Industry playing catch-up with lithium

At first glance, it appears that mining giants have been slow on the uptake during the booming market for battery materials. This may demonstrate an unusual lack of forethought, or over the next few years, may actually prove they've been two steps ahead.

In less than a decade, the likes of lithium, cobalt, and graphite went from minor materials to a demand so intense that several electric vehicle (EV) and battery manufacturers are jumping the usual supply chain and investing directly in resource acquisition, as a shortage of fair-trade resources risks pushing the global energy transition hard up against global carbon-zero deadlines.

Automakers leery of shortages have taken steps to ensure a steady supply. From contracts with suppliers requiring purchase of specific quantities to carmakers like Tesla getting into the lithium business more directly.

General Motors invested $650 million in Lithium Americas this year, which is developing a mine in Nevada. The deal makes GM the largest customer and shareholder of Lithium Americas.

Companies such as Anglo American, BHP Group, Glencore, Rio Tinto, and Vale are usually the industry leaders to watch, foreseeing the value of potential resources that promise high demand and short supply, but unexpectedly these companies have held back from all-out prospecting for energy transition metals – lithium in particular.

Prioritizing recycling

Switzerland-based Glencore announced earlier this month that it would be joining forces with Canadian recycling company Li-Cycle to repurpose an existing Sardinian plant as a lithium-ion recycling hub, producing nickel, cobalt, and lithium from recycled battery content. It promises to be the first of its kind in Europe and is expected to be up and running as early as 2027.

With Europe and the U.S. seeking to reduce reliance on countries like China and the Democratic Republic of Congo for raw materials as well as avoid the red tape and added environmental strain of too many new mines, Glencore's investment is very forward-thinking.

The company's portfolio of lithium projects focuses on green mining and processing technologies for the production of battery-grade lithium for EVs.

Hardrock lithium can be converted into lithium carbonate or lithium hydroxide, while lithium brine must be converted into lithium carbonate before it can be further modified into lithium hydroxide – which is preferred for the next generation of lithium-ion batteries, as the process requires less cobalt.

Rio Tinto has invested in mining the commodity – in March 2022, the Anglo-Australian company acquired the Rincon lithium project, a large undeveloped brine resource centrally located in Argentina's lithium triangle.

This project is expected to have one of the lowest carbon footprints in the industry. Rio Tinto also recovers battery-grade lithium from waste material at its Boron operations in California.

Joining the big leagues

Recent dealmaking, like last week's merger between Allkem Ltd. and Livent Corp., suggests lithium mining concerns may soon rise to boast similar digits as the more diversified major commodity producers like Anglo American.

Livent-Allkem will almost certainly have a market capitalization north of $10 billion, now the fifth in the lithium space to reach that bracket. In spite of these numbers, perhaps battery minerals still constitute too small a market for a materials giant to bother with.

The feasibility of new mine development depends on a combination of continued EV sales, development of battery recycling infrastructure, and whether the world at large remains in deficit or slips into surplus.

"We could have sold our output two times over, just in China," said Ken Brinsden, chief executive of Western Australian lithium developer Pilbara Minerals, insisting that global demand for lithium raw material supply is significant outside Europe and the U.S. "Demand for battery grade material is turning the industry supply base on its head."

Time will tell

Prices for lithium have fallen more than 30% this year, ending the two-year price leap mainly due to a global slowdown in electric vehicle sales.

While still growing, sales are not as prolific as automakers expected, which has led some lithium suppliers to produce more than is needed. Though this isn't too worrisome yet, as lower prices will mean cheaper cars which will likely drive EV sales back up.

Current improvements in battery technology designed to reduce the overall need for critical minerals could affect demand for lithium as well. The lack of involvement of major mining companies in this space could indicate that they're putting their money on the side of just such technological developments, rather than an anticipated demand for more and more raw materials.

There is also a concentrated focus on recycling, which will help circulate battery metals back into the supply chain and avoid the sociopolitical issues associated with new lithium mines entirely.