VANCOUVER — The buzz around the North American lithium market that began last year has blossomed into a full-blown exploration cacophony, with Canadian juniors flocking to stake ground in marketable proximity to Elon Musk’s near-mythical US$5-billion Tesla Motors (NASDAQ: TSLA) “gigafactory” outside Reno, Nev.
Musk ignited the frenzy in September when he declared on Twitter that Tesla would “definitely” be on the lookout for lithium sources in Nevada, which prompted struggling exploration companies — as well as shell companies — to proclaim an interest in picking up a lithium asset and striking a deal with the multibillion dollar U.S. electric car manufacturer.
Anyone who buys, processes or uses lithium carbonates and hydroxides has likely expected a supply deficit on the horizon. Industry observers might even recall a lithium “pre-rush” in 2009, when carbonate prices went on a similar run.
According to analysts at Benchmark Mineral Intelligence, lithium carbonate prices averaged US$5,500 per tonne in early 2015, and now range from between US$9,000 and US$13,000 per tonne. The price increases for lithium hydroxide have been even more pronounced, with the material now valued between US$12,000 and US$17,000 per tonne.
“We have what appears to be the most significant shortage we’ve seen in the past 15 years, so it’s positive for potential suppliers,” Benchmark’s managing director Simon Moores said during an interview.
“There isn’t a real differentiation in deposit type from the customer base. People simply need lithium units on the market at the moment. When we’re talking about prices it’s important to remember that we’re speaking about a price range … some people quote really high prices, but that’s just one contract, and it doesn’t necessarily reflect the greater market.”
Benchmark estimates that lithium demand totalled 160,000 tonnes last year, which equates to a 20,000 supply deficit. Meanwhile, Musk says that the world will need hundreds of the gigafactories to fulfill a growing global demand for lower-cost batteries for cars and power storage. Benchmark analysts figure that given the current growth in lithium-ion battery production, the global demand for lithium will hit 250,000 tonnes by 2020.
“One thing to look at in terms of something like the graphite boom a few years ago is that it corresponded with a rise in other commodities, thanks largely to China,” Moores said. “The current lithium boom is basically juxtaposed against a market where all other commodities suffered badly. The point we try to make is that it’s a fundamental shift driven by lithium-ion battery demand. I never expected an explosion like this, however, before the gigafactory going online.”
Nevada’s lithium rush encircles Clayton Valley, which lies between Reno and Las Vegas in Esmeralda County. The region hosts North America’s only producing lithium operation — Albemarle’s (NYSE: ALB) Silver Peak brine facility.
One of the earliest movers in the Clayton Valley area was Pure Energy Minerals (TSXV: PE), which is advancing the Clayton Valley South project. The company entered the lithium business in 2009, and picked up the asset after Rodinia Lithium (TSXV: RM; US-OTC: RDNAF) released the claims in 2011.
“At that time there were promising projects in South America, but they came with a variety of political challenges,” Pure Energy CEO Robert Mintak said during an interview. “After the shine came off the market, the project was let go, and that downturn allowed us to stay in the game in Nevada, when many other companies looked at alternative commodities. We were only looking at brine projects, because they represent a low-cost entry to production.”
The deposit is a salty “brine” groundwater, with lithium contained in two aquifers. The brine would be extracted by drilling boreholes into the aquifers and pumping it to surface for lithium removal.
Pure Energy has claimed over 40 sq. km in Clayton Valley, and released a maiden resource estimate on its deposit in July.
Clayton South hosts an inferred resource of 816,000 inferred tonnes of lithium carbon equivalent at grades ranging from 37 parts per million (ppm) to 400 ppm.
The company followed up with news in November it reached a five-year agreement to supply lithium hydroxide to Tesla.
“We focused on maintaining the asset and developing strategic relationships. We were confident in the work done at the project and its prospective value, and we were quite fortunate with how the market has emerged,” Mintak said.
“Tesla wasn’t a name people were talking about when we got started, but it quickly became the big story. As the space became more exciting, and these announcements came out about Nevada, fortune sort of smiled upon us. There wasn’t any secret strategy outside of managing our money and advancing a strong project,” he added.
Brine-based lithium operations often rely on processing technologies. A raw resource number doesn’t mean much if auxiliary minerals in the aquifers, like magnesium and calcium, impact the percentage of lithium that can be recovered. Lithium-ion battery producers also have proprietary manufacturing that requires different chemical balances.
Pure Energy has formed three technology partnerships to work on recovery techniques at Clayton South. The company has agreements with Korean multinational Posco and Bateman Advanced Technologies, and research partnerships with SRI International and the University of British Columbia.
Pure Energy has achieved nearly 100% lithium recovery from brine and produced a 99.9% purity in lithium chloride solution.
“We need to put more holes in the ground like a hard-rock deposit, but it’s different, since we need to show that the resource is pervasive and that the chemistry in the aquifers has a representative value. It’s interesting because there hadn’t been any resource on a brine-lithium deposit in North America until we released ours last year,” Mintak said.
“The salient point with these deposits, however, is that you can’t just measure a resource in the ground for lithium and assume it’s going to work. You have to have a process that proves you can make it into a material that will fit the supply chain and find a customer.”
There have been a number of juniors in Clayton Valley staking claims or acquiring projects. Graphite outfit Ashburton Ventures (TSXV: ABR; US-OTC: ASHXF) picked up the Elon lithium claims in September, while Frank Giustra’s Lithium X Energy (TSXV: LIX; US-OTC: ROCEF) staked the Clayton Valley North claims in November.
Meanwhile, Nevada Sunrise Gold (TSXV: NEV; US-OTC: NVSGF) staked the area’s Atlantis exploration project in December, and Dajin Resources (TSXV: DJI; US-OTC: DJIFF) staked the Tell Marsh property northwest of Silver Peak in late 2014. A bit further down the development road is Western Lithium’s (TSX: WLC; US-OTC: WLCDF) Kings Valley project, which hosts proven and probable reserves of 27 million tonnes grading 0.395% lithium. The company hopes to get the asset into production by 2019.
“You have to remember that the exploration community is reactive to a situation like this, because they aren’t involved in the lithium industry until there is a perceived supply deficit, and we need new deposits,” Moores said. “I wrote an article in late 2014 about the lithium hydroxide shortage, and it wasn’t until nearly one year later that it filtered down into the ju