How Lithium Producer Albemarle Took Over The EV Industry

This North Carolina lake sits on top of one of thelargest hard rock lithium deposits in the US. Kings Mountain, we believe, to be a top tier, topquartile resource capable of supplying at least a million, if not more,electric vehicles with its feedstock. What we're going to be doing is producing aspodumene concentrate. We're going to crush it up and we're going tofigure out a way to get just the green crystals out. Those green crystals are then processed intolithium hydroxide. Albemarle is the world's top producer of thiscritical metal and operates mines in Australia,.

Chile, and the only active lithium mine in theUS. Demand for lithium, a key component for electricvehicle batteries, is expected to surge from 500,000 metric tons of lithium carbonate in2021 to 3 to 4 million metric tons by 2030. Never in my career have I seen this rate ofgrowth, but I think even relative to some of the cell phone growth rates,it's been even faster. The difference really between North America andChile and Australia is the demand is here. And fortunately for North America, there isresource here. Albemarle's clients include the world's topbattery producers and auto companies like Tesla,.

In addition to its extraction business. And it's more than a dozen processing plantsacross the globe, Albemarle is also developing improvements to its lithium-basedcompounds that will make batteries that are longer lasting and more efficient. The challenges for the whole industry are many,and they really start with some of our lithium salts. Really understanding the impact of thingslike particle size and purity on the final performance of the cathode. The entire lithium ion battery chain from mine tomarket is expected to grow more than 30% annually from 2022 to 2030, where it couldreach $400.

Billion. But despite that growth, Albemarle facesa number of potential headwinds along the way, including a possible economicdownturn that could slow the demand for EVs, new battery chemistries that could reduce the needfor lithium, battery recycling and additional competitors. Tesla began construction of a lithium refinery inTexas in 2023. And ExxonMobil just purchased rights to an areain Arkansas that could begin drilling for lithium in the coming months. And not everyone agrees that expansion of miningis the best way forward for a sustainable future.

What our research shows is that we could get tozero emissions with much less mining if we make some of these changes to publicpolicies, to consumer habits, rather than just try to electrify the status quoof like really large cars and everyone needing to own an individualcar in order to get where they need to go. To better understand how lithium, known as whitegold, is extracted, the challenges involved and where production is moving next, CNBC got abehind the scenes look at Albemarle's operations in Chile and the US. Albemarle, based in Charlotte, North Carolina, gotits start in 1887 as a paper company and opened its lithium division in 1953.

Before batteries, lithium was primarily used forglass, ceramics and pharmaceuticals. It moved further into its chemical business inthe 1960s with its purchase of Ethyl Corporation and with its acquisition of DowChemicals bromine business in 1987. But a bet on batteries and a $5.7 billionpurchase of Rockwood Holdings, including its lithium assetsin Chile and Western Australia in 2015, may have had the biggest impact on thecompany. Albemarle's stock price has skyrocketed sincethen. Decades ago most of that energy storage was innon-rechargeable batteries such as the the coin cell batteries you'd see in a calculatoror in the back of a watch that contain lithium.

A little over 167,000 electric vehicles were soldin the US in 2013. The US is on track to sell a million EVs in2023. Maybe five years ago think people were sitting ontheir heels a little bit. We weren't certain was it really going to takeoff? But I think at this point in time there's nodoubt that the electrification of the world is happening. In 2017, the company acquired two lithiumprocessing plants in China. Two years later, it purchased a 60% stake in theWodgina hardrock lithium mine in Western Australia, one of the largest hard rocklithium deposits in the world.

If you see an electric vehicle on the road,there's a high probability that Albemarle's lithium is inside of it. Albemarle, along with its main competitors SQM andPilbara, control about 40% of the world's lithium supply. Albemarle currently is in the high teens marketshare, so it is a market leader, but it is not an extremelydominant one, right? So there are several big ones. There are major competitors in China such asGuangfeng, Tianqi. There are major competitors outside of China suchas SQM, but.

Also companies that were not really big players,let's say 4 or 5 years ago but they are influential right now,such as Pilbara. The Inflation Reduction Act, signed by PresidentBiden in 2022, has helped accelerate the shift to EVs. In 2022, Albemarle had net sales of $7.3 billion120% higher than the previous year. The main reason is that lithium prices shot uplast year. Albemarle's lithium business made up 68.4% of netsales, followed by its bromine segment, which includes fire safetysolutions and catalysts which refer to products.

For the oil refining industry. The strength is really that probably they're goingto have the most de-risked growth pipeline because they're notdependent on one mine or one region. At Albemarle's brine mine in the Salar de Atacamain the Atacama Desert, one of the driest places on earth, lithium is extracted from beneath thesurface by pumping extremely salty water into large evaporation pools. That salty water, known as brine, is thentransferred among 15 different ponds over a period of 18 months, leaving behind highconcentrations of lithium.

About a third of the world's lithium comes fromChile. So we use this power of the sun to concentrate thelithium from 0.02%, concentrate to 6% at the end of thisprocess. That concentrate is then trucked to Albemarle'sprocessing plant 150 miles away, where it is turned into battery grade lithium carbonate. Albemarle says its brine mining process is notonly cost effective, but brine has limited other uses and is not the same as water. For those who are concerned about our lithiumextraction that's brine ten times saltier than seawater, itcan't be used for human.

Consumption. It can't be used for agriculture. Chile's lithium industry has faced criticism fromvarious constituencies, including indigenous communities, who have traditionallyopposed mining expansion. Globally, over 50% of lithium production isconcentrated in areas with high water stress levels. So we're talking about, I don't know, it's animmense millions of liters of water that evaporate every day to produce one ton of lithium. And that's have an effect. I mean, we cannot say that have any effect whenit's part of the of the water cycle.

