Warren Buffett And Elon Musk To Spark A Lithium Boom (Oilprice.com)

The following article, reposted with permission, was originally published on the Oilprice.com website. The context for lithium mentioned is in the battery and energy storage industry — but we know that it could also turn out to be a critical element used in LENR energy production also.

Warren Buffett And Elon Musk To Spark A Lithium Boom

by James Stafford

The age of electrification across the transportation sector, the solar panel revolution, and Tesla’s battery gigafactory are igniting a battle for the cheapest battery. That will transform lithium into a boom-time mineral and the hottest commodity on the energy investor’s radar. It has been easy to take lithium for granted. This wonder mineral is the backbone of our everyday lives, popping up in everything from the glass in our windows to our mountains of electronics.

And while investors have long appreciated the steady rise in demand for this preferred mineral, the number of new applications continues to multiply. Smart phones, tablets, laptops, and other consumer electronics demand more lithium. But the largest driver for future lithium use will be in electric vehicles and home batteries for solar panels. That has lithium on the verge a boom for which supply can no longer be taken for granted.

Not since the shale boom have we seen a market transformation of such significance. Lithium has long been used for a variety of mundane purposes, and while the variety is spectacular—with applications in everything from glass, ceramics and greases to a line-up of industrial process—it has flown under the radar for most investors.

Supply has always largely managed to keep pace with steadily rising demand for lithium, and while the mineral is slated for growth with or without the ‘battery explosion’, Tesla’s gigafactory will spark a phenomenal spike in demand that will be no less exciting than the shale boom.

Not only will battery gigafactories change an already attractive lithium demand picture, but the suppliers themselves will change, making way for newer entrants—with more foresight and better technology–that will provide some of the best investment opportunities in the sector.

The lithium story cannot be told without first telling the Tesla story. Tesla Motors (NASDAQ:TSLA) is developing a cheaper line of electric cars for release later this decade, and to achieve this it is constructing a $5-billion gigafactory to build 500,000 electric cars with the objective of lowering the cost of batteries by at least 30 percent.

Moreover, around one-quarter of the plant’s capacity may be for Tesla’s stationary storage business, which also sells backup batteries for homes, businesses and utilities—all fueled by lithium.

According to Tesla’s brainchild, Elon Musk, demand for stationary storage batteries has skyrocketed to the point that an expansion of the gigafactory may have to be considered before it is even built.

Musk is eyeing a “complete transformation of the entire energy infrastructure of the world to completely sustainable zero carbon,” and what he’s talking about here is lithium-battery production on a mind-blowing scale. Tesla is planning to produce more lithium-ion batteries in this factory than in the entire global marketplace combined.

Lithium—the lightest and most versatile of the metals—is the backbone of this exploding battery market. Lithium is already a key part of our everyday lives, but as batteries become the rule of the day in a new global energy picture, demand for lithium is soaring—and we are only at the beginning of this curve.

Battery manufacturers across the board are moving to lithium because it has the highest electric output per unit weight. And nowhere will this demand soar more than with the production of hybrid, plug-in hybrid and electric vehicles used by everyone from Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (NYSE:NSANY), Renault (EPA:RNO), and Mitsubishi (NYSE:MSBHY), to Ford (NYSE:F), Chevrolet and GM (NYSE:GM). And of course Tesla Motors. Without lithium, there will be no gigafactory. In fact, this factory alone will need 15,000 tons of lithium carbonate a year just to get started.

We are on the edge of a profound competition over batteries as Tesla drives down lithium-ion battery production costs, lowers the benchmark and increases cost competition. The response will be new entrants to this market, and competing battery gigafactories.

Tesla’s competitors will make this one of the biggest battles of the century—a battle the entirely depends on lithium supply. Tesla’s biggest rival will likely be Build Your Dreams (BYD), the Chinese automaker backed by Warren Buffet. Already, BYD is building electric buses on American soil and has global gigafactory ambitions. By the end of the year, according to Reuters, BYD should have 10 GWh of battery production capacity, which it expects to increase to 34 GWh by 2020 with a new factory in Brazil—about the same capacity as Tesla’s.

Other Tesla rivals rushing to the battery production scene will be iPhone manufacturer Foxconn and LG Chem, which is already one of the top three battery makers. Samsung is also hot on the trail, having just acquired Magna’s battery production division.

According to Credit Suisse, the lithium industry is “poised for significant volume growth,” which could lead to shortages of supply. As a result producers of lithium are set to enjoy significant earnings throughout the decade.

Even before Tesla’s gigafactory – and its rivals – entered the picture, global lithium consumption had doubled in the decade before 2012, driven largely by its use in lithium-ion batteries for cell phones and power tools. Then electric cars hit the scene in earnest, further boosting demand for lithium, while Tesla’s gigafactory is expected to use up as much as 17 percent of the existing lithium supply, according to Fortune magazine, citing Goldman Sachs.

