Posted on January 20, 2017 by Charles Morris
Is lithium the new white gold? Scare stories about a shortage seem to have little basis in fact (lithium isn’t a fuel, it’s abundant and highly recyclable, and batteries don’t really use that much of it). However, there’s no question that demand is soaring, and entrepreneurs around the world are scrambling to secure supplies of the stuff.
Above: The world’s largest deposits of lithium are found in Chile (Source: Bloomberg)
Ashlee Vance, the author of a biography of Elon Musk, traveled to Chile’s Atacama Desert, where the world’s largest deposits of lithium are found, for a recent episode of Bloomberg's Hello World travel program. He visited the facilities of mining giant SQM, one of several companies that have massive lithium extraction operations in the area. In response to growing demand, the firm plans to more than double capacity in the next four years.
Above: Ashlee Vance gets a crash course in how lithium is mined (Source: Bloomberg)
SQM pumps lithium-rich brine from the ground and stores it in enormous ponds (44 million square meters worth), where the water evaporates in the sun, leaving a yellowish oily liquid from which the lithium salts are extracted. As Vance points out, nowhere is more suitable for evaporation than the Atacama Desert. The driest place on earth outside the polar regions, it gets no more than a tablespoon of rainfall a year.
Above: An SQM train in Chile (Flickr: Lucas Burchard Señoret)
It’s a strangely beautiful but forbidding landscape - the 10,000-foot altitude, the arid atmosphere and the daily extremes of heat and cold make the region singularly inhospitable to humans. After a few days, Vance and his film crew were suffering from light heads and cracking skin. Miners here work a week on and a week off.
Above: Elon Musk biographer Ashlee Vance explores lithium mining in Chile’s Atacama Desert (Youtube: Bloomberg)
Lithium mining is not without controversy. Flocks of flamingos in nearby wetlands are in decline as water levels recede, and local environmental groups believe that the extraction of massive amounts of water from the aquifer may be responsible (SQM pumps up some 1,500 liters of brine per second). A parliamentary commission has yet to confirm any direct connection between the fate of the flamingos and the mining operations. The mining companies keep tabs on water levels in the lagoons, and help to finance monitoring of the local environment. SQM (and other Chilean mining companies) won’t discuss their customers, so we don’t know if their lithium even finds its way into Tesla vehicles or not, but Tesla reportedly met with Chilean officials in 2015 to discuss lithium supplies.
Above: Lithium cost curve from top producers, SQM at far left (Source: Hedge Connection via HSBC)
Meanwhile, Tesla seems to be well on the way to securing a supply of lithium much closer to home. As part of the incentive package that Nevada granted to Tesla for building the Gigafactory, it extended a road connection to US Highway 50 (known as “the loneliest road in America”), which shortens the route between the Gigafactory and major lithium deposits at Silver Peak, the location of the only active lithium operation in Nevada. A year later, according to Seeking Alpha, Tesla entered into a lithium supply agreement with Pure Energy Minerals, which has developed a new solvent extraction process to separate high-purity lithium chloride from brine sources in the area.
Above: Outside the Tesla Gigafactory (Image: Inhabitat)
Now a couple of Nevada lawmakers have proposed new tax incentives aimed at increasing lithium production in the state. Assemblyman Jim Wheeler (R-Minden), and Senator Pat Spearman, (D-North Las Vegas) have proposed a bill that would make equipment and supplies used to explore for and develop lithium exempt from sales tax. “There is a lot of lithium in Nevada,” Wheeler told the Reno Gazette-Journal. “We would be the fourth largest supplier in the world if we were to actually take advantage of our lithium.”
Above: A Tesla Model S battery pack, the site of about 7,000 Panasonic 18650 lithium-ion battery cells (Image: Inhabitat)
Wheeler said lithium extracted in Nevada is shipped overseas for processing, then shipped back to the US. The tax breaks would encourage companies to complete the production cycle entirely in Nevada. Wheeler is considered one of the state’s most conservative legislators, and Spearman among the most liberal. In May, each received a $1,000 campaign contribution from Western Lithium, a company that would benefit from the proposed legislation. Of course, this had nothing to do with the lawmakers’ interest in the light white metal. “That is just kind of normal,” Wheeler said.