Global Lithium Supply Under Pressure as South American Nations Discuss "Lithium OPEC"

Equity Insider – Lithium exports hit a 10-year high in Argentina, as EV demand has sparked a race to secure the white battery metal. The world is taking notice, as earlier this year Germany’s Chancellor Olaf Scholz visited Argentina, Brazil and Chile over his country’s deep concern over maintaining access to lithium. Those countries, along with Bolivia are also allegedly in talks to analyze the possibility of creating a so-called “Lithium OPEC” in terms of building group negotiating power. Currently the Lithium Triangle produces about half of the world’s lithium, and is estimated to contain more than 60% of the world’s known lithium resources. Today, multiple companies have interests in South America’s lithium scene, including Lithium South Development Corporation (TSXV:LIS) (OTC:LISMF), Sociedad Química y Minera de Chile S.A. (NYSE:SQM), Albemarle Corporation (NYSE:ALB), Sigma Lithium Corporation (NASDAQ:SGML) (TSXV:SGML), and even Tesla Inc. (NASDAQ:TSLA) (NEO:TSLA).

Headquartered in Vancouver, Canada, Lithium South Development Corporation (TSXV:LIS) (OTC:LISMF) is advancing its flagship Hombre Muerto North Lithium Project (HMN Li Project) situated in Salta Province, Argentina. With an established maiden resource of 0.57 MT Li2CO3 equivalent (M+I) from 2019, the company is committed to increasing the resource size through an extensive drilling program and progressing towards a comprehensive Feasibility Study for the HMN Li Project.

The HMN Li Project is neighbored by two prominent lithium producers—Korean powerhouse POSCO and Livent—at the northern tip of the esteemed Hombre Muerto Salar.

The first months of 2023 have focused on Lithium South’s Alba Sabrina resource expansion drill program. Impressive lithium values have been obtained from all completed drill holes, including an average of 663 mg/L Li across samples, with values between 320-752 mg/L Li, and a range of 569-708 mg/L Li in another drill hole.

"We are very pleased with the exploration results to date and look forward to the calculation of an upgraded lithium resource at the HMN Li Project,” said Lithium South President Adrian F.C. Hobkirk. “Hole AS02 is the deepest hole completed to date at the HMN Li Project and demonstrates the potential to significantly expand the total resource for the project. We are very pleased with the high lithium and low magnesium values."

The evaluation of the HMN Li Project has made significant strides, with a Preliminary Economic Assessment (PEA) completed in April 2019. However, the previous assessment focused on the original Tramo claim, covering 383 hectares of the initial project claims. Presently, the property package spans 5,687 hectares across nine mining concessions.

Furthermore, Lithium South has taken measures to improve the project's potential for Direct Lithium Extraction (DLE) by providing three 2,000-liter bulk samples of premium HMN Li brine for testing. The tests were carried out by three strategic partners: Chemphys Chengdu from China, Argentina-based Eon Minerals, and Lilac Solutions from California.

In Chile, the government has plans to require all new lithium projects to produce using direct extraction. “For us, any future development has to done with direct extraction,” said Chile’s Mining Minister Marcela Hernando.

With DLE, brine can be reinjected back into salt flats, reducing the environmental impact and accelerating production. While this seems like an overall improvement, each operation would still have to be adapted to the particular conditions of each salt flat. To date, the DLE method is barely used commercially anywhere in the world.

The move will likely impact both Sociedad Química y Minera de Chile S.A. (NYSE:SQM) and Albemarle Corporation (NYSE:ALB) the most, as they’re currently the only two firms permitted to produce from the Atacama salt-flat. Currently, the two companies pump up vast amounts of brine, then storing it in giant evaporation ponds for a year, before processing it and selling to mostly Chinese and Korean battery makers.

As the world’s second-largest lithium producer, this new challenge hasn’t stopped Chile’s SQM from earmarking $3.4 billion of new capital expenditure by 2025 to boost production capacity to 210,000 tonnes of Li2CO3 equivalent annually, up from the current 180,000tpa. SQM noted it would invest $1.4 billion from the total planned for the 2023-2025 investment in 2023, as it continues expanding its capacity in Chile.

Meanwhile, back in February, executives from Tesla Inc. (NASDAQ:TSLA) (NEO:TSLA) met with Chilean authorities, including the ministers of foreign affairs and mining, to secure supplies of battery metals, with lithium at the top of the list.

According to local newspaper La Tercera, executives from Albemarle were also in attendance at the hearings. The official minutes of the meeting showed that Tesla was interested in knowing more about Chile’s development agency Corfo’s plans for the lithium sector, as well as the potential collaboration opportunities with lithium producers like Albemarle.

It wasn’t the first time that Tesla had dipped a toe in the idea of becoming a lithium miner itself. Back in April 2022, CEO Elon Musk tweeted: “Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.”

Chile isn’t the only South American jurisdiction where Albemarle is operating, as lithium giant still holds the central area of the Antofalla salar, having commented in a 2016 news release: “Albemarle believes that this lithium resource (the company’s concession at the Antofalla salar) will be certified as the largest lithium resource in Argentina.”

Despite not being a part of the Lithium Triangle, Brazil’s importance in South America’s lithium future is growing, mostly through the successes of Sigma Lithium Corporation (NASDAQ:SGML) (TSXV:SGML) which as of February 2023 was still on track to start production in April 2023.

"What drives us at Sigma Lithium is the larger purpose to leave a legacy of prosperity at Vale do Jequitinhonha in Brazil," said Ana Cabral-Gardner, Sigma Lithium CEO and Co-Chair. “We are inserting Brazil in the global battery materials supply chain through the front door, producing an environmentally and socially sustainable lithium that will be building the next generation of electric vehicles with materials produced with the same ethos of its customers.”

The initial stage of Sigma’s wholly-owned Grota do Cirilo Project in Brazil aims to generate 270,000 tonnes per annum (equivalent to 36,700 LCE per annum). Assuming a decision is made to continue, subsequent phases (2 and 3) are predicted to boost output to 766,000 tonnes per annum (or 104,200 LCE per annum) of eco-friendly, high-quality lithium concentrate suitable for batteries. The lithium plant will feature cutting-edge Greentech technology that runs exclusively on 100% renewable energy, employs 100% recycled water, and utilizes 100% dry-stacked tailings.


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