Latin American lithium: ‘It’s not just about the brine’

Latin America has the option of sharpening its focus on the alternative lithium extraction route amid challenges weighing on the brine segment, BNamericas was told.

The region – the biggest producer of the mineral in the world until 2017, when hard rock miner Australia advanced a production ramp-up – already has three non-brine projects under development.

Nearly all of Latin American lithium mine production in 2018, estimated at 22,800t by the US Geological Survey, corresponded to brine operations in Chile (16,000t) and Argentina (6,200t).  

The balance, 600t, corresponded to hard rock operations in Brazil.

“It’s not just about the brine,” Milan Thakore, a senior research analyst at UK-headquartered consulting firm Wood Mackenzie, told BNamericas.

“They have also got exposure to hard rock operations. Latin America does have the option of going down that route as well.

“If you compare it to the interest in brine, development of the hard rock operations in Latin America has been greater than brine operations just over the past few years, in terms of new operations coming online.”

Most Brazilian output corresponds to state producer Companhia Brasileira de Litio but new projects are underway. Dutch firm AMG’s Mibra and Canadian player Sigma Resources’ Grota do Cirilo are expected to reach full production within the next few years, consolidating the country’s position as the region’s third largest producer.

In a May report, Fitch said it expected annual Brazilian lithium mine output – which corresponds to hard rock operations – to grow to 9,100t in 2021, supported by the two projects.

Meanwhile, Australia's Crusader Resources – now known as Big River Gold – has the Manga project, currently in the early works phase. Others that are still at the preliminary stage are Australian player Cougar Metals' Solonopole project and the Falcon Litio project of Canada's Emerita Resources. 

In addition, in Mexico, Canada's Bacanora and China's Ganfeng are carrying out the Sonora project, a soft rock initiative with estimated output at 17,500t starting 2021.

Bolivia, with large brine resources, is seeking to tap its lithium potential and has attracted Chinese and German investors. Last year the government awarded a contract for a 50,000t/y lithium carbonate plant and signed a lithium battery factory contract. However, the country’s Uyuni salt flat – one of Bolivia's two major lithium sources – has high magnesium levels, which could increase costs.

“There are questions on whether those Bolivian operations will be anywhere near as competitive as the other operations, across the border,” said Thakore.

On top of this, political risk as well as challenges associated with exporting the mineral to international markets hang over the landlocked country.

Peru could also get in on the game. Canadian miner Plateau Energy Metals is carrying out metallurgical test work at its Falchani brine project in the country.

Fitch forecasts Latin American lithium mine production to reach 96,900t by 2028. Chile and Argentina are expected to remain the biggest players.

US company Albemarle and local group SQM both produce in Chile and have interests in hard rock operations in Australia. 

MARKET SHARE

While brine output will grow, the segment will fail to regain its dominance.

“Brines are really struggling to keep pace,” said Thakore. “The EV and battery world is moving very quickly. The scale of demand for batteries is larger than ever, growing faster than anyone could have predicted a couple of years ago.

“However, in terms of ramping up production, the South American brines just haven’t been able to do that. Where all of the new lithium has come from has been Australia and some other regions, too.

“Right now, we’re less optimistic on the brine operations’ ability to ramp-up and keep their share of the market.”

In 2016, lithium from South American brines accounted for over 50% of the market, a share that has dropped to about 30% today. Even if planned ramp-ups happen, the market share of brines is expected to remain at around the same level. 

CHALLENGES

While brine extraction is cheaper than extracting the mineral from rock, the segment faces challenges in other areas.

Extracting lithium from brine is technologically more complex than tapping a mineral seam. On top of this, salars host fragile, remote ecosystems and operations require a lot of water – a scarce resource.

Furthermore in No. 1 producer Chile, lithium was deemed a strategic resource in 1979, which means all current lithium extraction is being carried out under concessions awarded before that year.

“It did tremendous damage to the development of the lithium industry. If we want to push this industry forward, we must remove the strategic label and place it under the system of minerals that can be subject to concessions,” Cristián Solís, a lawyer from local legal firm Montt Group, said this month.

ALSO READ: Chile readies PPP-driven strategy for lithium sector

MARKET OUTLOOK

Demand will increase for lithium, driven by the battery-manufacturing segment as carmakers tighten their focus on electric vehicle production.

Wood Mackenzie expects global electric car sales (with a plug) to account for 7% of all passenger car sales by 2025, 14% by 2030 and 38% by 2040.

The company, however, projects demand growth below what other market observers are forecasting.

“We still see very strong growth for lithium demand, but we just think it’s going to happen slightly slower than a lot of other people in the market,” said Thakore.

US research firm Mordor Intelligence expects the lithium market to register a CAGR of 10.1% in 2019-24.

Spot prices for lithium carbonate have fallen by around US$7,000/t since June 2018.

Thakore said: “We’ve seen a lot of new lithium come into the market and actually demand hasn’t really been as high as people previously expected. So we’re seeing quite a lot of downward pressure on prices. We think there is still some way to go in terms of how low lithium prices can go.”