Thanks LJ,
We are very fortunate to have some very interesting posters here, who have contributed a lot to fundamental discussion very recently
and don't get bogged down in the mud-slinging that has dragged on this place for the last couple of years.
I'm pleased to see a bit of a return to this kind of discussion.
I'd also be very interested in what
@Sjlasx @regal @GCar have to say with regards to this exact question.
What is the possible impact of direct extraction on SDV? What is the likelihood of Tesla involvement?
Perhaps I can just kick off and provide some background to the alt tech thing.
What I think is interesting about the current test program is the change in the Galaxy strategy.
I was fortunate to have the chance to spend some time with AT (at a lunch that Thesi was also invited to - and possibly still regrets not flying in for) a few days before the very first Galaxy shipment back in 2016. It was a last minute thing and the aim was to have a few posters from Hot Copper. The lack of a chat system made it impossible to get a group together.
So it was just me. I had been in touch with Nick to organise an Hot Copper published interview with AT back in November 2016.
In hindsight, I should never have gone along. I was already wanting to stop posting in 2016 as other things in my life were getting busy.
I got sucked back in and have ever since had the badge of being a Galaxy shill etc etc..
Anyway.
AT talked a lot about the lithium sector, nothing directly about Galaxy that wasn't already known but it was a long chat (about 4 hours) and I did probe just about every angle I could, including "alt tech" production approaches. Indirectly I formed a view of the company's strategy and mindset.
I was also impressed by Anthony Tse's skill as a communicator and his knowledge of the sector. It was clear just how many strong relationships he had formed with the bosses of different companies etc.
At that time the idea of POSCO or some company gazumping the fledgeling hard rock plans of the West Australians with newer instantaneous cheap brine production was one of the biggest down-ramps floating around.
AT was unimpressed with what he saw. The results in the beaker under lab conditions were very different to operating at scale in the real world with real raw materials. Remember that, at that time, Galaxy was at the time still not quite back on its feet, still holding a lot of debt and not quite capable of walking and chewing everybody's gum at the same time. So he was taking his cue from what the majors were doing. They were much better resourced to explore every possible improvement to their processes.
He was struck that none of the brine majors were investing cash in new tech, and that was a telling sign that there wasn't a magic bullet just sitting there ready to be loaded. That appears to have been the right call.
None of the majors have since trumpeted any advancements in brine tech, or highlighted any investments in alternative tech.
The only company I can think of that was pouring money into it was POSCO.
They had been running a direct extraction tech and sinking a lot of cash (was it north of $1bUSD?) into a plant at Rincon (I think?memory is rusty...) and the results were disappointing that it was low output and very high cost. It would have been cheaper for them to buy carbonate from another supplier than to actually produce it that way. We heard nothing more about their interest in brine until they emerged as the buyer of the northern SDV tenements last year.
It is absolutely not clear exactly what tech POSCO are planning to use. We can, however, pretty well assume that it is not entirely a traditional plant and they will be using a lot of their own new tech.
The new MD of POSCO was elected last last year after heading up the Chemical Division. You could also assume that one of the problems that POSCO had with the previous alt tech test plant was the resource at Rincon. High magnesium is kryptonite to brine chemistry.
So. Something happened since late 2016. One of those things was the substantial investment in LPD which was a very public acceptance that there may be new chemical methods of processing coming available. Or at least a profitable trade at some point.
The other, more interesting event, is that they have stated that they are testing 4 new direct extraction processes at SDV, and made reference to at least one of those methods being from outside the lithium world.
First of all, I do not believe that LPD is involved in SDV.
There would be no reason for Galaxy not to mention it if it was true.
So there is something else that has caught Galaxy's eye. Something innovative enough for them to be willing to suspend a modular construction of a traditional plant. We have heard the words "encouraging" a couple of times now about the results. We know there has been a site visit.
That's all we have until we hear more.
Specifically on Tesla. It's common knowledge that Tesla have been talking to Galaxy for years.
What is also true is that they are difficult clients
and cheap dates.
They use their brand power to brow-beat suppliers into producing for them at near cost. Martin Rowley made some joke about Tesla at the AGM being surprised at how slowly the mining world moves as they were all laptop wielding software people, used to the insane speed of inhouse development.
Then there was the Elon comment about possibly getting into mining.
