Lithium for Tesla, EVs, batteries: Touring Silver Peak, Nevada

SILVER PEAK, Nev. — On the sting of Western Nevada, hours from a significant metropolis and miles down personal dust roads, lies the United States’ solely lithium-producing plant.

The nearest city is Tonopah — inhabitants 2,179 — the place a prospector found silver on the flip of the twentieth century. The city’s mining roots are nonetheless on show, however the motion has shifted to the nation’s largest lithium brine operation 45 minutes away.

Silver Peak has been producing lithium for the reason that Nineteen Sixties. Specialty chemical compounds firm Albemarle acquired the location in 2015 from Foot Mineral Company and has owned it ever since.

Silver Peak has gained newfound consideration lately because the power and transportation sectors race to wean themselves off climate-warming fossil fuels. Lithium’s distinctive properties make it the widespread denominator throughout battery applied sciences. Forecasts for simply how a lot shall be wanted within the a long time to come back range. Under the International Energy Agency’s most bold local weather state of affairs, lithium provide should develop fortyfold by 2040 from right now’s ranges.

The U.S. was a frontrunner in lithium manufacturing, nevertheless it’s since ceded that place to international nations, together with China. Now the Biden administration has mentioned that bringing battery provide chains again to U.S. shores is a matter of nationwide significance, and the not too long ago handed Inflation Reduction Act — the most important local weather package deal in U.S. historical past — underscores this new push towards home manufacturing of significant supplies.

Part of the difficulty with bringing new provide on-line, nonetheless, is the sheer quantity of land required. The scale of Silver Peak is tough to know from photos. It spans 13,000 acres, and appears to look out of nowhere, tucked between mountain ranges within the Nevada desert.

Evaporation ponds at Albemarle’s lithium operation in Silver Peak, NV.

Pippa Stevens | CNBC

The solar bears down and it hardly rains — ideally suited situations for this sort of lithium extraction, which is determined by photo voltaic evaporation. There’s additionally salt, a byproduct of manufacturing, in all places.

The large website is just not bustling with exercise, which makes it appear even bigger than it’s. The solar offers a lot of the labor, and fewer than 80 individuals whole work on the facility. But it is websites like these — huge, sweeping operations — that can energy the longer term.

“The U.S. is at the start of really expanding and developing its supply chain domestically for this critical mineral lithium, as well as the broader supply chain for electric vehicles and electrification,” mentioned Karen Narwold, government vp and chief administrative officer at Albemarle.

“From Albemarle’s perspective, we think the United States can bring the full supply chain here.”

From a whole lot of ft underground to your automotive

Lithium will be produced from brine, onerous rock or clay, and every methodology requires its personal set of situations and extraction processes. Silver Peak produces lithium from brine tapped from the Clayton Valley basin.

Salty brine that incorporates lithium is pumped from between 300 and a couple of,000 ft underground to the floor. Then, over the course of 18 to 24 months, photo voltaic evaporation concentrates the lithium.

This is among the first of 23 ponds that lithium-rich brine travels via over the course of 24 months at Albemarle’s Silver Peak website. Brine is pumped from as a lot as 2,000 ft underground to the floor.

Pippa Stevens | CNBC

The brine flows via a sequence of 23 ponds on the website because it turns into extra concentrated, taking over an more and more vivid turquoise shade. The ponds vary in measurement, and the most important is greater than 700 soccer fields. As extra brine is evaporated, the ponds get smaller and smaller.

About midway via the method, lime is pumped via the brine, which separates out magnesium that is discovered alongside the lithium. Once the brine has moved via all 23 ponds, the remaining lithium is chemically processed right into a white powder kind generally known as lithium carbonate.

What occurs subsequent is determined by the lithium’s finish use. Lithium is not used solely in batteries; it is also present in prescription drugs and glass, amongst different issues. Some of the carbonate from Silver Peak is shipped to Albemarle’s processing facility in Kings Mountain, North Carolina. There it may be additional refined into lithium hydroxide, which is used for electrical car batteries. Albemarle counts main automakers, together with Tesla, as prospects.

