Lithium

As the cliché goes, the global economy is inextricably interconnected.  Easy to say, but still surprising to see it unfold in front of us – especially when the nation illustrating the truism is the world’s 44^th largest economy, with a GDP roughly the size of Indiana.

But small size belies the multiplier effect of Critical Minerals, which can have an outsized impact on the global economy.

On April 20, 2023 Chile’s President Gabriel Boric announced his plan to nationalize the country’s lithium industry to boost the Latin American nation’s industrial base and protect the environment.  Falling short of full nationalization, the proposals envision majority state-owned partnerships with private companies for lithium exploration and production, and would require that the two lithium miners currently operating in the country, Chile’s SQM and U.S. company Albemarle, “negotiate an unspecified state participation in their existing concessions, which run to 2030 and 2043 respectively.”

Considering that Chile is the world’s second largest lithium producer, observers called Boric’s announcement a “shock move,” but in all reality, Chile is only the latest in a series of countries resorting to resource nationalism at a time when critical mineral demand is soaring.  As for the shock effect, Boric’s plans to nationalize mineral operations were well-known.  The shock seems to result from global observers who are still learning to appreciate the importance of parts of the Periodic Table more critical to economic growth than ever before.

But there is something new under the Latin American sun.  As Peter Schechter and Juan Cortiñas outlined in a February 2022 piece for Marsh McLennan’s Brink News ARPN featured at the time, the shunning of laissez-faire economics, particularly in Latin America, is not new. “What’s different this time,” they say, “is that these new interventionist policies are not only focused on the traditional energy sector. Instead, the region’s attention is turning to increasingly valuable minerals that are key to the new green economy quickly gaining momentum across the world.” 

Chile’s move comes on the heels of a comprehensive lithium nationalization plan enacted by Mexico which culminated in President Andres Manuel Lopez Obrador signing a decree handing over responsibility for lithium reserves to the country’s energy ministry in February of this year.

Bolivia’s ruling socialists have also favored state control over the nation’s vast untapped mineral resources but are relying on Chinese partners to harness them.

Meanwhile, some speculate that had it not been for his ouster, Peru’s President Pedro Castillo, who won a narrow victory in 2021 and had initially pledged to nationalize much of the country’s mining sector, might have pursued an approach similar to Boric’s in Chile.

While Peru may have bucked the resource nationalism trend, and is now “watching from the sidelines” as it gains steam, for all its resource riches, lithium watchers have their eyes on the last remaining holdout against the region’s statist trend:  Argentina.  There, a number of lithium projects currently in development are open to foreign investment and capital.  But across the region, and with Chile joining Mexico and Bolivia, the Argentinian exception proves the rule.

With resource nationalism rising across the Latin America region, stakeholders in the U.S. must heed the lesson that the best approach to shoring up our own critical mineral supply chains is a comprehensive “All of the Above” approach.

The increasingly popular strategy of “friend shoring” is an important pillar of this approach, and of course, remains highly appealing to policy makers with “not in my backyard (NIMBY)” constituencies.  However, as we previously outlined:

“[Friend shoring] will not be sufficient to meet our vast material needs, particularly as NIMBY-ism is going global.

It’s time we come to terms with the fact that as much as we want to rely on our friends and allies, this can only be part of our critical mineral resource strategy.  To succeed and remain competitive in the 21st Century, we will also have to harness our arguably vast domestic resource potential across the entire value chain — from mine to manufacturing.”

 

Sometimes hailed the “fuel of the green revolution,” lithium has been the posterchild of the “battery criticals.”  Start with the fact that the leading battery technology underpinning the shift towards net zero carbon emissions is called “lithium-ion.” With its high electrochemical potential and light weight, the commercialization of the lithium-ion battery has transformed and accelerated the renewables shift.  Lithium is a key component of the battery cathode, and the EV market and demand for renewable energy storage are key drivers for soaring lithium demand.

Meanwhile, as global lithium production has quadrupled since 2010, the U.S. share of production has dropped significantly. Once the largest producer of lithium in the 1990s, the United States’ share of production has dropped to 1 percent of the global total, as Australia, Chile and China dominate the field.

As we previously pointed out, China may only account for 13% of total production, but It has not only consistently developed domestic mining capabilities — it has also acquired lithium assets in countries like Chile, Canada and Australia, and, one link down the lithium supply chain, it is now home to 60% of global refining capacity. In light of skyrocketing demand projections, the country has stepped up its involvement in the electric game, and has recently beat out automaker Tesla in a bid to mine for lithium in Nigeria.

