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Speaker 1: Hi everyone. In two thousand and eight, I went to

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Speaker 1: the annual expo for the geothermal sector in Reno, Nevada.

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Speaker 1: There I ran into an acquaintance at geoscientists at one

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Speaker 1: of the national labs. She told me she had left

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Speaker 1: the lab to join or co found I can't remember which,

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Speaker 1: a startup that was going to extract lithium out of

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Speaker 1: geothermal brines, to which my reply was why, And she said,

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Speaker 1: to catch the growth in electric vehicles. Huh okay. Remember

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Speaker 1: it was two eight right. There weren't a lot of

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Speaker 1: people talking about electric cars back then. Side note, go

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Speaker 1: check out Benf's Electric Vehicle Outlook, our forecast for this

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Speaker 1: market out to twenty forty, published last week. It'll absolutely

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Speaker 1: be worth your time. You can get it quick search

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Speaker 1: for benef Electric Vehicle Outlook. Anyway, the company was called

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Speaker 1: Symbol Materials, and they said they had a new process

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Speaker 1: for cheaper and more efficient lithium extraction. They got a

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Speaker 1: demo going in the salt and sea area of the

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Speaker 1: California Desert in then we're planning a big commercial scale plant.

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Speaker 1: Then it stopped. It's unclear, but the word is they

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Speaker 1: ran into money. But then they got a letter from

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Speaker 1: Elon Musk offering to buy Symbol for three twenty five

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Speaker 1: million in Tesla stock, but the deal fell through. I'm

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Speaker 1: not sure Symbol isn't around anymore. It looks like they

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Speaker 1: were about ten years too early, but it appears that

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Speaker 1: the company has been revived. It is a new startup

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Speaker 1: called International Battery Medals. What's interesting about the story of

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Speaker 1: Symbol is that it seems to illustrate most of what

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Speaker 1: we'll talk about today, interest from car and battery manufacturers

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Speaker 1: securing additional and preferably local lithium supply, and from suppliers

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Speaker 1: trying to catch the wave of growing demand for lithium.

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Speaker 1: This week on the show, we've got Sharon Moustrie, Medals

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Speaker 1: and mining analysts for BENF here to tell us about

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Speaker 1: unconventional lithium, what it is and what to expect from it.

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Speaker 1: Our discussion is based on report titled Unconventional Lithium the

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Speaker 1: Road to Supply Security. BENOF users can get this report

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Speaker 1: on BNF dot com, the BENF mobile app, or the

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Speaker 1: Bloomberg terminal. As a reminder, BENIF does not provide investment

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Speaker 1: or strategy advice, and you can hear the full disclaimer

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Speaker 1: at the end of the show. I'm Mark Taylor and

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Speaker 1: you're listening to Switch on the BENF podcast. Sharon, thanks

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Speaker 1: for joining. Thank you Mark. Can you start us all

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Speaker 1: the way back and just quickly tell us why is

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Speaker 1: lithium important. Lithium is a key element that we need

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Speaker 1: to make lithium my own batteries, which today are the

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Speaker 1: best technology that we have for energy storage, and we

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Speaker 1: need that in order to make our transportation systems and

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Speaker 1: our power systems cleaner. So if we want to decarbonize

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Speaker 1: those systems, we're going to need a lot more the

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Speaker 1: family in the world, in the energy storage markets picking up,

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Speaker 1: the electric vehicles markets picking up, So lithium is just

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Speaker 1: going to become more and more important in that story.

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Speaker 1: I assume, yeah, exactly. There are some competing technologies, but

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Speaker 1: so far there's nothing that has proven to be a

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Speaker 1: real competitor with lithium my own batteries, oh, topic of

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Speaker 1: another day, like the glass batteries or something like that.

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Speaker 1: That sounds cool. We'll definitely do that. Can you tell

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Speaker 1: us though, where do you find it? Most of lum

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Speaker 1: today is extracted roughly even we split between rock deposits

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Speaker 1: in Australia and Brian deposits in Latin America, mostly Chile

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Speaker 1: and Argentina. Today, that accounts for about of lithium production today.

