Lithium Americas Corporation was set up last year after the discovery of the third largest lithium bearing brine deposit in the world. Its 64,572 hectare Cauchari-Olaroz discovery in Argentina will come on stream just in time to feed escalating demand from the manufacturers of electric vehicles.
Lithium is a plentiful metal and widely distributed in the earth’s crust, but it tends to come in low concentrations and is very hard to extract from the pegmatite rock that holds it. It is invaluable as a flux for welding or for making glass and ceramic products, and when added to fireworks it creates a delightful red flare. It is also used in pharmaceuticals and to refine other metals, but what makes it an exciting prospect for investors right now is its use in batteries.
Electric cars are relatively rare just now but there are increasing numbers of hybrid cars on the road. All-electric cars are being developed so fast, however, that it’s no longer fanciful to suggest that in ten years’ time petrol and diesel driven vehicles will be more common in museums than on the road. President Obama has said he wants a million on American roads by 2015. Lithium is not the only game in town for the battery manufacturers, and it is likely that competing systems will emerge, but lithium is tipped to remain the dominant technology and that means we will need a lot more of it.
“Lithium is on a roll,” says Waldo Perez, CEO of Lithium Americas Corporation (LAC). “Currently just 25 percent of the world’s lithium production is used to make batteries. Demand for the remaining three quarters is increasing at roughly the rate of economic growth in the BRIC economies, but its consumption in batteries is growing at an explosive rate and in a few years more lithium will go into batteries than into all other applications put together.”
All this has resulted in something of a lithium rush, focused on the few places it is found concentrated and comparatively easy to extract. Chief among these are the ‘salars’ of South America, salt pans in Chile, Bolivia and Argentina underlain by a mineral rich brine in which lithium is a constituent. The Cauchari salar on Argentina’s Puna Plateau first came to Perez’s attention when he was in charge of exploration for Latin American Minerals (LAM). “We were actually looking for potash deposits at the time and were not that interested in lithium.”
Lithium, he explains, was just starting to make the markets twitch, and by the time he had established that the resource was actually there and that it contained significant amounts of lithium it was clear that the situation was changing. “You could say that LAT was the antecedent company to LAC, which is a new company that we floated on the Toronto Stock Exchange in May 2010.” LAT made many discoveries including gold and diamonds in Paraguay and a significant zinc project in Argentina, and also, of course, this lithium project. But lithium is a speciality metal—a different type of business—so at the time it made more sense to have a different company as a vehicle, he says. “It was the right decision. LAT continues to develop its gold projects but LAC span off as an industrial minerals company.”
Since then Waldo Perez has been leading LAC. “This is a new company but the team is not new; some of us have been working together for up to 15 years. We have a mature, well consolidated team in a new company.” The IPO brought in $45 million, which funded the 53-hole drilling programme that confirmed the viability of the resource as the third largest lithium brine resource in the world. Processing the brine is a very much easier and cheaper way than milling hard rock and leaching out the valuable minerals, explains Perez. “The process is more like drilling for oil or gas than hard rock mining. Once you have ascertained that the brine is there you have to evaluate how much of it you will be able to extract from the porous space underground. It is not infrequent for only 50 percent of the resource to be accessible, and that is why you have to look for large resources—you know a significant proportion will stay in the ground.”
Once started, the process is simple and environmentally friendly, he says. The mineral bearing brine is pumped into evaporation ponds where nature takes its course. The downside is that it takes a long time, but in a year the concentration increases from around 500 mg of lithium carbonate per litre to something between 10,000 and 20,000 mg per litre. It is then removed to an industrial plant on site that extracts boron and lithium and processes them for the market. Logistics are not a problem—the deposit lies close to a major highway leading to the Pacific ports of Chile and the Atlantic ports of Argentina.
Economically the project is justified on the basis of current growth rates alone, which comes mostly from batteries in appliances such as cellphones and laptops. However, the larger anticipated growth in demand will be caused by the electrification of the car. Two major automotive players have each taken an equity stake in the company. The Canadian auto parts manufacturer Magna and Japan’s Mitsubishi will between them take a third of Cauchari-Oloroz production: the remaining two thirds, Perez confidently predicts, will find a market in China where BYD Auto and other manufacturers are at an advanced stage in developing all-electric cars for mass production.
Another bonus is LAC’s partnership with mine developer WorleyParsons,the engineering firm that designed the largest, lowest cost, lithium brine processing facility in the world at Atacama in Chile. WorleyParsons will complete its preliminary economic assessment by April 2011 prior to embarking on a full scale feasibility study; meanwhileLAC has signed an agreement with SGS Canada for the completion of bench studies required to design a pilot lithium carbonate plant, manufacture it in Canada then ship it to Argentina where it will start producing 99.5 percent pure lithium carbonate by October this year.
Full scale production will start in 2014, when Lithium Americas will be able to deliver lithium carbonate in quantity to the markets in Europe, North America and Asia, precisely when demand is expected to start outstripping current supply levels.
