Lithium Exploration and Development
Geopolitical trends drive high demand
For many years, the lack of clarity concerning the lithium policy has placed lithium exploration companies in an extremely challenging situation. “In the time that Wealth Minerals (TSXV: WML) has been waiting, of the 17 companies that were in the space when we started, nearly 15 are out now because they decided not to continue pursuing Chile as an investment destination for lithium or they could not afford the administrative costs of maintaining the company,” said Marcelo Awad, executive director of Wealth Minerals.
One need only look across the border to see the missed opportunity. Unlike Chile, Argentina has actively courted foreign investment in lithium, and according to JP Morgan, it is expected to go from supplying 6% of the world’s lithium in 2021 to 16% by 2030. In this scenario, Chile will be bumped from its perch as the No.2 lithium producer in the world by 2027.
For lithium exploration companies, the new announcement by the government is a boon to the sector. Steve Cochrane, CEO of Lithium Chile (TSXV: LITH), described the new lithium strategy as encouraging for future lithium production: “We have acquired over 110,000 hectares of lithium rich projects across the country; the creation of a state-owned lithium company would create a vehicle that could joint venture with companies like ours to advance these projects for the mutual benefit of both parties.”
Lithium Chile has multiple priority projects defined for its 2023 exploration program in Chile. The company has received community approval for a four well exploration program on the Salar de Llamara, which it expects to begin during the second half of May 2023. Cochrane said: “This is an exciting opportunity for us; Llamara is a 35,500-hectare property with historic drill results showing lithium grades up to 343 mg/i.”
The company is also advancing other projects in Chile, including the Los Morros property and its 2,500-hectare property in Aquas Calientes. With the regulatory challenges now cleared up, it has fielded numerous expressions of interest for JVs and purchases from companies seeking to enter the Chilean lithium sector.
Investors who have previously flocked to Argentina see an opportunity in Chile. The activity in Argentina has resulted in skyrocketing prices for a land position, often over US$5,000 for a hectare, with the country pricing itself out of the market. If a company gets a property in Argentina, it must then manage a year-long waitlist for a drill rig and deal with Argentina’s chaotic import-export regulations. In this context, Chile, with clear rules and plenty of drilling companies and experienced workers, is a superior option.
And, beyond that, Chile’s lithium mineralization is remarkable. Wealth Minerals, a junior that is actively moving forward with its community pre-agreement towards a four-hole drilling program at its Ollague project, received excellent geological news. The government asked SQM to complete an assessment of the 300,000 hectares of the Atacama Salar, and SQM drilled a hole right on the edge of Wealth Minerals’ salar. SQM’s results support Wealth Minerals’ 600-meter-thick anomaly. Awad stated: “In the publication of their results, they proved that there was an average of 1,250 ppm of lithium concentrate. This is one of the highest concentrations in the world.”
“ Our focus is to supply battery grade lithium to either the EU or U.S. electric vehicle markets, hopefully taking advantage of the recent Inflation Reduction
Act in the U.S. The Act is an excellent opportunity for us.” Aldo Boitano, CEO, CleanTech Lithium
The looming demand makes it an excellent time for investment in the Chilean lithium sector. With a significant number of consumer plants expected to be up and running by early 2025, the demand from battery manufacturers will jump noticeably. Policy developments in the US and Europe could further increase demand. Cochrane noted: “There are already rumors that the US will outlaw the internal combustion engine. Many political factors could accelerate the process and increase the supply-demand imbalance.”
Chile has to potential to play a leading role as a sustainable and safe producer of battery metals. Awad said: “I think Chile has a moral commitment to the world to supply critical minerals. This is a highly environmental government, and on an ideological level, Chile must commit to helping the world.”
Direct Lithium Extraction
It is highly improbable to produce a metal with zero emissions, but the positive impact of the finished products of lithium and copper in the energy transition outweighs the local impacts when mining is practiced in an environmentally centered and community conscious manner. In this push for a more environmentally friendly production, many technology companies and major mining companies are investing intensely in research and development to improve lithium extraction methods.
Rio Tinto, for example, is actively investing in DLE. The company is already working to deploy DLE at Rincon Project in Argentina. Soledad Jeria, general manager business development for Rio Tinto, said: “The DLE technology uses a selective absorption resin, and when compared to competitive technologies in the market, the key differentiators are that DLE takes place at ambient temperature (no need to heat the brine), and the resin is cleaned with fresh water, not acid.”
The new lithium framework is notable for its push to use advanced technologies that are more environmentally friendly, including direct lithium extraction (DLE) rather than evaporation ponds, which use significantly more water. However, DLE has never been tested at scale; in South America, it is only active in one pilot plant in Argentina, which uses a combination of evaporation and DLE.
“Instead of just being a service provider to producers, DLE technology companies are indicating that they believe so strongly in their technology that they are willing to take a position in a mining or exploration company or project.”
Jamil Sader, CEO, Monumental Minerals
DLE is a lithium production technique in which brine is reinjected back into the salt flats. This process utilizes significantly less water, which is crucial in a land defined by droughts and water scarcity. The technique has many potential benefits, but has not been tested commercially at scale, so to demand that all future projects utilize a technically challenging and comparatively unknown production process is a risk.
Eramet Group (ETR: ER7), a French mining company, has an advanced DLE project in Argentina, with a pilot working for three years and a plant currently in construction and expected to produce next year. The company holds 10 patents for its proprietary direct lithium technology. Eramet is actively seeking to enter Chile and has carried out mapping of different salars to understand possibilities in the region. Of its Argentinian DLE plant, Hubert Porte, senior representative for Chile, stated: “Of all the companies, we are the closest to industrial production. It will produce 24,000 t/y of carbonate lithium by the end of May 2024.”
Some studies have demonstrated that a combination of evaporation and DLE uses less water than DLE alone, with pre-concentration improving the optimal range to reach low Capex, water, and power usage. “Most DLE companies that we have looked at have an optimal range of lithium concentration of between 200-300 mg/I lithium where their processes are most efficient,” said Cochrane. “DLE is the way of the future, and people have embraced it, but a perfect solution has yet to be found.”
However, DLE projects are already being pursued in Chile. CleanTech Lithium (FRA: T2N) has planned since its beginning to produce via DLE. CleanTech’s CEO Boitano spoke enthusiastically of the technology’s benefits, saying: “The recovery of the resin level is around 95%. The traditional method in the Lithium Triangle requires seven evaporation pools in a batch process, which takes over 315 days, while with DLE, it takes less than 24 hours. DLE has an extremely high recovery rate, lower Capex, takes a shorter time to market, uses significantly less water, and leaves a smaller footprint on the area.”
This all-in bet on DLE is risky, forcing investors to either depend on an unfamiliar technology, or stay out of the Chilean lithium market entirely. It will undoubtedly dissuade some investors from participating. That being said, demand for lithium is so high that investors needed only clarity to engage, and after years of delay, that clarity is here, and the game is on. If DLE can be successfully implemented at scale across the country, Chile will be a leader in green lithium production.
Article header image courtesy of SQM