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Speaker 1: There's a little bit more around the world, especially in China,

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Speaker 1: but Chinese assets tend to be quite expensive because of

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Speaker 1: their mineralogy, the way they're composed. They're mostly Brian deposits

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Speaker 1: in China, but they tend to have more contaminants that

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Speaker 1: make them more expensive. Okay, so whether it's a Brian

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Speaker 1: deposit or a rock deposit, you have to pull up

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Speaker 1: the resource and then pull out the lithium out of that,

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Speaker 1: so that can be kind of expensive. I guess you

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Speaker 1: could say, yeah, that's exactly it's. So the reason why

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Speaker 1: Brian in China is more expensive than Brian in Latin

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Speaker 1: America is because in Latin America it is in this

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Speaker 1: really really arid landscape where there's almost no wainful and

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Speaker 1: basically the process of extracting the fium is just putting

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Speaker 1: it in a pond and waiting for the other stuff

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Speaker 1: to evaporate. That means that you have very little input costs.

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Speaker 1: For China, that's going to be a different story because

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Speaker 1: they don't have as much solar radiation and the evaporations

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Speaker 1: will not be the same. Wow, so really hot high

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Speaker 1: pond that evaporates and you just left with some pretty

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Speaker 1: great lithium. Yeah, it takes about a year and a

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Speaker 1: half to two years for the whole process. It's really slow,

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Speaker 1: but those are some of the cheapest assets we have today.

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Speaker 1: So the electric car market, as we just saw this week,

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Speaker 1: there are electric vehicle outlook launching by when our forecast

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Speaker 1: goes out to that market is going to grow quite

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Speaker 1: a bit, and so is the stationary storage market for batteries.

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Speaker 1: That means we're gonna need a lot more lithium. Is

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Speaker 1: there a shortage? Is there a risk of shortage where

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Speaker 1: we at? Yeah, that's actually a really interesting question. A

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Speaker 1: few months ago, it would have been a quick, easy answer.

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Speaker 1: Were oversupplied. The reason why is because the lithium market

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Speaker 1: got really excited for the huge spike in prices about

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Speaker 1: two years ago. The suppliers added a ton of capacity

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Speaker 1: and that led to an oversupply that has been happening

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Speaker 1: for the last almost two years, and prices have been

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Speaker 1: coming down, making it harder to finance and supplied today.

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Speaker 1: So now we see that with the impact of coronavirus,

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Speaker 1: those finance troubles and those capacity editions might be delayed,

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Speaker 1: causing a shortage in the mid term. Whereas in the

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Speaker 1: beginning of the year we were projecting the market to

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Speaker 1: be comfortably supplied until twenty thirty, today we see it

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Speaker 1: might be a bit more of a rocky road. Okay,

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Speaker 1: that's really interesting. So people were trying to chase a

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Speaker 1: high price, so they built a bunch of assets in

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Speaker 1: mostly what Australia, Latin America, anywhere, in particular Australia Latin America.

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Speaker 1: They built too much. Now they're kind of paying for it,

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Speaker 1: and I guess you're saying they're not willing to build anymore,

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Speaker 1: and that could lead to a shortage in the future.

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Speaker 1: Exactly is that concern about the future where these unconventional

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Speaker 1: resources come in. In part the unconventional resources are an

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Speaker 1: interesting set of resources because they are more geographic leep diverse.

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Speaker 1: Of course, part of what the coronavirus has showed us

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Speaker 1: is that if we concentrate our resources in just three countries,

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Speaker 1: that's a huge risk to the rest of the supply chain.

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Speaker 1: And it also means that if there's an interruption in

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Speaker 1: Latin America, or in China, there's no backup. So part

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Speaker 1: of the reason why we want unconventional resources is not

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Speaker 1: because they're unconventional. It's just because they're closer to centers

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Speaker 1: of demand like Europe and the US. That means that

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Speaker 1: countries that are seeing electrification pick up quickly or that

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Speaker 1: are pushing for electrification in their policies are going to

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Speaker 1: want to secure supply, and that's a huge push for

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Speaker 1: unconventional resources, both in North America and in the U,

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Speaker 1: were lithium is classified as a mineral of special importance.