Lithium costs skyrocket

Lithium has garnered vital consideration in current months as a result of a pointy spike in costs, surging greater than 700% since January 2021, in line with Benchmark Mineral Intelligence. In some locations, together with the Chinese spot market, costs are up much more.

In a boom-and-bust cycle of kinds that mirrors different commodity markets, costs rose over the course of 2017 and into 2018 earlier than cratering midway via the 12 months and falling all through 2019. At that time the market was oversupplied, which led to a scarcity of funding in new manufacturing. The results of that slowdown are nonetheless being felt. Today, provide is racing to meet up with demand, and a few are warning that it merely will not.

According to forecasts from Benchmark, 600,000 tons of lithium carbonate equal, or LCE, shall be mined this 12 months — that is 10,000 tons lower than wanted. By the top of the last decade, the agency envisions annual provide reaching 2.15 million tons of LCE, which is able to lag demand by a whopping 150,000 tons.

One of the intermediate-stage ponds at Albemarle’s lithium facility. As the brine turns into extra concentrated with lithium the swimming pools tackle extra of a turquoise shade.

Pippa Stevens | CNBC

The surge in lithium demand comes from nations and corporations doubling down on local weather targets prior to now few years. That contains automakers, that are saying bold all-electric fleets.

Lithium is not the one mineral in these batteries — additionally they require cobalt, graphite and nickel. Each has its personal limitations, and scientists are experimenting with completely different battery chemistries.

But whereas it is potential to swap out some supplies, at this level there is not any viable different to lithium.

Although lithium is just not a scarce useful resource, getting a brand new mine up and working can take about seven years. These initiatives are capital intensive and require many permits, all of which implies the trade is slow-moving.

Lithium Americas has been attempting for greater than a decade to get manufacturing going at its Thacker Pass clay mine in Nevada, in opposition to opposition from environmentalists and Native American tribes. Piedmont Lithium is within the means of creating a spodumene mine in North Carolina, which it hopes will start producing by 2026.

Albemarle is working by itself North Carolina mine at Kings Mountain, close to its processing facility. It’s a brownfield mine — that means it was beforehand producing — which the corporate hopes will assist it velocity previous the hurdles that delay new initiatives.

Extractive industries are resource-intensive by their very nature and will be extremely disruptive to native ecosystems. But it is onerous to see how the world can transfer away from fossil fuels with out new lithium manufacturing. An electrical car requires greater than six occasions as many mineral inputs relative to inside combustion autos, in line with the IEA. Under the Paris-based company’s most bold local weather state of affairs, it forecasts 230 million electrical automobiles, buses, vans and heavy vehicles on the street by 2030.

This is the final of the 23 evaporation ponds at Albemarle’s Silver Peak lithium website. From right here, the lithium is shipped for on-site processing the place it is was lithium carbonate.

Pippa Stevens | CNBC

Still, some consider these forecasts are far too bold, and the world ought to as an alternative give attention to current sources reasonably than creating new websites.

Recycling might additionally develop into an possibility — Albemarle is among the corporations engaged on this — however the market hasn’t but reached essential mass. Technologies are additionally being developed to make operations extra environment friendly in order that mines yield as a lot as potential.

Albemarle units its sights on growth

Silver Peak is Albemarle’s largest U.S. lithium manufacturing website at current, nevertheless it constitutes solely a small portion of the corporate’s total lithium manufacturing. Silver Peak produces about 5,000 metric tons per 12 months of LCE, whereas Albemarle’s Chile operation — within the Salar de Atacama area — has the capability to provide 85,000 metric tons per 12 months. The operation there makes use of the identical brine manufacturing course of that was first developed in Nevada.

The firm additionally co-owns two mines in Australia, and operates quite a lot of processing services, together with in China.

Albemarle can be growing its footprint at Silver Peak. In January 2021 the corporate introduced plans to double capability to 10,000 metric tons a 12 months, which the corporate mentioned is sufficient to energy round 160,000 electrical autos.

Bags of lithium carbonate at Albemarle’s Silver Peak facility. Some of it’s despatched to the corporate’s processing plant in North Carolina, the place it may be was lithium hydroxide, which is used for EV batteries.

