand.

And the costs?

DLE’s economics are comparable to traditional designs. You may have a higher initial investment and need to manage it properly. But if you do, it will likely have lower unit costs in the future, which offsets the initial costs. There are projects that are already in commercial scale production for these technologies. A company in Argentina has been doing commercial-scale construction since 2022 and plans to produce next year, with an imminent decision to expand. So these technologies are definitely here and emerging and will be more and more widespread.

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