For investors who are just catching on to the lithium battery revolution, the best way to play the game is to look past the traditional lithium producers. In this boom scenario, investors will be looking at companies with the lowest market caps, solid management and highly prospective deposits.

Currently, lithium is not traded as a commodity; rather, it is managed through a kind of oligopoly situation where there are three or four major suppliers globally and they have rather successfully managed supply and demand for lithium over the past decades. Because of this, everything is priced on a contract basis.

“The problem is that these three or four major suppliers have been responsible for supply and demand but they are not going to be able to meet new demand for lithium,” Dr. Andy Robinson, a Ph.D. in Geochemistry and the COO of Pure Energy Minerals (OTMKTS:HMGLF), told Oilprice.com.

As Robinson points out, however, not all lithium is equal. It’s sold in different types for different prices. For instance, lithium carbonate sells for around $6,000 per ton and is used to make some of the materials for new battery technology. However, many of the new battery technologies—particularly those used by Tesla—use lithium hydroxide as the starting material, which trades at around $2,000 more per ton than lithium carbonate.

And lithium found in salty water, or brines, is by far the most cost effective. According to Dr. Robinson, “brine is the best way to produce lithium because it’s so cheap, as nature has done all the hard work in rendering the lithium into a form that is easy to extract from the ground. All you have to do is drill a few wells and pump the liquid brine.”

Furthermore, there are only a few places in the world where lithium is present at high enough concentrations in these salty brines and the most famous is in the Atacama Desert, in the “Lithium Triangle” of Bolivia, Argentina and Chile. Supply here is threatened by corruption and politics, making it difficult to capitalize on burgeoning demand.

When Tesla’s gigafactory comes online, everyone will be looking for cost-effective lithium sources closer to home, which brings us full circle to the state of Nevada, where Pure Energy Minerals has the only potential future brine resource in North America. The only other brine resources are located in China, are much smaller and are controlled by Chinese companies.

Lithium is increasingly the tech of choice for battery banks across the board, and when Tesla’s gigafactory is producing batteries one year from now, the winners in this emerging battery boom will be those behind the lithium, and those following the brine.

Source: http://oilprice.com/Energy/Energy-General/Warren-Buffett-And-Elon-Musk-To-Spark-A-Lithium-Boom.html

  • Omega Z

    Lithium batteries will have their place, but I don’t think their the answer. There is just not enough Lithium to fill all the needs. The majority of lithium is contained in the Oceans. On land, it is found in salt brine pits/mines. This brine is pumped into man made reservoirs & allowed to evaporate for 1 to 2 years to concentrate the lithium to a point that it can be economically extracted. The processing of lithium is quite expensive. Increased demand will make it more so. Per below-

    There are several brine pits in the world that are not considered economical even with a reservoir evaporation system. However, preliminary exploration is being done. It is considered not if, but when Lithium prices increase by 300% to 400%, these brine pits will become economical to develop.

    Did I mention- “The majority of lithium is contained in the Oceans.”
    Apparently, It is also a more expensive process or why wouldn’t they already be making use of it. As with many brine pits, it is apparently in low concentration. Otherwise they would merely pump seawater into man made reservoirs & allowed to evaporate for 1 to 2 years. Many a shoreline deserts in the world.

    I’ve indicated this before. Using a reverse osmosis water filtration system by means of various types of filters, many elements can be extracted separately from the oceans. Instead of just building a Billion$ desalination plant to provide 50 million gallons of water a day, you also extract the elements. The cost spreading reduces the cost of all products including providing cheaper water. I add 1 caveat. We need to determine the importance of these elements extracted to the ocean ecology. We don’t want to kill our oceans.

    Note that one of the better Lithium batteries uses Nickel in either the cathode or anode & they are looking to increase the amount used as they are getting improved performance. Your E-cats will increase in price.

    Probably, we should hope that a graphene battery breakthrough will be cheaper & better.
    PS- Frank excluded the pharmaceutical use of Lithium…

  • Frederic

    I think the critical element will be nickel and not lithium.
    That is why I personally invested in the Nickel sector.

    Today, Li supply is very much superior to demand.

    It is true that the increase in importance of batteries risks to weigh heavily on Li, unless a techno allowing a more important storage by kilo of battery appears (and using something else than Li)

    Concerning the abundance of Ni and Li:

    As nickel is the 5th element the most abounding on earth and Li only the 33rd, we could have an impression of abundance of Ni over Li.

    However :

    Recoverable reserves according to USGS in 2009: 11 000 KT
    extraction / year: 25 to 28 KT
    since : 11 000 / 28 = 400 years

    Recoverable reserves: 67 000 KT
    extraction / year: 1300 KT
    since : 67 000 / 1300 = 50 years only !