Pippa Stevens | CNBC

Albemarle’s Narwold mentioned the growth, initially slated for completion in 2025, is forward of schedule. The firm spent the final 12 months and a half setting up 22 new brine-pumping wells, finishing the primary stage of the growth.

By the top of this 12 months Albemarle shall be pumping at 20,000 acre ft yearly, which is equal to roughly 18.5 million gallons of water per day. That represents the complete extent of Albemarle’s water rights, which can be the whole lot of the rights out there within the Clayton Valley.

Albemarle is not only a lithium firm; it additionally has bromine and chemical compounds divisions. But the lithium phase has grown in significance following the worth spike and Albemarle’s growth plans. Lithium now accounts for about two-thirds of the corporate’s income, in line with Meredith Bandy, vp of investor relations and sustainability at Albemarle. That’s up from just a few years in the past, when every division was about one-third of total income.

“We’ve been investing in the lithium market for the last couple of years, and that’s starting to pay off in terms of volumetric growth as well as price performance,” she mentioned.

Traditionally Albemarle had long-term, mounted contracts with prospects. But this 12 months the corporate restructured a few of these contracts in an effort to seize upside from rising costs. It appears to be paying off.

One of the intense blue ponds at Albemarle’s lithium plant in Silver Peak, Nevada.

Pippa Stevens | CNBC

During the second quarter, Albemarle mentioned, web gross sales from its lithium division jumped 178% 12 months over 12 months. The firm raised its full-year steering thrice between May and August, when Albemarle posted second-quarter outcomes. The firm will report third-quarter earnings on Nov. 2.

For the complete 12 months, Albemarle now expects adjusted EBITDA for its lithium division to develop between 500% and 550% on a year-over-year foundation. That’s up from prior expectations of a 300% leap.

“There’s a tremendous amount of demand. The industry really is having to work hard — Albemarle is having to work hard — to keep up with that demand,” mentioned Bandy.

Investors have rewarded the corporate’s efficiency. The inventory climbed to an all-time excessive on Sept. 14, throughout a rocky interval within the broader market. Shares have since fallen 18%, however the inventory remains to be up about 8% for the 12 months, with an organization valuation round $30 billion.

By comparability the S&P 500 and Nasdaq Composite are down 25% and 33%, respectively, for 2022.

Climate invoice: A sport changer?

While the overwhelming majority of battery manufacturing takes place exterior the U.S. — China is a key participant, presently refining 56.5% of worldwide lithium, in line with Benchmark — the Biden administration is attempting to alter that.

In February, the White House introduced funding for home manufacturing of supplies and minerals essential to the power transition. Then, in March, Biden invoked the Defense Production Act for these supplies.

Albemarle’s Silver Peak lithium plant spans 13,000 acres.

Pippa Stevens | CNBC

“To promote the national defense, the United States must secure a reliable and sustainable supply of such strategic and critical materials,” a March assertion from the White House learn, citing lithium as among the many “critical materials.”

But essentially the most significant initiative, by far, is the not too long ago handed Inflation Reduction Act. The invoice, which is the most important local weather funding package deal in U.S. historical past, focuses on incentives and credit aimed toward accelerating the U.S.’ shift in the direction of renewable power whereas additionally jump-starting home manufacturing.

The invoice contains measures that can assist battery corporations on each the provision and demand aspect. Over time, a better portion of an electrical car’s battery supplies should be sourced from the U.S. or one in every of its free-trade allies so as for shoppers to qualify for the tax rebates. Producers also can reap the benefits of the manufacturing tax credit.

Narwold known as the Inflation Reduction Act a “great step forward.”

“It really does give the impetus to start focusing domestically on building that supply chain,” she mentioned. “No reason why the United States can’t be a significant contributor to that supply chain with the right support, both from the government — state and federal — as well as from the industry.”

Bags of lithium carbonate. This is the top product after the lithium-rich brine has spent about 24 months travelling via evaporation ponds at Albemarle’s Silver Peak plant.

Pippa Stevens | CNBC

— CNBC’s Katie Brigham contributed reporting.

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