This North Carolina lake sits on top of one of the largest hard rock lithium deposits in the
US.
Kings Mountain, we believe, to be a top tier, top quartile resource capable of
supplying at least a million, if not more, electric vehicles with its feedstock.
What we're going to be doing is producing a spodumene concentrate.
We're going to crush it up and we're going to figure out a way to get just the green crystals
out.
Those green crystals are then processed into lithium hydroxide.
Albemarle is the world's top producer of this critical metal and operates mines in Australia,
Chile, and the only active lithium mine in the US.
Demand for lithium, a key component for electric vehicle batteries, is expected to surge
from 500,000 metric tons of lithium carbonate in 2021 to 3 to 4
million metric tons by 2030.
Never in my career have I seen this rate of growth, but I think even
relative to some of the cell phone growth rates, it's been even faster.
The difference really between North America and Chile and Australia is the demand is
here. And fortunately for North America, there is resource here.
Albemarle's clients include the world's top battery producers and auto companies like Tesla,
in addition to its extraction business.
And it's more than a dozen processing plants across the globe, Albemarle is also
developing improvements to its lithium-based compounds that will make batteries that are longer
lasting and more efficient.
The challenges for the whole industry are many, and they really start with some of our lithium
salts. Really understanding the impact of things like particle size and purity on
the final performance of the cathode.
The entire lithium ion battery chain from mine to market is expected to grow more than
30% annually from 2022 to 2030, where it could reach $400
billion. But despite that growth, Albemarle faces a number of potential headwinds
along the way, including a possible economic downturn that could slow the demand for EVs,
new battery chemistries that could reduce the need for lithium, battery recycling and
additional competitors.
Tesla began construction of a lithium refinery in Texas in 2023.
And ExxonMobil just purchased rights to an area in Arkansas that could begin drilling for lithium
in the coming months.
And not everyone agrees that expansion of mining is the best way forward for a sustainable
future.
What our research shows is that we could get to zero emissions with much less
mining if we make some of these changes to public policies, to consumer habits,
rather than just try to electrify the status quo of like really large
cars and everyone needing to own an individual car in order to get where they need to go.
To better understand how lithium, known as white gold, is extracted, the challenges involved
and where production is moving next, CNBC got a behind the scenes look at Albemarle's operations
in Chile and the US.
Albemarle, based in Charlotte, North Carolina, got its start in 1887 as a paper
company and opened its lithium division in 1953.
Before batteries, lithium was primarily used for glass, ceramics and pharmaceuticals.
It moved further into its chemical business in the 1960s with its purchase of Ethyl
Corporation and with its acquisition of Dow Chemicals bromine business in
1987. But a bet on batteries and a $5.7 billion purchase of
Rockwood Holdings, including its lithium assets in Chile and Western Australia in
2015, may have had the biggest impact on the company.
Albemarle's stock price has skyrocketed since then.
Decades ago most of that energy storage was in non-rechargeable batteries such as the
the coin cell batteries you'd see in a calculator or in the back of a watch that contain lithium.
A little over 167,000 electric vehicles were sold in the US in
2013. The US is on track to sell a million EVs in 2023.
Maybe five years ago think people were sitting on their heels a little bit.
We weren't certain was it really going to take off?
But I think at this point in time there's no doubt that the electrification of the world
is happening.
In 2017, the company acquired two lithium processing plants in China.
Two years later, it purchased a 60% stake in the Wodgina hardrock lithium mine in
Western Australia, one of the largest hard rock lithium deposits in the world.
If you see an electric vehicle on the road, there's a high probability that Albemarle's
lithium is inside of it.
Albemarle, along with its main competitors SQM and Pilbara, control about 40% of the
world's lithium supply.
Albemarle currently is in the high teens market share, so it is
a market leader, but it is not an extremely dominant one, right?
So there are several big ones.
There are major competitors in China such as Guangfeng, Tianqi.
There are major competitors outside of China such as SQM, but
also companies that were not really big players, let's say 4 or
5 years ago but they are influential right now, such as Pilbara.
The Inflation Reduction Act, signed by President Biden in 2022, has helped accelerate the
shift to EVs.
In 2022, Albemarle had net sales of $7.3 billion 120%
higher than the previous year.
The main reason is that lithium prices shot up last year.
Albemarle's lithium business made up 68.4% of net sales, followed by its
bromine segment, which includes fire safety solutions and catalysts which refer to products
for the oil refining industry.
The strength is really that probably they're going to have the most
de-risked growth pipeline because they're not dependent on one mine or one
region.
At Albemarle's brine mine in the Salar de Atacama in the Atacama Desert, one of the driest places on
earth, lithium is extracted from beneath the surface by pumping extremely salty water into
large evaporation pools.
That salty water, known as brine, is then transferred among 15 different ponds
over a period of 18 months, leaving behind high concentrations of lithium.
About a third of the world's lithium comes from Chile.
So we use this power of the sun to concentrate the lithium from
0.02%, concentrate to 6% at the end of this process.
That concentrate is then trucked to Albemarle's processing plant 150 miles away, where it
is turned into battery grade lithium carbonate.
Albemarle says its brine mining process is not only cost effective, but brine has limited
other uses and is not the same as water.
For those who are concerned about our lithium extraction
that's brine ten times saltier than seawater, it can't be used for human
consumption. It can't be used for agriculture.
Chile's lithium industry has faced criticism from various constituencies, including
indigenous communities, who have traditionally opposed mining expansion.
Globally, over 50% of lithium production is concentrated in areas with high water
stress levels.
So we're talking about, I don't know, it's an immense millions of liters of water that evaporate
every day to produce one ton of lithium.