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Speaker 1: Beyond that, I think another really big push for unconventional

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Speaker 1: resources came from technology developments actually, so this was separated

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Speaker 1: from supply and demand in the market in general. That

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Speaker 1: has just been a lot of new companies, mostly startups actually,

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Speaker 1: which have been developing the technologies to extract lithium, especially

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Speaker 1: for brian in a faster and more efficient way. And

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Speaker 1: once you do that than unconventional deposits, which are usually

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Speaker 1: harder to extract from because they have lower lithium concentrations,

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Speaker 1: they become economically vient. So it's really a political and

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Speaker 1: technological story that's making these viable in the future. So

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Speaker 1: let's go back and talk about what they are. So

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Speaker 1: can you tell us about what the unconventional resources are. Yeah.

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Speaker 1: For Bloomberg an EF, we classify the major groups into clay,

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Speaker 1: geothermal brine, and oil field brian. What's common of all

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Speaker 1: these resources is that they don't come from traditional deposits,

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Speaker 1: which have usually higher lithium concentrations, lower contaminant concentrations, and

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Speaker 1: therefore can use conventional extraction methods to get the lithium

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Speaker 1: out of either the rock or the brine. For unconventional resources,

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Speaker 1: it's going to take new technologies and it's also going

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Speaker 1: to take new business models to make them economically viable.

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Speaker 1: Why is that new business models? Well, for example, this

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Speaker 1: particularly salient for geothermal and oil field brines since they

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Speaker 1: have such low concentrations. In order to make it economically

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Speaker 1: viable to extract I feel we usually have to partner

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Speaker 1: with a company that already extracts the brian but just

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Speaker 1: doesn't extract the lithium from the brind. So a company

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Speaker 1: that has been doing that in the US quite successfully

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Speaker 1: now is Standard Lithium. They partnered with Lenses, which has

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Speaker 1: really big wells where they extract brian to get bromine

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Speaker 1: out of and now they're implementing a new process to

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Speaker 1: extract lithium from it. But they don't have to incur

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Speaker 1: all the drilling costs for the well is all the

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Speaker 1: extraction costs. They just add a new step and that

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Speaker 1: makes it a lot cheaper. Is the process proprised terry,

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Speaker 1: Why doesn't the other company just do it themselves? Yeah,

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Speaker 1: so it is proprietary. And the tricky part about lithium

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Speaker 1: is that it's not easy to use one process developed

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Speaker 1: for one brian and in one location and apply it

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Speaker 1: to another brand in a different location. So this this

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Speaker 1: has actually taken years of iterations to refine the process

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Speaker 1: and make it particularly successful in this briand which is

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Speaker 1: the oil field brine, and it's near the macro reformation.

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Speaker 1: So in the US, where is that this macro information

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Speaker 1: is the oil field formation, which with highs this theme

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Speaker 1: concentrations in the world, and it's in Arkansas in the US.

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Speaker 1: It bleeds a little bit into Texas as well. That's

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Speaker 1: really interesting. I remember I used to work with scientists

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Speaker 1: that we're studying geothermal technology, and this came up back

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Speaker 1: in two thousand seven when I was last looking at it.

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Speaker 1: I think it was Lawrence Berkeley National Lab that was

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Speaker 1: doing a lot on this, pulling the lithium out of

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Speaker 1: the geo thermal brine. It's interesting to see that's come

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Speaker 1: not full circle yet. I think I was going to

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Speaker 1: say that I think they were maybe ten years early,

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Speaker 1: but reading your note saying you know that things are

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Speaker 1: going to pick up a bit later even from now,

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Speaker 1: they could be even ten years too early right now,

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Speaker 1: I don't know. I think we'll wait and see. There. Yeah,

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Speaker 1: for geo thermal, it's mostly California that's pushing this type

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Speaker 1: of lithium, and they exactly insulted. And Saltancy also has

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Speaker 1: the highest lip in concentrations of geothermal Brian's recorded up

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Speaker 1: to today in the entire world. So they're in a

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Speaker 1: really unique position. And the California government has been very

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Speaker 1: excited about this because it not only becomes a local

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Speaker 1: source of lithium, but it also means that they're geothermal

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Speaker 1: plants which sometimes struggle to get financed because they're so

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Speaker 1: CAPEX intensive. They're going to have another source of revenues

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Speaker 1: to make this type of clean energy viable in the state.