As for the United States, according to the latest USGS Mineral Commodity Summaries, “[c]ommercial-scale lithium production […] was from one continental brine operation in Nevada. Lithium was also commercially produced from the brine-sourced waste tailings of a Utah-based magnesium producer. Two companies produced a wide range of downstream lithium compounds in the United States from domestic or imported lithium carbonate, lithium chloride, and lithium hydroxide.”

Big picture, the U.S. simply cannot realize its aspirations to be a global player in the renewable revolution while producing 1% of worldwide lithium supply.

Efforts to strengthen the lithium supply chain are underway. Followers of ARPN are aware of the green energy-related provisions of 2021 congressional infrastructure package, as well as the 2022 invocation of the Defense Production Act for lithium and the battery criticals and the passage of the Inflation Reduction Act (IRA).

[Lithium is the latest in ARPN’s feature series reviewing the battery criticals against the backdrop of the latest USGS Mineral Commodity Summaries. View our posts on graphite, manganese, cobalt, and nickel.]   

In January of this year, the Department of Energy’s Loan Programs Office (LPO) announced a conditional commitment to Ioneer to advance the domestic production of lithium and boron at its Rhyolite Ridge project.

Rhyolite Ridge would become the second lithium mine in the United States, but – while DOE is providing a 9-digit loan guarantee – the project is still pending approval from DOI, the Department of the Interior, where it is mired in the inherent irony of the green energy transition, with environmentalists opposing the project on grounds that Thiem’s buckwheat, a rare wildflower found on the proposed mine site, was added to the endangered species list by the U.S. Fish and Wildlife Service only a few weeks ago.   We have seen this paradox elsewhere. As Reuters columnist Andy Home phrased it: “public opinion is firmly in favour of decarbonisation but not the mines and smelters needed to get there.”

Also in January, General Motors announced that it would jointly invest with Lithium Americas Corp. to develop the Thacker Pass mine in Nevada, which is the largest known source of lithium in the United States, and is considered the third largest in the world.  With a $650 million equity investment, this would represent the “largest investment by an automakers to produce battery raw materials” in GM’s own words. Under the agreement, GM will have exclusive access to the lithium once the investment is complete. The company expects that once the mine is operational in the second half of 2026, the batteries bearing Rhyolite Ridge lithium could power up to 1 million EVs.

Not surprisingly, the Thacker Mine, too, is embroiled in a high stakes legal battle, with environmentalists and tribal leaders attempting to block the project near the Oregon line.  Just last week, however, a federal judge – for the third time in two years – sided with the Biden Administration and Lithium Americas, denying the opposition’s request for an emergency injunction until the 9th U.S. Circuit Court of Appeals can hear their latest appeal.  Based on the judge’s decision, construction could begin as early as this week.

In addition to projects pursuing lithium as a primary material, Rio Tinto’s U.S. Borax Mine in California has recovered lithium from 90-year old waste piles.  The effort has leveraged a public-private partnership linking Rio Tinto with DOE’s Critical Materials Institute, to work through processing challenges.  It’s the kind of unconventional thinking that finds a 21^st Century tech material in the mine tailings of the 1920s, turning a “waste stream” into a “work stream” in a world hungry for lithium.

Achieving global (and domestic) decarbonization goals while at the same time strengthening our supply chains and reducing our over-reliance on critical minerals from China will require a comprehensive “all of the above” approach across the entire value chain, and,  ARPN’s Daniel McGroarty has consistently  pointed out, “we don’t have the luxury of time” anymore.

Earlier this week, USGS released its latest iteration of the annual Mineral Commodity Summaries, a much-cited report that every year gives us a data-driven glimpse into our nation’s mineral resource dependencies. It’s fitting that ARPN reviews the report on Groundhog Day, February 2nd, because just like in the Bill Murray classic movie, in which the clock jumps [...]

As part of the Biden Administration’s efforts to bolster U.S. critical mineral supply chains, and specifically the battery supply chain, the Department of Energy’s Loan Programs Office (LPO) has announced a conditional commitment to Ioneer Rhyolite Ridge to advance the domestic production of lithium and boron. Under the conditional commitment, the LPO would lend up to $700 [...]

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As geopolitical tensions continue to mount and supply chain challenges loom large across many sectors, Beijing is tightening reins on its critical mineral supply chains. According to news reports, the Chinese Ministry of Industry and Information Technology announced plans to increase its supervision of China’s lithium battery supply chain, which, according to the ministry, is “severely unbalanced.” [...]

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