Then there was the site visit. All this was the same week or so.
There were definite hints being made.
We know why Galaxy want direct extraction. The most obvious is speed to production.
There is a typical 18 month lag from pond to product. Orocobre took pretty close to exactly 2 years from breaking ground on their plant and ponds to first production, so at this point the down-ramps about 5 years etc are incorrect.
Galaxy has studied the hell out of SDV. If they can't get a build together faster than ORE then I'd be very surprised.
But that is a traditional plant. If LPD are making their product in a high tech tin-shed in Perth with the fancy equivalent of a few plastic buckets and some tubing, then the alternative brine processes that they are testing in SDV may not need the same kind of shiny metal traditional chemical facility.
The other reason to concentrate of direct extraction is to risk-proof the brine process itself.
Climate change is starting to impact the Atacama. It is much worse in Chile where SQM and ALB have been impacted by catastrophic floods.
Catamarca seems a bit more protected but there is likelihood that there may be more rain and storm events as the world climate becomes more extreme.
The high altitude Atacama is still the driest place on earth. Stuck between dual rain-shadowing ranges, they have gauges up there that have virtually never seen a drop, areas that have gone for periods of centuries with nothing. Perfect for dehydration.
Brine is much closer to a straight out chemical process than hard rock. Solar dehydration condenses brine into a higher concentration and then lithium chloride is produced as the first stage of processing. Ultimately, more and more brine will stay in this form as it is the ingredient required by lithium metal batteries. Lithium Metal will ultimately take over the crown as the most desirable lithium battery formula in the next generation (imo). Hard rock needs a lot more stages of processing to create lithium chloride, giving brine an insurmountable cost advantage once batteries move beyond the current fascination with lithium hydroxide. Even now JL and other commentators are talking about an equalising between carbonate and hydroxide pricing. The reality is that there is a lot of demand for all formulations, and, even as we progress, the sector will produce and support a wide range of products, geared to what works best for each segment.
ie Batteries for grid have different requirements than batteries for laptops and different again for cars, different again for planes, trains etc etc.
Back to Tesla. I have always said that brine seems a much better fit for Tesla than mining.
They have an initial target demographic (particularly in the infancy stages of the company) that wants to appeal to the "rich green" dollar.
The optics of brine & lab coats is a lot more palatable than piles of TNT and holes in poor old Mother Earth.
Rockstars park them in their driveways to improve record sales.
These early adopters have paved the way for the cheaper and cheaper models, the sharing of IP with other companies etc.
I read an article recently where Elon priced the drive train + battery "skateboard" component of the Tesla at around $11-13k and that the next generation that it would come down to $7-8k. In traditional ICE vehicles the engine alone is often budgeted at 50% of the vehicle cost.
a $50k BMW has a $25k engine under the hood.
And this drive train will eat any ICE vehicle for breakfast.
Questions of price parity are just academic.
We already know that Ford is going to basically stick their own chassis on a VW "skateboard" and still call it a Ford.
The Chinese will OEM the hell out of these drive trains.
How much for a chassis that doesn't even have to be mechanically connected to the drive train?
Stick a computer in there, OEM a software package, add your optional extras
and a smug self-righteous I-have-done-my-bit-to-save-the-world attitude - and voila.
Parity phht.
EVs are going to kill ICE vehicles on sticker price very soon.
I also definitely see the potential for a lot more custom vehicle designs built on OEM "skateboards".
That is what I want. A bone white Valiant Safari station wagon 1969 chassis on a Tesla drive train thanks.
With my dog hanging his head out the window.
Cars may finally start looking interesting again after 10 years of driving past cookie-cutter SUVs.
Since Galaxy was in production ahead of the current WA crop I think one of the big advantages is that we have been fortunate to partner with a few of the better concentrators, specifically those who produce hydroxide.
Hydroxide requires a much cleaner concentrate and I think this basically removes the quality issue from the down-rampers' playbook.
It may help to explain why Galaxy contract pricing had tended to be well ahead of the competition as the product has been selling at a hefty premium until recently.
It's also likely in a constrained market that some of Galaxy's hydroxide has already ended up in Tesla cars.
Tesla's Gigafactory 3 is breaking construction records and aiming at production in Q4.
That is all I can say without doing the final stage of guesswork and connecting the dots for you.