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Speaker 1: So it's really exciting for many reasons. I think California's

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Speaker 1: have been excited about it and cycled through the excitement,

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Speaker 1: and as companies come, they try it out and fail.

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Speaker 1: Now a lot more companies are trying, and that's a

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Speaker 1: sign of not only it being like a good idea,

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Speaker 1: but maybe the technology is ready now, so potentially it'll

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Speaker 1: come online, but it's still a few years away and

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Speaker 1: it still requires us to try the technology and refine it.

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Speaker 1: As I was saying through a lot of iterations, it

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Speaker 1: was interesting in your section on geothermal. I noticed there

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Speaker 1: was a lot of the logos of the companies there.

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Speaker 1: I remember from when I was looking at geothermal those

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Speaker 1: years ago. It sounds like they're evolving as companies or

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Speaker 1: as a micro industry. I guess you could say, I

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Speaker 1: don't know. When I saw this note, I thought, oh,

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Speaker 1: this is so cool. This is really interesting to me

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Speaker 1: personally because of my past life in geothermal. But I

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Speaker 1: thought when I opened it up that it was gonna say, Okay,

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Speaker 1: this is gonna be huge, gonna be a big thing.

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Speaker 1: But then you say five percent of the lithium market,

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Speaker 1: and I was like, alright, okay, it's a bit of

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Speaker 1: a letdown, but let's put that into context. My assumption

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Speaker 1: there is that the market a four team is going

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Speaker 1: to be a lot bigger in and so five could

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Speaker 1: be a fair bit today. Can you help us out

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Speaker 1: with that, Yeah, exactly. So five percent in twenty would

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Speaker 1: be huge today it would require like like a decent

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Speaker 1: amount of big projects to come online. That five percent

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Speaker 1: actually is on the lower side of what could happen

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Speaker 1: for unconventional lithium, and the reason why is because it's

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Speaker 1: based on our lithium database, which only takes into account

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Speaker 1: for our supply forecast projects that have reached feasibility, and

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Speaker 1: for unconventional lithium today that's only really clay projects in

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Speaker 1: North America. So actually, if we see Standard withium become

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Speaker 1: successful with their demo plant in the US, and other

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Speaker 1: projects become successful, then all of those projects will add

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Speaker 1: to that five percent and will include them in this

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Speaker 1: forecast that we do for supply. But even then that

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Speaker 1: five percent out to is a pretty decent amount considering

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Speaker 1: that most of the growth in the market today is

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Speaker 1: coming from conventional resources that are really big in Australia

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Speaker 1: and in Latin America and that can expand for relatively

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Speaker 1: cheap because their production costs keep getting lower. As as

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Speaker 1: it expand, so it's just economically a no brainer for

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Speaker 1: them in many cases. The other side of it is

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Speaker 1: that if withinum prices keep coming down, it might become

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Speaker 1: really difficult for new projects, especially projects that require new

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Speaker 1: technologies and a lot of testing to come online. So,

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Speaker 1: for example, with what we call petrolithium or withinum from

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Speaker 1: oil field brands. In the note, we forecast that today

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Speaker 1: actually very very few old oil field brands would be

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Speaker 1: economically viable because prices are so low. Who stands to

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Speaker 1: benefit most from this growth and unconventional resources? I think

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Speaker 1: actually the people who can bend if it the most

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Speaker 1: are auto manufacturers because it means that they will have

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Speaker 1: supplied closer to them and it will be less risky

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Speaker 1: to make contracts for lithium. It also means that potentially

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Speaker 1: costs can go down because a lot of the transportation

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Speaker 1: positive costs, everything related to you know, getting with him

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Speaker 1: all the way from China instead of California, if you're

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Speaker 1: Tesla and Nevada, all of that will change and they

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Speaker 1: can potentially even invest in lithium assets that are closer

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Speaker 1: to them because it's less risk. Have you seen that

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Speaker 1: or are they taking more of a watch and see approach.