It's impossible to say that have any effect. What directly how is something that has to be, Ithink, understand and researched even more. Well, mining has intervened in all ecosystems, right? In the cultural sphere, our own culture, our heritage, tends to disappear. Under an agreement with the Atacama IndigenousCouncil, Albemarle contributes 3.5% of its Chilean revenue to Indigenous groupsthat live near the Salar. The company also pays the Chilean governmentannual royalties that range from 6.8%.

To 40% of the lithium export price. This year, 2022, we will have paid the Chileangovernment over $600 million in commission. And it has faced additional challenges. In April, Chile announced plans to create a stateowned lithium company and laid out a future for the country in which private companies will berequired to partner with the government on future projects. Chile's new lithium policy will honorthe contract Albemarle has in place with the government. Chile has a long history of respecting the rule oflaw.

I would expect us partnering with the governmentand to expand our operations or to get additional mineral rights and to expandthe lithium production in Chile and do that in partnership with the government. Similar to its brine operations in Chile. Albemarle has operated Silver Peak in Nevadasince 2015. It produces about 1% of the world's lithium, butan expansion to double capacity is underway. Albemarle also aims to bring anotherdomestic mine on line in 2027, Kings Mountain. That mine, currently covered in 150ft of water,was previously open from the late.

1930s until the 1980s, when mining in Chile wasseen as more cost effective. When we are done, it will look very similar towhat it looked like before. There will be trucks and shovels. There will be a limited amount of blasting and itwill be a conventional hard rock mining operation. Unlike brine mining in Chile or at AlbemarleSilver Peak operation that relies on the sun at Kings Mountain, Hard Rock will be broken,crushed and turned into a concentrate resembling sand. We need to get the green stuff out and that willproduce what's called a spodumene concentrate.

That concentrate will run about 6% lithium oxide. So the intent there is to produce thatconcentrate. That will be what we give to conversionfacilities. That concentrate will be transported toAlbemarle's soon to be built $1.3 billion processing facility in South Carolina, where itis turned into battery grade lithium hydroxide. The plant will support themanufacturing of 2.4 million electric vehicles annually and will be able to processlithium from recycled batteries. It's the nature of mining. You don't know exactly how big these projects aregoing to be until you get them fully.

Explored, studied, and then permitted. Before that happens. One challenge is removing the massive amount ofrainwater that is built up inside. It's not like we've got a big, you know, billiongallon tank to pump this into and wait. So our permitting process right now is basicallyto take this water, which we've done plenty of testing on and we are inpermitting with all relevant regulatory agencies to ensure that we can discharge this intowaterways and into places that they tell us that we can put it. The town's mayor has said that the community,while eager for the high paying jobs, has.

Expressed concern over the impact to the watertable. Worrying about wells running dry, pollution of thegroundwater as well. They're fairly lucky that we're close to town andmost city water is connected all around the mine anyway. Albemarle claims the water is clean, saying it hasbeen tested and citing the wildlife that lives on the surface as proof of its purity. The town is supportive, the governments beensupportive to date, but we still need to get all the permits in order. The US was the world's largest lithium producer inthe 1990s, accounting for more than a third of.

Global production. Today, Australia, Chile and China collectivelymake up about 90% of lithium mine production, while the US only accounts for about1%. Albemarle's stock price reached $325 in November2022, roughly the same time the price of lithium carbonatesoared to a new high. There are two main lithium compounds thatAlbemarle sells for use in electric vehicles. Lithium carbonate and lithium hydroxide. Those are the breadwinners. So there's the ones that really carry most of theweight today.

In Albemarle's battery lab, chemists andscientists study and test those compounds in an effort to improve battery performance. We're not developing new batteries, but we'redeveloping the materials that go into the batteries. So we're trying to make our customersbatteries more stable, more efficient, cleaner operating, longer life. In this lab, we'll take the lithium hydroxide orlithium carbonate and combine it with other transition metal oxides to make those cathodematerials. And we do this at a relatively small scale toreally understand what is important about our materials for our customers.

In general, lithium ion batteries work like this. Batteries are composed of an anode or cathode, aseparator between the two electrodes and an electrolyte that fills the remaining space. Energy is stored and released as lithium ionstravel between these electrodes. Today, lithium is primarily stored in the cathodeside of the battery, but that could change as improvements in technology shift focus towardsmore lithium heavy battery chemistries. The promise of the future is having lithium inboth sides of that cell and you'll have significantly more energy density for lower cost. We're not just trying to optimize today'smaterials, but we're inventing tomorrow's.

Materials. And that includes lithium metalanodes. Those have the potential of taking a cell that'sthis size and turning it into a cell that's this size. So get the same driving range for half thevolume. Moving from conventional graphite battery anodesto lithium metal could double energy density and reduce costs by as much as 50%. Recycling could also play a bigger role in thecoming years, too. Today we are really looking at what opportunitiesthere are within recycling to bring, at the very least, the lithium back into theecosystem and potentially even a.

Broader look to to understand how we canparticipate, bringing not just the lithium but other transition metals. Lithium ion batteries on average last 12 to 15years in moderate climates and 8 to 12 years in extreme climates. But despite those efforts, questions remain abouthow much lithium is needed to power the transition to electric vehicles. And we're still early in the technology curve forthe lithium ion batteries. I think most people are working on or working onbecoming more efficient, higher energy density, longer ranges or smaller batteries, and thenultimately that will move toward solid state.

So you're using lithium metal. And from our standpoint, that's good because ituses more lithium, but it's a safer operation. It will be more range, it'll charge faster.

Sharing is caring!