And that's have an effect.
I mean, we cannot say that have any effect when it's part of the of the water cycle.
It's impossible to say that have any effect.
What directly how is something that has to be, I think, understand and researched even
more.
Well,
mining has intervened in all ecosystems, right? In the cultural sphere, our own culture, our
heritage, tends to disappear.
Under an agreement with the Atacama Indigenous Council, Albemarle contributes
3.5% of its Chilean revenue to Indigenous groups that live near the Salar.
The company also pays the Chilean government annual royalties that range from 6.8%
to 40% of the lithium export price.
This year, 2022, we will have paid the Chilean government over
$600 million in commission.
And it has faced additional challenges.
In April, Chile announced plans to create a state owned lithium company and laid out a future for
the country in which private companies will be required to partner with the government on future
projects. Chile's new lithium policy will honor the contract Albemarle has in place
with the government.
Chile has a long history of respecting the rule of law.
I would expect us partnering with the government and to expand our operations or
to get additional mineral rights and to expand the lithium production in Chile and do that
in partnership with the government.
Similar to its brine operations in Chile.
Albemarle has operated Silver Peak in Nevada since 2015.
It produces about 1% of the world's lithium, but an expansion to double capacity is
underway. Albemarle also aims to bring another domestic mine on line in
2027, Kings Mountain.
That mine, currently covered in 150ft of water, was previously open from the late
1930s until the 1980s, when mining in Chile was seen as more cost effective.
When we are done, it will look very similar to what it looked like before.
There will be trucks and shovels.
There will be a limited amount of blasting and it will be a conventional hard rock mining
operation.
Unlike brine mining in Chile or at Albemarle Silver Peak operation that relies on the sun
at Kings Mountain, Hard Rock will be broken, crushed and turned into a concentrate resembling
sand.
We need to get the green stuff out and that will produce what's called a spodumene concentrate.
That concentrate will run about 6% lithium oxide.
So the intent there is to produce that concentrate.
That will be what we give to conversion facilities.
That concentrate will be transported to Albemarle's soon to be built $1.3 billion
processing facility in South Carolina, where it is turned into battery grade lithium
hydroxide. The plant will support the manufacturing of 2.4 million electric
vehicles annually and will be able to process lithium from recycled batteries.
It's the nature of mining.
You don't know exactly how big these projects are going to be until you get them fully
explored, studied, and then permitted.
Before that happens.
One challenge is removing the massive amount of rainwater that is built up inside.
It's not like we've got a big, you know, billion gallon tank to pump this into and wait.
So our permitting process right now is basically to take this water, which we've
done plenty of testing on and we are in permitting with all relevant regulatory agencies
to ensure that we can discharge this into waterways and into places that they tell us that
we can put it.
The town's mayor has said that the community, while eager for the high paying jobs, has
expressed concern over the impact to the water table.
Worrying about wells running dry, pollution of the groundwater as well.
They're fairly lucky that we're close to town and most city water is connected all around the
mine anyway.
Albemarle claims the water is clean, saying it has been tested and citing the wildlife that lives on
the surface as proof of its purity.
The town is supportive, the governments been supportive to date, but we still need to get all
the permits in order.
The US was the world's largest lithium producer in the 1990s, accounting for more than a third of
global production.
Today, Australia, Chile and China collectively make up about 90% of lithium mine
production, while the US only accounts for about 1%.
Albemarle's stock price reached $325 in November 2022, roughly
the same time the price of lithium carbonate soared to a new high.
There are two main lithium compounds that Albemarle sells for use in electric vehicles.
Lithium carbonate and lithium hydroxide.
Those are the breadwinners.
So there's the ones that really carry most of the weight today.
In Albemarle's battery lab, chemists and scientists study and test those compounds in an
effort to improve battery performance.
We're not developing new batteries, but we're developing the materials that go into the
batteries. So we're trying to make our customers batteries more stable, more efficient, cleaner
operating, longer life.
In this lab, we'll take the lithium hydroxide or lithium carbonate and combine it with other
transition metal oxides to make those cathode materials.
And we do this at a relatively small scale to really understand what is important about our
materials for our customers.
In general, lithium ion batteries work like this.
Batteries are composed of an anode or cathode, a separator between the two electrodes and an
electrolyte that fills the remaining space.
Energy is stored and released as lithium ions travel between these electrodes.
Today, lithium is primarily stored in the cathode side of the battery, but that could change as
improvements in technology shift focus towards more lithium heavy battery chemistries.
The promise of the future is having lithium in both sides of that cell and you'll have
significantly more energy density for lower cost.
We're not just trying to optimize today's materials, but we're inventing tomorrow's
materials. And that includes lithium metal anodes.
Those have the potential of taking a cell that's this size and turning it
into a cell that's this size.
So get the same driving range for half the volume.
Moving from conventional graphite battery anodes to lithium metal could double energy density and
reduce costs by as much as 50%.
Recycling could also play a bigger role in the coming years, too.
Today we are really looking at what opportunities there are within recycling to bring,
at the very least, the lithium back into the ecosystem and potentially even a
broader look to to understand how we can participate, bringing not just the lithium but
other transition metals.
Lithium ion batteries on average last 12 to 15 years in moderate climates and 8 to
12 years in extreme climates.
But despite those efforts, questions remain about how much lithium is needed to power the transition
to electric vehicles.
And we're still early in the technology curve for the lithium ion batteries.
I think most people are working on or working on becoming more efficient, higher energy density,
longer ranges or smaller batteries, and then ultimately that will move toward solid state.
So you're using lithium metal.
And from our standpoint, that's good because it uses more lithium, but it's a safer operation.
It will be more range, it'll charge faster.