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Speaker 1: It's more of a watch and c approach today for

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Speaker 1: lythium since it became oversupplied quite quickly since this whole

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Speaker 1: electrification story came along. I think auto manufacturers are not

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Speaker 1: as worried as for other metals like cobalt and nicol.

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Speaker 1: But we have seen rumors from time to time where

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Speaker 1: auto manufacturers say they're going to invest. For now, that's

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Speaker 1: probably not their priority, so we don't think that will

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Speaker 1: happen soon. What's the next unconventional project to go online?

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Speaker 1: Do you think? For claim, the most advanced projects is

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Speaker 1: the Sonora project from BAA in Mexico. They're pretty advanced

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Speaker 1: in their construction and we think they'll come online the

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Speaker 1: soonest of all unconventional projects after that. If you talk

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Speaker 1: about oil field Brian's, it's probably going to be standard clithium.

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Speaker 1: Actually this week, a few days ago, they fully commissioned

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Speaker 1: their demo plant, and that means that if it's successful,

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Speaker 1: it will not only lead them to finance and invest

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Speaker 1: the full plant that they're planning for a few years

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Speaker 1: from now, but it will also signal to the market

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Speaker 1: that these like direct liium extraction technologies are viable and

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Speaker 1: that you can partner with companies and be more creative

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Speaker 1: about how you extract with them this demo plant. Yeah,

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Speaker 1: it'll be a very cool part for innovation in the

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Speaker 1: lithium market. Since for minors, innovation is not their strong suit,

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Speaker 1: they'll go with the conventional of the tried and true.

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Speaker 1: So to close this off, is there anything that was

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Speaker 1: surprising or interesting that you'd like to dip into that

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Speaker 1: we haven't yet. Yeah. So the main reason why we

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Speaker 1: devoted our time to this research on unconventional resources that

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Speaker 1: are still so new to the market and so risky

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Speaker 1: potentially not coming online, is because we kept getting client questions,

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Speaker 1: especially about lithium from oil field brands, which is a

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Speaker 1: great story because oil companies could shift to lithium and

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Speaker 1: produce lethium as well. However, a really surprising realization that

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Speaker 1: came really early on in the research actually is that

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Speaker 1: oil field brands are not viable, and not because of technology.

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Speaker 1: That technology might end up working, there's a few companies

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Speaker 1: testing it and having good results, but rather because of

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Speaker 1: the economics because lithium prices have gone down so much

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Speaker 1: in the last two years. So we think that Petro

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Speaker 1: lithium or earlithium from oil field Briand's and also relatedly

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Speaker 1: from geothermal might be more risky than than for clay.

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Speaker 1: And that doesn't mean that we shouldn't invest in these

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Speaker 1: technologies or in these resources. It just means that less

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Speaker 1: of the global resources, global oil fields, global geothermal fields

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Speaker 1: might be viable for lithium extraction. Another really interesting realization

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Speaker 1: was actually the fact that North America has so many

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Speaker 1: unconventional resources, and that means that if they were to

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Speaker 1: rely only on conventional resources, they can't really supply their demand.

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Speaker 1: But if they push for ound conventional resources, they might

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Speaker 1: become actually quite independent from other countries to source their

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Speaker 1: lithium and they could become an important focal point for

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Speaker 1: the market. So it would be very interesting that as

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Speaker 1: the auto manufacturers start to pick up as demand starts

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Speaker 1: to pick up for electric vehicles in the US, they're

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Speaker 1: also able to source there with him locally and therefore

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Speaker 1: even reduce the emissions the life cycle emissions related to

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Speaker 1: electric vehicles shortened. The supply change reduce the risk for

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Speaker 1: auto manufacturers potentially even decreased prices, which are a huge

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Speaker 1: cost component for batteries in cars. Okay, so North American

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Speaker 1: Clay could be the future. Everybody, Sharon, thanks for coming

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Speaker 1: in today. Thank you. Mark. Bloomberginn ea F is a

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