    And remember we need in Rossi’s reactor 1g of Ni for only .1 g of Li, so 10 times more nickel !

    Thus counterintuitively there is less of Ni available than Li.
    Nevertheless, to date 50 % of Ni is already recycled in the world.

    • Omega Z

      From Rossi’s posts, The Nickel used in the E-cats can be recycled for other uses, but likely Virgin Nickel will be required for the E-cat fuel.

  • Once the Development of the E-cat is finalised.
    There will be plenty of energy to make Hot evaporation,
    of Various brines containing lithium practical financially….

    • Obvious

      The most cost effective brine operations use solar evaporation, at least two giant ponds (in succession), and are located in high elevation deserts where vapour pressure is low. This would be very hard to compete with using any other heat source that would have to be purchased or fuelled somehow.

      • Hi! Obvious.
        I was thinking (brain bashing) If the plant was situated,
        next to the ocean and water taken from same.
        Then the different mineral’s and salts could be “sorted”.
        The then de-mineralised sea water could be bottled and sold.
        With all the character of the sea but none of the salt, slogan.

        • Obvious

          Certainly that has been a goal sought by many researchers, for many reasons. There are billions of tons of uranium in seawater, too, and a fair bit of gold also. The problem (having solved the energy requirement) is that the product of seawater evaporation is salt with a whole mess of hard to separate elements mixed in at still -low concentrations. Mining any element always starts with a fairly high concentration of the desired element or a few elements that, critically, have an easily recoverable phase sufficiently different from the host material to allow a simple separation process. Otherwise we could just mine soil.

  • I would bet on a long term decline in lithium prices over time because I think batteries will be replaced by carbon and ceramic super-capacitors, and the amount of lithium needed for LENR is very small. How many E-Cat reactors could you make with the lithium in the battery of just one electric car? Soon we will reach a point where supply far outpaces demand.

    • Albert D. Kallal

      Good call! – I much agree!

      No question that if we start using batteries at any kind of
      larger rate for transportation, then demands for Lithium will increase. I have
      to agree that Lithium is under pressure.

      However, the rate of increased demand for lithium likely will
      be gradual.

      And now that the phone market is going from a 30% growth rate
      per year to more likely a 5-10% growth rate, then the demands on lithium on the
      cell phone side should ease demand pressure somewhat. (we are approaching replacement rates as opposed to growth reates. Recall DVD players boomed in growth at about 30% per year for nearly 8 years – after that – growth was TINY as the industry
      tended towards replacement rates as opposed to adoption rates).

      I should also point out that while a 30% reduction in the cost of such batteries by the Telsa mega plant is great, it is not really that much of a game changer in terms of those adopting electric cars.

      Take an $110,000 Telsa, and reduce the battery cost by 30%.
      That battery pack is about $12,000, so we talking about a $3600 reduction in
      the price of the car. So now your Telsa will cost you $106,400. Hardly some “big”
      revolution in the electric car industry that will sell or move more cars with such a small rice drop.

      Now I suppose if you talking about a car that cost $45,000, and now it will cost $41,400, then the reduction in battery cost helps, but NOT NEAR as much as the PR and sales job these folks are doing. Even at $33,000, you dropping the price down to $30,000.

      And as I stated many times here it NOT really the battery technology that holding back adoption of electric cars so much as it is affordable electricity.

      For every hour of charging your car from a standard wall plug, you get 3 miles of driving. So for an 8 hour charge, you get 24 miles of driving. And with shortages of electricity in places like California (with crazy peak rates of 80 cents or more per khwh, then driving our car on electric is going to cost MORE than using gasoline).

      Perhaps most interesting is that lithium also seems to be a VERY important component of LENR – so lithium demands may well not only increase due to battery demands, but lso that of widespread adoption of LENR.

      However, I am VERY much in the boat as Christoper here – I also think that the some pure carbon based battery technology will come along that will reduce or even eliminate the demands for lithium (at least for use in batteries). And such a nontoxic and commodity based carbon substance for batteries not only reduces lithium demands, but also is a enviormental fridaly approach to batters – a MUST occur for large scale electric cars. So I am all for electric cars – but a non toxic battery is a MUST HAVE in my humble opinion before e-cars become a good idea.

      Graphine is REALLY the next killer industrial product – we just have to figure out how to manufacture the stuff at scale. Once we do then the issue of using rare earth metals like lithium will become a non-issue.

      For those who not heard of this “magic” stuff?
      Watch this:


      If we figure out how to mass produce the above – it will be the next big revolution right after LENR! Graphene only been around since 2004!

      Albert D. Kallal
      Edmonton, Alberta Canada